Innovation in a Post-Pandemic World
How to keep the wheels of innovation turning at your company despite the upcoming economic upheaval
Much has been discussed and debated about “what’s next?”, once the current COVID-19 health crisis has passed and the nationwide lockdowns have lifted. There are new consumer and business trends emerging, new regulations being drafted, and new measures being considered to stem new outbreaks.
However, in listening to all the talking heads, what is clear is that no one has any idea about what this new normal will actually be. No one has experienced anything similar in over 100 years, and thus “what’s next?” is just a guessing game until we are there, living in it.
Subsequently, this means that the playing field has been leveled and new business opportunities will abound.
The global economy is on the verge of a major shift, and those who can make intelligent bets about emerging needs may be able to redefine the rules. Furthermore, in this new world, existing infrastructure in large organizations may be more of a hindrance than an advantage, legacy systems and processes preventing them from adapting quickly, thereby further emphasizing the need for corporate innovators to fuel new ideas and change in their organizations.
While shifts will bring about opportunities for innovators, at the same time, we stand at the brink of a major economic crisis that may stall creativity. The expected economic contraction may collapse financial markets, send businesses into bankruptcy, and leave a significant portion of the workforce jobless. And in such times, it is hard to justify increased spending on innovation when many companies may be struggling just to stay alive.
In a 2012 paper, “The Impact of the Economic Crisis on Innovation”, which examined corporate behavior before and after the 2008 financial crisis, while incumbent enterprises expanded their innovation investment before the crisis, after the crisis only a few enterprises and new entrants were ready to “swim against the stream” by expanding their innovation expenditures. Yet, as shown in a Gartner study on standout performers after the 2008 financial crisis, it is precisely those that “swam against the stream” that outperformed the competition over the next decade, averaged total shareholder return (TSR) that was 7.01% points higher than their Fortune 1000 peers.
So how should you position your company to pursue innovation in a post-pandemic world?
Dig into Costovation Opportunities
While innovation is often driven by investment, there are many opportunities for corporations to innovate with a cost-first focus, stripping down their offerings and revising their business models to offer exactly what customers need, and nothing more, i.e. costovation.
In a prolonged economic crisis, customers will be seeking more budget-friendly options while still maintaining a certain quality of lifestyle; businesses will be seeking alternatives in their raw materials, which still maintaining their core value proposition to their customers. There will be shifts from ownership to rental, as not to tie up savings or capital; there will be growth in blended categories like “affordable luxury”. Furthermore, consumers and businesses alike will be more willing to pitch in self-labor, i.e. IKEA, to keep costs down. Companies that can step into the gap to shift costs will be well positioned to disrupt their industry.
Discover New Channels
As people have been quarantined at home, we have seen a rise in e-commerce penetration and growth in home delivery penetration. Channels and customer relationships have been re-imagined and strengthen in the digital realm. However, for corporations, the exploration of new channels should go beyond social media and e-commerce.
New direct producer-to-consumer models (i.e. farm-to-home), physical to digital service offerings (i.e. online preschool classes), and alternative B2B sales engagement applications are emerging as businesses and customers learn to interact in different mediums. Just as we experienced a boom in home delivery during the pandemic, post-pandemic will fuel the emergence of new channels at the expense of traditional ones. Corporations need to consider how their product offerings fit with these new channels, and either seek to own them or work better with them.
Explore Underserved Emerging Needs
In the past two months, sitting at home, people have had a chance to reevaluate their priorities: health, family, friends, and community. Employees have learned how to work effectively from home. Everyone has developed new skills, explored new hobbies and interests, formed new habits and patterns. Even businesses have had to readjust and adapt how they manage in this new normal, from working with suppliers, facilitating orders, and even doing quality control and audits.
This shift will bring about completely new needs (i.e. how do we ensure the hygiene of a product?) or simply accelerate the importance of existing needs (i.e. what’s the best way to facilitate online meetings & discussions?). And in this shift, the sector boundaries will be blurred, meaning that companies can start looking outside their traditional scope into adjacent or even farther-flung markets for opportunities. Companies should empower a handful of agile teams to start exploring those emerging needs on their own and create a portfolio of ideas and business models to be systematically tested and refined. Those that separate themselves from the pack today, will be able to rewrite the rules of their sector. Everyone else will be playing catch up for the next decade or longer.
Search for Atypical Collaboration Opportunities
The pandemic has stripped the entire news cycle to a single topic, and spurred institutions, governments and even individuals to collaborate on innovative heath solutions. Next, as we move into a post-pandemic stage, the need for innovative solutions will extend beyond health, and the expansion of collaborative efforts will increase proportionately.
However, corporations need to extend beyond their comfort zone to find atypical partners — startups, universities, other companies, even competitors — in order to weather this shift and react faster to emerging opportunities. This also means they will need to open up about their strengths, as well as their deficiencies. They will need to share about potential opportunities, and how they need help to capture them. But in return, these collaborations will help companies to distribute risk, speed up testing cycles, discover new markets and access a wide range of skills and resources. In new channels and emerging needs, those that leverage atypical collaboration will be able to identify opportunities and build new solutions faster.
In a post-pandemic world, the way for corporate innovators to help their organizations adapt is to work asymmetrically, finding ways to keep pursuing ideas against the corporate grain while also leveraging hidden, untapped resources. Just as the entire global economy shifts, so must corporate innovation. But that is also what corporate innovators are best at, adjusting and adapting.
It is just that today, corporations need them now more than ever.
Make Innovation Work
Core Strateji is a strategy consulting firm that specializes in supporting leading companies to transform into ambidextrous organizations. Are you ready to move your innovation activities forward?
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