INNOVATION IN TIMES OF CRISIS
During times of crisis, companies suddenly gain a completely new perspective to deal with new challenges, often coming up with disruptive solutions which they would not have otherwise envisioned or perhaps dared to present, for fear of rejection. The motto now becomes “survival mode” so everything becomes valid: disruption in processes, new products, innovative solutions…
We already have some examples of this kind of attitude during the COVID-19 crisis: retailers transforming idle (locked down) shops into distribution centers, just-in-time supply-chain suddenly becaming mainstream, remote workplace becoming the standard overnight or even medical protocols that usually take years to finalize now reduced to months or weeks.
Having recognized these few examples, the truth is, however, that investments in innovation have mostly been either dramatically reduced or almost eliminated as a response to the Covid-19 crisis.
A very interesting article by McKinsey (Innovation in a crisis: Why it is more critical than ever, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/innovation-in-a-crisis-why-it-is-more-critical-than-ever) analyzes the response of companies in times of crisis in regards to their innovation strategy: should companies be focusing on bare survival tactics or should they actually be investing more in innovation?
The graphs below basically confirm that:
1. Most CEOs realize that this is a time of opportunity for growth
2. Nonetheless very few CEOs are prepared to embark on this journey
3. And indeed most companies have correspondingly reduced their innovation budgets for 2020 (when not almost scratched them altogether)
4. All this in spite of the fact that historic data confirms that companies that took the decision of investing in innovation in times of crisis have reaped excellent results, with a 10% improvement in market cap during the crisis and a 30% + improvement in the ensuing years, when compared to those companies that did not adopt this strategy
It´s completely uncertain when the Covid-19 crisis will end and how it will impact us. What we know is that so far there are very few companies that are emerging better from this crisis. We should therefore rethink our strategy and make sure we do not miss out on the opportunity to generate some lasting benefit, for us and especially for our companies. If we can trust the evidence from past we should be looking at this time at investing in innovation, in an efficient manner.
Innovatech Advisors can help you with effective strategies moving forwards!