The economy is moving in unprecedented and unpredictable ways. In the second quarter, U.S. GDP was down 4.8% compared to a year ago, its first drop since 2014. At the same time, April was the S&P 500’s best month since 1987.
When the landscape of commerce shifts daily, innovation is no longer just a handy skill for getting ahead — it’s a way to survive. Yet, the response is almost always the opposite. During a crisis, the natural inclination for most leaders is to tighten their belts and dismiss innovation as a distraction.
We already see this in scientific fields, where, despite remarkable cooperation and innovation regarding the virus, efforts to fight Covid-19 are overtaking all other work. The same is true in the automotive industry, where budgets for advanced research are expected to drop by 17% this year.
In reality, a crisis merely reveals the barriers that already exist in an organization. When things are going well, inertia keeps businesses from prioritizing innovation. Consequently, organizational structures aren’t set up for the rapid changes that come during a time of upheaval — and that’s a missed opportunity.
Crisis Innovation 101
A crisis is an ideal time for businesses to reinvent themselves. The coronavirus is likely to create significant long-range challenges, and companies that can defy and redefine the status quo are most likely to survive.
Here are four ways to prioritize innovation during a time of crisis:
1. Assess immediate and long-term impact. As you plan a response to a major event such as Covid-19, it’s important to balance your evaluation of its short- and long-term effects.
How will sharp drops in consumer spending and supply chain upheavals affect your business? What will the long-range psychological effects on consumer behavior mean for your business in the years ahead? Think about your customers, your sales and marketing capabilities, and even your core value proposition.
2. Accelerate innovation with autonomous units. When business survival hinges on your ability to innovate, it has to be a central priority. Merely including innovation projects within existing business units is not sufficient.
Rather than trying to work from all parts of your organization, consider ways to centralize your efforts to innovate faster. Consider your resources and evaluate the mindset, skill set and tool set of the leadership to determine how to best support the team to drive innovation. Ensure your organization can measure the results quickly.
3. Use your data. During a crisis of this scale, we barely know what’s coming tomorrow, much less next month. That said, use everything at your disposal to see clearly and navigate the storm.
Your teams should always be evaluating data — both external market data and internal KPIs. Harness the insights from this data to plan how your business will adjust. If you’re not using data, you’re flying blind.
4. Think digitally. With so many limits on in-person commerce, digital adaptation is more important than ever. This can’t be done ad hoc by reacting to changes and patching together digital capabilities in response. Companies must create digital transformation proactively and from within.
Start with creating a more seamless internal digital experience. As you adapt, your team will learn to think digitally all the time. This will open the door to new ideas for digital business models that you can use to expand into adjacent markets or launch new products and services.
In the face of a once-in-a-century crisis, it’s tempting to try to duck and hide until the chaos ends. But the businesses that respond creatively will make it through to the other side — and shape the new economy ahead.