Should companies be Investing in Innovation right now?
Short answer : YES.
Long answer : Most definitely YES.
Getting legacy companies to invest in innovation, at the best of times, is a challenge. As uncertainties increase, the response from companies is either to look at that as an opportunity & innovate, or more often, to buckle down into doing what they've always done, are great at doing & believe the uncertainty will pass.
The uncertainty will definitely pass. But in it's wake, it will leave behind altered consumer behavior, new regulations, new technologies, new business models and a whole host of new competitive threats.
Innovation is risky. Yes. But look a little closer. Rarely, if ever, have companies failed because of the failure of an innovation they commercialized. Amazon didn't fail as a company because the Fire phone failed. Nor did Google fail because of the failure of the Google Glass. The downside of the failure of an innovation is capped by the investment made into that innovation. That's as far as the failure matters. The upside however can not only be huge, but often transformative.
Failure of Innovation is not what sinks companies. The failure of not innovating is what sinks companies.
Back to the question; Is this the time for companies to be investing in innovation?
If we look back at the last 100 years, large scale crises, whether they've been wars, plagues, pandemics or financial in nature, have turned out to be watershed moments. Consumer behavior has often been altered after such events and new technologies and new regulations have spawned new business models. The end of WW1 & WW2 mainstreamed new technologies and business models. Commercial aviation really took off post WW2 because there were surplus aircraft's that could be re purposed and because during the war, there was enough invested in technology innovation, to be able to tackle the question of flying passengers further & faster than ever before.
The oil crisis of the 1970's sped up the mainstreaming of smaller, more efficient cars with companies such as Toyota & Honda breaking away from the competition. And after the financial crisis of 2008, digital business models, specifically in the financial space, really took off.
What will a global pandemic such as COVID-19 mean in terms of the innovation?
The Job To Be Done framework, one of Clayton Christensen's core theories, is a great way to look at innovation in the COVID-19 & post COVID-19 era. In the Job To Be Done theory, Christensen argues that customers "hire" products or services to do a "job" in their life. The "Job" has functional, economic & even social dimensions and the product or service that best solves the customer's need at that point in time, is the one they will "hire" to that job.
No matter the disruption or situation, the "Job" never changes. The Job To Be Done is permanent. What changes is the environment in which the the solution space operates. In other words, we will always want food from restaurants, but given the COVID-19 crisis, our preference for delivery may be higher rather than eating at the restaurant. The basic job of eating food from a restaurant hasn't changed but the solution has. And that change has happened because of the COVID-19 crisis.
COVID-19 started out as a health crisis, has turned into an economic crisis and will leave lasting social changes as a result of it. While we're in the middle of the crisis, it's difficult to say which of the changes will stick. Not all the behavioral changes we're having to adopt today, will stick once the crisis is finally over. But in these temporary changes, there will be permanent solutions that will arise. The challenge for companies is to be able imagine a future state, even multiple states, and commit to them.
There's no doubt that Digital Transformation will be more widely embraced. But the success of digital transformation will hinge on whether companies have a clear enough vision of what the pointy end of their business is aiming at. If you don't know where you're going, any road will take you there.
At Ranzar Consulting, we're helping our clients imagine a future state and invest in Innovation today, to not only survive the crisis, but come out of the crisis better positioned to embrace the new normal.
Given the disruption the COVID-19 crisis is having in almost all businesses, the next 18 months is going to be a struggle to keep the business viable. Companies will need to react to changing social, political, regulatory, economic & technological changes that will continue to evolve. While there is a high level of uncertainty today, it will subside over time & consumer preferences & behaviors will evolve and crystallize.
From an Innovation perspective however, today's the time to form an innovation team, if you already don't have one. As Scott Anthony from Innosight puts it, now is the time for the leadership to form a small, core innovation team and tell them to look up while the rest of the company looks down. It's tempting to put all available resources into keeping the current business viable, but it's also never been more important to be able to see the forest for the trees. A small innovation team, if not already formalized in the organization structure, needs to be tasked with taking a step back and sensing what's happening. Because regulations are very rarely in sync with technological & social developments, consumers will adopt temporary turnarounds. Again, at this stage it's almost impossible to say which of these temporary behaviors will stick long term, but it's critical to know them now in context of the regulatory, political & economic developments.
At the same time, it's important to know & be aware of the solutions that more agile start ups are offering in response to the external situation. Take, for instance, how the education sector has responded to the COVID-19 crisis. From schools taking their classes online, to universities adopting the MOOC model, the agility from this otherwise steady industry, has been astonishing. And welcome.
The best that a company has today in terms of a future, post-COVID era, are a set of assumptions. These assumptions need to be well articulated because as we progress into the next 18 months and the future becomes less hazy & uncertain, these articulated assumptions are what will form the bedrock of a company's future growth. With these assumptions, the Innovation team must be able to construct multiple future scenarios.
Over the next 6 months, as the health crisis hopefully lessens in intensity, there will be residual behaviors that stick, whether they're institutionalized or driven by socially. The future will a little less uncertain. The economic impact of the crisis, however will be playing out. The Innovation Job To Be Done now will turn to separating the signals from the noise in terms of evolved consumer preferences & behavior. The assumptions made today, will need to be checked & re-calibrated. With the information gathered over the next 2 months, the how & when of the Innovation strategy will need to be detailed out.
Already, Open Innovation & collaboration has been a positive to come out of the crisis as companies and even governments commit to harnessing solutions from a much wider net. Companies will need to develop the strategy to engage with the innovation ecosystem, whether it's the start up community, governments, other corporates, risk capital providers or even education institutes.
As we get further out to the next 18 months, we should hopefully be clear of the crisis and in the absence of uncertainty, will be new, permanent customer behaviors & preferences. How is the time for the company to decide which way the inflection point takes them. The options would have been worked. This will be a true test of character for most companies. Do they believe the new normal is the same as the old one or do they have the courage to commit to a new world.
Hopefully by then, companies would have realized the value investing in Innovation has, even at the worst of times. After all, failure of Innovation is not what sinks companies. The failure of not innovating is what sinks companies.
Get in touch with us today to find out how Ranzar Consulting can help your company & team look at innovation in this context.