Over and above the tragic human cost, the economic turbulence caused by Covid-19 has left established businesses and business models across the world facing new and unique challenges. As they attempt to adapt and survive these challenges, clients across all sectors tell us they are now being forced to innovate and make changes – often changes they have been contemplating for some time but have never quite managed to push through.
There are few precedents for the current situation. The challenges businesses face today differ to other recessions in recent history. Those downturns – the banking crash of 2008, the inflation spikes of the early 1980s or the oil crisis of the 1970s – were the result of factors internal to national and global economies; underlying problems with fiscal health or productivity.
What businesses face now is a new threat, caused by the external impact of the virus: consumer behaviour change on an unprecedented scale. Our clients, like businesses everywhere, are not just managing an economic recession, but a fundamental societal change. Many of the immediate solutions necessary to face this change have been around for years; remote working capability, on-demand services that can be delivered in a location of the customer’s choice, and so on. But until COVID, most companies have resisted wholesale investment in these things, always having ‘more important things to do’ than turn these into core aspects of how they work. Today, however, these innovations have moved from being seen as nice-to-have to becoming a key route to long-term survival.
Seeking short-term results or just trying to survive, many companies have defaulted to the ‘economic recession-busting’ tactics of doubling down on current business models and reducing costs. This attempt to weather the storm assumes an eventual return to the way things were. But this looks increasingly unlikely, at least in anything like the timescale that most businesses’ cash reserves can stand. In many cases, these businesses place increasing reliance on data (whether operational, financial or about customers) that reassures them that they can continue in the current form; using these data to dissuade themselves of the need to investing in significant change.
This inertia around real innovation is a common problem – innovation is recognised as important, but especially at times like these, does not seem critical enough to really commit resources to when there are apparently more urgent problems to solve. As such, ‘innovation’ is most often limited to incremental changes to enhance the status-quo, rather than bold changes. This could be a mistake. Now could be the moment when you have the greatest chance of success.
Recession success stories
Historically, for those businesses that have focused on the behaviour change aspects of downturns rather than the economic factors, recessions have proven to be great breeding grounds for innovation. Some of the world’s greatest business success stories have their roots in a recession. Disney was founded at the height of the Great Depression; Microsoft in the midst of the 1975 Oil Embargo Recession; and more recently in 2008, Airbnb launched amidst the financial crash. People often say that start-ups (such as the aforementioned) have an advantage here because they are not saddled with existing ways of working, but many established businesses have also been able to transform – think IBM, Phillips, GE.
What marks these businesses out is not just about having good ideas or delivering those ideas in a commercially successful way. What really matters is recognising the behavioural changes that economic turbulence can cause, driving through changes in operations, product set or business model needed to reflect these, and making often difficult decisions around investing in some areas of the business and cutting back in others. Making sure the right ideas were deployed, at the right time. To do this, confidence is needed – to back new ideas and withstand both external naysayers and the internal voices with a vested interest in the old ways of doing things.
Of course, at times like these, it can be particularly difficult to strike the right balance – a focus on growth and profit when society and individuals are suffering severe hardship is not straightforward and must be done right. You can imagine the point at which people told Walt Disney that the Great Depression is not a laughing matter, that people don’t want distraction during a period of mass unemployment, they want serious help. But Disney knew different. He saw through this conventional wisdom, with an understanding of his customers that went deeper, and was able to see that at a time like that, distraction and laughter was exactly what people needed to get through. And so what became one of the world’s most recognisable companies was born. This starting point has led to a business culture within Disney that continues to value the ability to understand and challenge the status quo, that ensures people have the roles and more importantly the confidence to identify game-changing new opportunities . In our own work with them, we have seen time and time again Disney’s ability to take decisive and game-changing action; countering new threats, being open to new ways of understanding people and thinking about their customers, and always seeming to come out on top of the challengers – in many cases acquiring them and turning them into a source of their own success.
3 tips to avoid innovation inertia
When working with our clients to identify customer-driven innovation opportunities, we always start with three key principles. And in today’s unpredictable times, these are more important than ever in helping companies identify and deliver the right changes to their business to ensure they survive and thrive in months and years to come.
- Don’t start internally by looking for answers in restructuring, finance or organisational structure changes. These changes are the outcome of good innovation, not the mechanism for it. Look at yourself from the outside in, challenge your assumptions about what customers want. Open your organisation to new realities by building a deep understanding of what it is that customers really value, whether or not this is something you – or your competitors do today.
- Recognise that the really exciting opportunities often do not come from within, and realise the power of customer data and insight as the source of inspiration and confidence in identifying opportunities and creating new ideas. Many businesses miss this key value in using insight to drive innovation, instead relying on it as a validation or testing tool for ideas that emerge internally, rather than as the source of strategic direction about opportunities. Customers are great at telling you what they really want, but only if you ask the right questions in the right way and at the right time.
- Be alert to the “tyranny of measures”. Just because measuring certain things in the past provided useful insight and knowledge does not mean these data are a good guide to future opportunity. In fact, relying on past data, however useful they were before, is often actively misleading and can provide a strong limitation to imagination and creativity when thinking about future changes. Past data often provides reasons to maintain things or delay a change, but always be alert to the danger that this evidence is partial at best, because it is based on data only gathered in the past and for reasons that may not matter anymore.
The key takeaways
Short-term, limited attempts at innovation primarily driven by a focus on internal factors, like reducing the drain on cash reserves or streamlining the existing operation, offer limited long-term success or viability at a time like this. The thing that marks out businesses such as Disney that are successful in the long-term is having the confidence needed to make tough choices. Rather than a reliance on internally focused survival mechanisms, this means sensitively balancing the right approach amid tragedy with the ability to take decisive, timely action for the business, driven by a deep understanding of what is really going on for consumers.
Knowing what customers are really trying to achieve and the progress they are trying to make in these uncertain times opens the door to a new route to commercial success as a truly customer driven organisation. Organisations need to stop putting the customer at the heart of everything they do and instead, ask what it means to put themselves at the heart of everything the customer does. To ask themselves fundamental questions about what they really means to customers. To understand why they really matter not in their own terms but in the customer’s. Although taking bold decisions might seem more challenging than ever, the organisations that get this right will seize the moment.
Get in touch to explore how we can help you seize the moment.