Understanding the design in the confusion enables us to ride the change; and although wobbly at first, we slowly find our balance
Change happened at laser velocity in the last two-and-a-half years. Tomorrow became today, and the next suddenly turned into now even before we fully realised what was happening. Just when we thought that the virus was conquered and we could ride a much-anticipated post-pandemic boom when pent-up demand would be released, the world plunged into a geopolitical crisis, perhaps the biggest since World War II.
A series of concurrent calamities hit every country and company in a relentless wave – runaway inflation, spiralling energy costs, scorching heatwaves, supply chain crisis, a great resignation, a fuzzy future of work, the resurgence of the pandemic in China, entire countries facing bankruptcy, a looming food insecurity, and above all a force for deglobalization unleashed, which some have called it “slowbalization”. So much of change crunched in such a short time span is unparalleled.
Flying blind into the future
The most fascinating element of these powerful forces of change is that there was no historical data that could have given us an idea of what was likely to happen. The pandemic itself was once in a century event, with no past data of the trajectory that it was likely to take. The last geopolitical conflict of such magnitude had occurred over 70 years ago. We were like flying blind in a storm and yet learning to read even the weakest signals to navigate the tempest. Nevertheless, if we turn the pages of history, we find that crisis has always been a springboard for innovation.
We have stepped into the era of Chaos-As-Usual. Something remarkable happened when everything was getting pounded by the waves of disruptive forces; we began to read a pattern into these events. Once we understood the lurking design in the confusion, we tried to ride the change; a bit wobbly at first, like a novice surfboarder, but slowly finding our balance. Let’s see how we did it – navigating chaos and transforming it into a positive force.
Crises are adrenaline for innovation
You must make decisions quickly under extremely uncertain conditions, and you never have enough time or information to fully weigh difficult choices that may affect both employee livelihoods and the survival of the business. Yet these very constraints can unleash waves of creativity. Necessity and urgency spur ideas and dissipate inertia. Leading innovators seize such conditions to reshape mindsets and behaviours, embracing the opportunity to uncover fresh solutions and make bold bets that can reignite growth.
Quite remarkably indeed, seeds of innovation were embedded in each one of these crises. Climate change meant the emergence of CleanTech investments; the energy crisis is pushing us towards solar, wind, and revival of nuclear power; supply chain challenges translated into blueprinting a new network of suppliers using artificial intelligence to forecast the next disruption; the future of work provided the motivation to redesign work, reconfigure our offices into exciting collaborative spaces more like Starbucks; food insecurity forced us to explore technologies to use less resources to grow more, innovate drought-resistant crops; hybrid work reimagined the employer-employee relationship into a new contract that factored in lifestyle changes that had happened during the pandemic; the next phase would usher in telepresence, the Internet of Senses when we use our senses of touch and smell to create immersive experiences in a metaverse. These will be the foundation of the future of everything.
A pattern of innovation
It’s a pattern manifested throughout history: a significant economic or social disruption creates a market need or shift in behaviour that innovators use as a launchpad for new products, services, and business models. In the 1940s, manufacturers of home appliances and convenience technologies responded to the needs of women who entered the workforce and were spending less time at home.
The SARS epidemic that ravaged Asia in 2002 and led its citizens to shelter in place kick-started widespread adoption of e-commerce, making China the epicenter of innovation in online transactions and social commerce. A workforce left underemployed by the financial crisis enabled the explosive growth of the sharing economy. Now, climate change and the corporate crisis of conscience are not only driving significant investments in solar technologies, electric cars, and sustainable foods but also shifting many organisations’ focus to environmental, social, and corporate governance (ESG) priorities.
“How do we accelerate the pivot to growth?” This is one of the most common questions we hear today, particularly from executives whose organisational cultures prioritise short-term financial returns and execution over innovation. Leaders’ tendency is to ask for “bigger, bolder ideas,” but that is only part of the innovation equation—and not the most important one.
Successful innovators invest in building sustainable delivery systems for innovation. The how is far more important than the what to ensuring that innovation is a predictable, stable profit-growth engine. A siloed innovation group that simply generates myriad ideas will not produce such results. Pivoting to innovation-led new growth needs to be an explicit choice backed with dedicated resources.
The Crisis Innovators – Obstacles into Opportunities
History is replete with stories of organisations turning obstacles into opportunities.
- General Electric: Thomas Edison and company launched General Electric right as the United States was heading into the Panic of 1893, a period of 16 months where business activity dropped nearly 40% across the nation. Nevertheless, the company persisted and went on to be one of the original 12 companies listed on the Dow Jones Industrial Average in 1896, where it remained for over a century.
- General Motors: Though his business was still manufacturing horse-drawn carriages in the late 1800s, General Motors Founder William Durant made his transition into the newly created automobile industry in 1904 with his purchase of the Buick Motor Company. However, it wasn’t until early 1908 – in the middle of the 30% business declines experienced during the 13-month Panic of 1907 – that Durant decided to launch GM as a holding company to acquire even more automobile manufacturers. This strategy would serve GM well, as it would go on to become one of the largest corporations in the history of the world.
- IBM: Launched as the Computing-Tabulating-Recording Company (CTR) by Charles Flint in June of 1911, IBM got its start selling commercial and business machines right in the middle of a long two-year panic. While industries everywhere saw double-digit declines in activity, CTR was able to not only survive but thrive, eventually changing its name to IBM, and becoming the leader in technology that would support the digital revolution, making billions along the way.
- Microsoft: In the early 1970s, the U.S. entered a 16-month recession when the GDP took its worst hit in nearly two decades. It was during these difficult times that college drop-outs Bill Gates and Paul Allen developed the concept of easy-to-use computing for homes and offices.
- Facebook: The 2001 US recession was an eight-month economic downturn that began in March and lasted through November. While the economy recovered in the fourth quarter of that year, the impact lingered and the national unemployment continued to climb, reaching 6% in June 2003.
- Google: As 1998 drew to a close, the world was caught in the grips of the most serious financial crisis since the Great Depression of the 1930s. Starting in Thailand in July 1997, the crisis spread to rest of Asia, parts of Latin America, and Russia over the next 18 months. By the end of the year, it posed a direct threat to the U.S. economy.
Three steps for innovation
Research and experience suggest that creating an innovation launchpad out of this crisis entails three core steps.
- Reallocate toward the future: In most organisations, innovation is not an ideas problem but a resource allocation problem. A crisis that reshapes market conditions, with potentially dramatic impact on existing business models, only accentuates this disconnect. Funds and people may need to be rapidly redeployed to secure the organisation’s future. Such redirection of investment requires quick reassessments of market dynamics to identify new opportunity areas and profit pools.
Leaders should review product pipelines and challenge assumptions that the crisis may have changed. Consider doing reverse P&Ls–for example, start with the profit a project would need to generate and work backward to determine the revenue needed to meet that hurdle. Such assessments can create the foundation for resource-reallocation decisions. Almost every organisation has a long tail of noncore initiatives whose resources can be put toward higher-value, more urgent growth opportunities.
- Embed flexibility: When an organisation faces a crisis, it is usually forced to suddenly shift to agile ways of working. Companies that are no longer operating in crisis mode should use this time to make these agile models’ part of their next normal rather than reverting to the old normal.
Organisations should also systematise working and operating processes that empower the front lines to make connections with customers. Investments in digital and advanced analytics that help uncover and track new customer and market insights will help remove some of the risk inherent in shifting decisions down in the organisation.
- Role models for change: Leaders, meanwhile, need to serve as role models for the new behaviours and mindsets they seek from the workforce, including challenging orthodoxies about “how it has always been done” to encourage the embrace of “the way we now do it.” Hack processes to increase development speed.
Too much of most organisations’ time is spent on tracking and managing processes instead of the outcomes of those activities. Through years of risk aversion and scrupulous process monitoring, companies can lose sight of the ultimate prize: delighting the customer. Changing such a culture starts with shifting the organisation’s focus to the decisions that matter, and decluttering the decision-making process itself.
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