Two of the biggest problems with innovation as a corporate strategy are that innovation is expensive and outcomes are often uncertain. But with profits hard to come by and competition high amid the uncertainty sown by the COVID-19 pandemic, a willingness to embrace innovation is likely to become the ultimate litmus test of a company’s chosen business model – and make the difference between success and failure.
As a result, new COVID-19-era corporate strategies are more likely to elevate the importance of R&D work and encourage innovation across a company’s areas of operation, as more companies look to build up a pipeline of ideas that will fuel growth and give them a competitive edge.
The pandemic as disruptor
Already stiff competition in many sectors will be exacerbated by digital disruption and fluid market settings, pushing corporate leaders to fast-track changes to corporate culture.
In recent decades, the disruptive trends of the Fourth Industrial Revolution have gradually transformed the ways our economics function. Although governments and businesses are still debating how to adjust and capitalize on the opportunities delivered by digital disruption, the current crisis is forcing more and more companies to embrace new ways of learning and doing business.
The shift to remote working, for instance, has been one of the distinctive changes of the current pandemic, with 34 percent of Americans who previously commuted to work every day now working from home. Many people have found that they can work just as effectively from any location with stable internet access, while overall levels of productivity remain unchanged.
Many factors influence corporate innovations, including business organization (sole proprietorship, partnership, corporation and LLC), venture capital features (high degrees of risk, equity participation, long term investment and participation in management), corporate governance and executive leadership, as well as legal, institutional and market frameworks, and even rates of political activism.
The changes wrought by the pandemic have impacted the majority of the factors above, as well as companies’ overall strategic approach to innovations.
The path to post-pandemic recovery will take time, with companies that are able to adapt faster and transform their working patterns emerging as the ultimate beneficiaries. This puts pressure on corporate leadership teams to accelerate their embrace of innovation, while also operating within the harsh market realities of stiffer competition and reduced profits.
Higher risk tolerance may be another distinctive feature of post-pandemic corporate innovation strategies. Businesses do not like uncertainty, and one way to reduce it is to expand internal investments into innovation. Companies can abandon their safety-first approach and build richer sets of ideas and solutions to potential challenges.
The current situation requires innovation strategies that promote alignment among diverse groups within a company and clarify their priorities. In order to avoid conflicts and embrace opportunities delivered by diverse ideas and business perspectives, innovation strategy should be aligned with business strategy and establish a single objective across all departments.
Another effective approach is to free up internal resources and involve more people and departments in the innovation process. While R&D budgets have been hitting new highs, many marketing leaders have struggled to identify ideas with real business potential. A pipeline of ideas that aligns with the company’s innovation strategy is a way to solve customer-centric problems, promote B2C and B2B engagement in a meaningful way, and yield actionable services or goods.
Amid the current volatility, not only large companies but also SMEs can no longer maintain a traditional R&D department model. It is important for enterprises to constantly evolve their corporate practices and come up with products and solutions that appeal to their customer base. Improving operational efficiency and enhancing the involvement of every department is likely to be the only viable solution to creating an effective innovation pipeline.
What should companies do?
There are multiple practical recommendations that enterprises might embrace, such as establishing “innovation incubators” either within or across departments. These spaces would encourage employees to get together and discuss issues that impact productivity, or brainstorm new ways to improve performance indicators or working processes. They might also engage in some form of internal competition that would help to identify the best ideas and spearhead their implementation.
Companies could likewise expand their collaboration with startups and engage with local accelerator ecosystems. The shift to remote working and the spread of startup culture across developed economies allow many departments to embrace the juncture system, direct and formalized cooperation with startups, which helps to outsource and test some ideas. This is likely to not only infuse corporate culture with startup dynamism, but also accelerate internal operational processes. The result will be a management culture that is more open to new ideas and more resilient to disruptions.