For businesses, a crisis is not simply something to endure. Nor does a crisis always result in catastrophic outcomes. With the right mindset, a crisis can bring opportunity. Challenging times present business owners with a choice. We can resign ourselves to the situation, or we can seek innovative solutions.
Unexpected crisis hits Aussie SMEs
Since the start of the COVID-19 pandemic, many small and medium-sized Australian businesses have confronted an unexpected crisis. The pandemic has upended nearly every aspect of our lives. Words and phrases – such as ‘lockdown’, ‘contact tracing’, ‘social distancing’, and even ‘zooming’ – are now commonplace. Famous tourist sites like Time’s Square, The Great Wall of China, The Taj Mahal and The Colosseum, have been deserted. Once bustling city centres have become quiet. Entire economies have been shut down.
In Australia, lockdowns have forced businesses to adapt. They have changed how we interact with customers, how we work with our employees, and how supply chains deliver our products and services. Many of these changes are here to stay. In a recent survey, for example, McKinsey & Company found that more than 90 percent of executives said they expect the fallout from COVID-19 to fundamentally change the way they do business over the next five years, with almost as many asserting that the crisis will have a lasting impact on their customers’ needs.
Of course, it’s important to note that COVID-19 has not affected all sectors or local economies equally. Businesses have had to innovate in different ways, and some more so than others. But what does not change is the underlying need for innovation in moments of crisis.
Innovative businesses fare better during and after crises
Research shows how businesses that innovate during crises deliver superior growth and performance postcrisis. In other words, businesses that focus on generating new growth, rather than simply weathering the storm, perform better. We have seen this in the past. Businesses that maintained a focus on innovation throughout the 2009 financial crisis emerged stronger. These companies outperformed the market average by more than 30 percent and they continued to deliver accelerated growth over the following years.
Here, we’ll outline why a crisis can bring opportunity. To do so, we’ll focus on four key ways that crises (such as a global pandemic!) encourage innovation.
1. Urgency and focus
Great ideas are often sparked by a flash of imagination, or a lesson learned from a recent failure. The inspiration for these ideas rarely comes from moments where we are feeling comfortable. We don’t often seek out innovation when ‘business as usual’ is working just fine.
COVID-19 has forced businesses to adapt. To meet this crisis, creativity and innovation are needed. For companies, lockdowns brought on by the pandemic are accompanied by a sense of urgency. When a business leader harnesses this urgency, they can focus their team’s attention and galvanise action. These challenging and unique conditions allow innovators to thrive. They provide the opportunity for creative ideas and rapid change. They also encourage teams to learn from one another, as they work together to solve problems and address a crisis.
2. Confronting orthodoxies
We’re all guilty of accepting entrenched orthodoxies. Just think of how often you’ve asked a question, only to hear: ‘This is the way things are usually done.’ As people, we are, in many ways, wired to revert to the status quo.
The same is true for company leaders, who often wait until a problem becomes acute before addressing it. In an article by the MIT Sloan Management Review, our tendency to avoid challenging conventions is termed ‘normalcy bias’. However, there’s also a phenomenon known as ‘prospect theory’: When the outcome we face is negative, acute, and imminent, people are motivated to act and ready to embrace innovation.
For businesses, the negative outcomes of COVID-19 spur motivation and help us to overcome our normalcy bias. The pandemic forced businesses to re-examine methodologies and systems that were entrenched in their operating model. For example, during COVID-19, disruptions to the supply change have forced food distributors that traditionally supplied restaurants to set up digital direct-to-consumer channels. Similarly, many sporting industries generated new content (for example, replays of old events and matches) to fill the void in programming that arose when leagues were suspended. Even museums created and streamed digital content, so people could remain engaged during lockdowns.
3. Spotlighting weaknesses
When a crisis hits, we are compelled to confront the truth about how well our systems actually work. In this way, it’s useful for businesses to think of a crisis as similar to an outside consultant. Outside consultants are hired to provide a new perspective and pinpoint areas that you might have overlooked. Much like a fresh set of eyes, COVID-19 has exposed businesses’ operational weaknesses and unaddressed problem areas.
We are already seeing how lockdowns have compelled businesses to confront weak spots in their operating model. This is particularly true in the digital sphere. Since the pandemic hit, online purchasing and digital engagement with customers has increased. For example, McKinsey’s B2B Decision-Maker Pulse survey found that 96 percent of businesses have changed their standard market model since the start of COVID-19, with the overwhelming majority of these now using multiple forms of digital engagement with customers. To meet the needs of our fast-paced, ever-evolving digital marketplace, businesses must continually innovate their online presence. For many businesses, COVID provides an opportunity to develop new digital structures that engage customers and spur growth.
4. United teams
In the confusing early months of COVID-19, something surprising started to happen. Innovators from around the world looked to help and began to form partnerships. Companies started to work together in ways they hadn’t before. Major companies, such as Dyson and GM, manufactured ventilators. When grocery stores started to run out of hand sanitisers, distilleries across the world stepped in to help. Siemens, a German multinational, opened up its Additive Manufacturing Network to anyone who needed help in medical device design. Scania, a heavy truck maker, partnered with the Karolinska University Hospital. Through this partnership, Scania managed to convert trailers into mobile testing stations, and they also directed their team of purchasing and logistics experts to locate, acquire, and deliver personal protective equipment to health care workers.
In an article by the Harvard Business Review, this sort of collaboration is called ‘open innovation.’ Open innovation improves problem-solving skills and helps generate creative solutions. It also allows companies to find new ways of creating value, be it through novel partners with complementary skills or by unlocking hidden potential in long-lasting relationships. Perhaps most importantly, this pandemic has highlighted how open innovation allows companies to employ their skill set to higher goals for the greater good.
Are you looking for ways to better meet the business challenges brought on by COVID-19? Or are you seeking to innovate your business practices and identify new areas for growth? Get in touch with Brainiact’s expert team today. We’re here to help.