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Necessity is the mother of invention: How crises drive innovation

Crises have characterized the rhythm of economic cycles for centuries. Innovations have always been regarded as essential instruments for adapting to a changing environment and thus ensuring corporate success for the future.

To successfully emerge from a crisis, you need the courage to change and the willingness to innovate.

The outbreak of the COVID-19 pandemic and the subsequent war in Ukraine has made it even more apparent: the pace of change is even stronger during times of crisis. But how do companies react to the unravelling upheaval, and how can the business of tomorrow be secured?

Innovation occurs in spite of crisis

Crises are a trigger for change – even if they are as aggressive, incomprehensible and senseless as the war in Ukraine. The experiences of the previous months and years in projects for customers make it clear: while Lead Innovation registered significantly fewer enquiries from clients relating to innovation strategy in the first crisis year of 2020, the focus since 2021 has clearly been placed on the development of new business models – and at a higher speed of innovation.

At the start of the coronavirus pandemic, product or service innovations were the focus of our innovation partners in all projects. The reason for this is obvious: the pandemic changed the commercial environment and the needs of customers in all kinds of ways. Companies require quick and effective solutions to maintain their competitiveness. Numerous innovations have been implemented – at a pace that was previously barely conceivable.

2021 saw this trend suddenly turn around, and it has not returned since. Strategic issues such as establishing new business or developing sustainable innovation management have been the focus of our innovation partners since then. The generation of new business opportunities is also used as an approach for more resilience, which is required in volatile times in particular.

While companies therefore played it safe in the first crisis year of the pandemic with innovations that can be implemented rapidly, now it's all about improving strategic innovation processes in order to bolster innovative strength and resilience for the long term. The speed with which innovation projects need to be realized has also increased.

Managing directors are rightly asking themselves how to bring about innovations during times of crisis. Here are two success factors that help companies in these volatile times:

Success factor 1: flexible adjustment of business models

The pandemic has led to new customer requirements in many areas. Companies that recognize this quickly, and adapt their business models and core commercial processes appropriately, have come through the crisis in good condition.

One example of this is the kitchen trade: Anybody wishing to buy a kitchen prior to COVID-19 had to have it planned out in a furniture store. However, during the lockdowns, all furniture stores were closed. Kitchen planning had to change. IKEA – where planning kitchens online has been possible for years – came out the winner here. Customers bestowed the Swedish furniture retailer with a healthy growth in sales.

Of course, an IKEA-style online planning facility is not set up overnight, however. Yet a rapid adjustment to the sales process could conceivably have been easy to implement by means of online planning meetings. This version even offers advantages.

The "rules of the game" have gotten even tougher in the wake of the Ukraine war. On top of the ongoing pandemic, you have a stagnating economy, underemployment and inflation on the rise. The energy-intensive steel industry, or even the cement and chemicals industries, are feeling the consequences of the restricted gas imports. In my opinion, for some players the solution is to flexibly adapt business models.

Success factor 2: shape the future yourself; don't leave it to chance

It is not only a lack of flexibility, but also riding out problems and slow decision-making processes that bring considerable competitive disadvantages with them. The early bird catches the worm. Amazon founder Jeff Bezos recognized this back in 1997:

the "Day 1" philosophy of Jeff Bezos

In a letter to his shareholders, Bezos laid out his "every day is day one" philosophy, whereby a company should always retain the vitality of its day of foundation. For Bezos, day 2 is closure. To maintain the attitude of a start-up, Bezos recommends sticking to various operational principles:
• Concentrating on customers
• Quick decision-making
• Quickly recognizing and immediately rectifying undesirable developments
• Adapting new trends instead of resisting them
• Focusing on results rather than processes
• Accepting uncertainty

The "Day 1" philosophy has turned Amazon into one of the largest companies in the world.

How this can also be successfully implemented in times of crisis is demonstrated by Tesla:

Tesla's innovation in car sales

During the lockdown, car dealerships were unable to deliver their vehicles in many cases, because many sales employees were working from home. Cars were kept stockpiled and buyers were put off. Tesla, on the other hand, took a different approach and implemented entirely contactless delivery as early as April 2020.

Tesla was the only car company to react immediately and quickly took a decision to solve the problem. This is in stark contrast to all the other manufacturers, who expected a swift end to the pandemic. Speed produces competitive advantages. It is no accident that Tesla is the only brand to grow despite COVID-19.

Best practice: innovation during times of crisis, using Lead Horizon as an example

LEAD Horizon is a painless COVID-19 test, which was developed by Lead Innovation together with network partners from commerce and science and used extensively in the "Alles gurgelt!" campaign. The inspiration for this project came during the first lockdown in Austria. Many of our customers put planned deadlines on hold for weeks on end, projects were put on ice, and our team suddenly had resources available that wanted to be used. Out of this necessity, we decided to get our own innovation project up and running with which to help contain the pandemic.

The idea for the coronavirus test was developed from our own experiences that helped us to identify "pain points", so as to make a contribution to a more efficient test infrastructure in Austria, with the aim of providing people with greater flexibility and quicker test results.

Forced into transformation – the next resilience test for companies

Increasing geopolitical risks have an impact on the innovative activity of companies. Investment-intensive projects and future investments are often sidelined or temporarily put on hold in favor of short-term projects. Such measures are understandable, but they reduce the level of innovation and should be carefully considered. Exit routes may be offered by the success factors for innovation presented above in times of crisis.

Conclusion: crises as a driver of innovation

Since the pandemic, many managers have been in a constant state of alarm. With the Ukraine crisis, which has hit energy-intensive industries particularly hard, this situation has exacerbated. Strategic issues therefore crop up all too often in the background. The upheavals that mostly arise due to the crises are not letting up, however – they will increase in speed and compel us, ultimately, to react.

Those wanting to get through this crisis need the courage to change and the readiness for innovation. Scrutinizing business models and core commercial processes is just as important here as flexibility, speed, and the breaking up of old structures.

Put simply, there is no pause button for innovation in a crisis.

Daniel Zapfl

With his comprehensive experience in holistic innovation management, Daniel brings valuable insights and best practices from various industries to your innovation project. He boldly and disruptively challenges conventional ways of thinking. As a TRIZ-certified sparring partner, Daniel will support you with creative solution-finding in a reliable and structured manner. More critical than the most discerning customer, he always has an eye on the big picture.

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