Innovation – all it takes is a crisis

by Tobias Vogel , 10.06.2020

Innovation – all it takes is a crisis

by Tobias Vogel , 10.06.2020

Tobias Vogel Consultant | Lean Startup

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Abstract

For innovation enthusiasts, the current situation is simply paradoxical. On the one hand innovation initiatives are stopped due to COVID-19 as if they were luxury goods that can only be afforded in a booming economy. On the other hand, this crisis awaked the entrepreneur in us which gives our dear innovation a real chance – if you let it.

Read how to utilize the momentum and start true innovation. (10 min read)

#COVID-19 #innovation #InnovationParadox #inspiration #entrepreneurship

“For innovation enthusiasts, the current situation is simply paradoxical.”

On the one hand, even before the crisis the situation of many large corporate innovation hubs was critical. The efforts of the numerous initiatives, which in recent years were still springing up like mushrooms, did not result in the new, profitable business models that would secure the future of its sponsoring companies. The general mood of retreat and the closure of many of the innovation laboratories (Manger Magazine) therefore seems only logical. After this punch to the gut has lowered the cover, fate sets in for knockout with a hook in form of the virus crisis. Entire programs are frozen, their employees sent on short-time work like recently happened in LIH the Lufthansa Innovation Hub (Faz, fvw). In current frequency, these messages paint a gloomy picture for our dear innovation. After all, liquidity and orders must now be secured. There is no time, space, and certainly no money left for the moderately successful exploration of new business models. The start-up culture is something for good times, when we can afford hip InnoLabs and modern start-up mentality. But now we have to get serious again. It’s enough to drive you up the wall!

But on the other hand, something wonderful is happening. Every crisis leads to a certain clarity, this applies to everyone personally as well as to companies. A crisis shows who is striving for real profitability and above all shows who has what it takes. This is how many of today’s unicorns emerged from the crisis and many more initiatives failed to make it. It is an evolutionary step that sifts much that perhaps should never have been pursued in the first place (Economist).
The necessary start-up mentality, whose cultural change many found a hard nut to crack and which all too often ended in innovation theatre, emerges in the crisis as if by magic. Necessity is the mother of invention, but it seems to work only with real existential pressure. If the core business is threatened employees in all areas, not just in innovation programs, switch almost effortlessly into a pragmatic, adaptive and opportunistic mind-set that comes as close to that of a founder and what some innovation hubs could only dream of. The way of working that emerged from the crisis was subsumed under “New Work” a moment ago but is now inevitably standard. It is now normal to work flexibly remotely, to actually use the numerous digital helpers and to communicate frequently and efficiently.

Was the crisis what it took?

Nora Olesen tells us exactly what we can and should learn from this situation on the topics of communication and innovation. She is a change agent working to break down entrenched attitudes and establish new ways of working. She regularly observes the markets and analyzes emerging patterns. Especially now it is fascinating to see surprisingly new and reemerging patterns which is an inspiration on how to take advantage of the crisis.

The biggest challenge, at the moment, is still the transition from everyday office life to remote work without compromising performance. It is a major break for many, even though home office and more flexible working hours have been more and more popular. There are, however, very advantageous behaviors that are adopted quite independently and almost effortlessly by leaders and employees under the new circumstances.

The following, are phenomena Nora observed:

Cultural change

Employees are kept up to date about the situation of the company.

Employees are provided with relevant information not only more frequently, but also more efficiently throughout the whole company. Oftentimes, company leaders inform their employees personally and at short intervals about news and make clear announcements. Employees feel better informed than ever before, which provides guidance and ensures cohesion in uncertain times.
Invisible communication boundaries between the silos are softened.

The transition from classic e-mail to chats such as MS Teams, Slack and similar tools leads to much faster responses and lowers the inhibition threshold to contact someone from another department. The exchange of information between silos according to the network effect has increased significantly and leads to faster work progress, especially when an entire meeting can be saved.
Quality of communication has increased impressively.

In a video chat with no feeling for body language and sometimes poor connection it is necessary to focus on the essentials. Colleagues try to get to the point faster and important topics are summarized more clearly. Reducing noise saves time and energy.

Communication

Risk of less valuable discussions.

A risk that emerges from increased efficiency is that employees find it easier to just not say anything, rather than challenge the already deep-rooted beliefs of an organisation. Furthermore, efficiency is one thing, but how much value creation are we actually losing out on by not having the coffee-break talks, or the discussions you have while walking between meeting rooms.
Information tide rises.

Of course, the speed and the amount of new information can also be overwhelming and there is a risk of losing some employees in this overabundance. However, like in start-ups, this is where you get thrown in at the deep end and you quickly get to know and appreciate the positive change and progress that comes with it.
Informal chats and personal contact are in danger.

For all the efficiency in communication, there is a danger of neglecting the interpersonal aspect. Networking and building trust is essential in most companies and this is made much more difficult now. Here is the opportunity to introduce dedicated social formats like digital coffee rounds, which allow for informal exchange and can be peppered with various small topics. This way, employees can still mingle and feel that there is still a person sitting at the other end.

Overall, the impression is that communication is more efficient, pragmatical and targeted than before. Hurdles for networking across silo boundaries are lowered through more modern communication tools. Challenges from information overload and lack of socializing still exist, but they are valuable incentives for new rules and formats.

Innovation

From exploitation (optimization of a functioning business model) to exploration (testing of new business models) in no time. Especially with industries which rely on personal contact, Nora observes, that the threat to the core business model boosts the testing of new variations or entirely new business models immensely. The fact itself is not surprising since in most cases the name of the game is to reach your customer in a new way or die. Interesting is the speed of switching from the exploitative mind set to an explorative one.

[Author’s comment] For many, also well-established companies it is now the new normal to think about fundamental changes in the core business. In many industries, the exploration of new business models has been outsourced to separate innovation labs to first try out what should later be reintegrated into the parent company. This often failed due to the clash of different cultures and incompatibility of grown structures. Now the force of change comes from within and sets free energy that breaks cultural inertia.

Agility is real

The current situation is influenced by many factors, such as the behavior of competitors, the opinion of health experts and the reactions of the government, which requires weekly, sometimes daily changes.

This means that planning horizons are very short and leaders as well as employees have to be prepared for constantly changing requirements. Decisions are now made faster and more independently, knowing that the basis for decision making can have changed again within a few days. Every company now feels what it means when the goal is only a vague vision and the way to reach it is unclear. But as if they had never done anything else, employees adapt the agile behavior that allows them to test more, execute faster and do not overthink in this uncertain (explorative) environment. The goal must be to use this as an example and to switch to the right working mode in uncertain environments even after the crisis.
Paradox: innovative and agile culture grows but innovation activities pause.

While the explorative work mode in these uncertain times is now experienced first hand, many programs dealing with new technologies pause.

This is understandable considering that the current restrictions often do not allow for a test run. Nevertheless, innovation is often treated as a luxury good. In good times we are happy to pursue many ideas, but in bad times this must stop. The reason often cited is to secure liquidity. This is an argument that is only understandable at first glance, when it is now becoming more than clear that the core business must continue to develop. It seems, however, that the existential pressure is not yet great enough. Only when to wait and see is more of a risk than changing, it seems, innovation is taken seriously. It is paradoxical because exactly now is the time when innovation programs can benefit so much from the new momentum.
How the utilization of that momentum could look like show the numerous hackathons.

#EUvsVirus from the European Commission, #WirVsVirus from the German government and Hack the crisis Norway from a network of Norwegian entrepreneurs, supporters and the City of Oslo are Hackathons dedicated to the fight the crisis.

Here, participants from all over the world connect remotely and work on ideas in categories as in the case of Hack the crisis Norway: “Save Lives”, “Safe Communities” and “Save Businesses” in a very short time (usually 48h). The best ideas are chosen and supported by a network of sponsors with an appropriate initial funding, so that the implementation can start immediately. Nora observed that many employees form different companies participated in Hack the crisis Norway and thus committed themselves beyond the boundaries of their companies. This format clearly shows how much energy and ambition is generated in a global context. It is astonishing how this energy can be channeled in the shortest possible time and spend for product or service execution without extensive PowerPoint battles. It blows up old boundaries and enables unreserved global cooperation.
So why not tackle company-specific challenges together?

With the platform “Start-Ups against Corona” 27pilots has created the possibility for companies to publicly advertise their own challenges with the crisis.

Start-ups can submit their proposed solutions there. 27Pilots evaluates the solutions and the start-ups on behalf of the companies and makes a recommendation about the cooperation. Open innovation par excellence, only on the crisis topic.

Companies are forced to test new variations or entirely new business models quickly which lets employees adapt elements of a truly agile work mode. Still, in well situated companies, innovation activities are mostly paused and treating as a luxury good that can only be pursued in a booming economy. Ways to utilize the momentum can be observed in hackathons and open innovation initiatives tackling the crisis.

Indeed, there are significant opportunities arising from the crisis situation and all in all Nora Olesen is impressed by the quantum leap that many companies have made in such a short time. It is astonishing how many employees turn into real entrepreneurs without even knowing it and push their companies forward even in times of crisis.

Begin now

So how can we use the momentum from the crisis in concrete terms? Together with our Norwegian partner code11 we from P3 observe similar phenomena in Germany. From this knowledge and our experience in consulting innovation hubs in the automotive industry and the energy sector, we have compiled practice-proven recommendations. We want to enable you to use the crisis to your advantage.

Inventory and reassessment of innovation initiatives

Give priority to innovation.

Resolve the paradoxical situation and see the crisis as an opportunity to approach innovation in an implementation-driven manner!

Understand customers in a new way.

Your own company faces new challenges, your customers certainly do too. Use the opportunity and openness of the hour to understand your customer’s pains exactly and reflect whether your business model still delivers the greatest possible added value.

Critically question your own data situation.

Resources are scarcer and must now be distributed even more considerately. Can my innovation projects show that they deliver added value to the customer based on real data, or do they just think they do? Is there a need to catch up or does the data even show that a project should be paused?

Develop company specific KPIs.

The company needs to understand exactly how it relates to its own customers and learn which KPIs express the added value for the customer. Innovation projects can then be rigorously measured against these indicators in order to make decisions about resource allocation.

Inventory and reassessment of innovation initiatives

Resource allocation according to evolution principle.

Distributing budgets according to the principle of Metered Funding gives all projects the same starting point (budget and time) and rewards those that can prove to be market-relevant within a given time frame (reward is then a wider budget and time frame to start the next round of evolution). This allows efficient prioritization between projects and early pauses between projects, which might otherwise be pursued without success.

Build up core portfolio.

The projects that are pursued can be considered as a portfolio in which proven strategies such as risk diversification help decide which projects are a suitable addition to the existing portfolio.

Kick off again from the crisis.

Those exceptional times break existing habits and, thus, are a powerful catalyst for a re-launch of innovation projects. Especially now colleagues should get a clear direction and be incentivized and motivated to pull together.

Fresh wind for Open Innovation.

Start-ups and corporate innovation initiatives must now prove themselves. Only those who are truly relevant to the market and are profitable will survive. Supposed success stories, which are more hype than substance, are now easier to uncover (Source Economist). This puts us in a good position to consider adding the new strong generation to our own portfolio. Modern formats such as hackathons are a good source for creating relevant and crisis-tested products and services. There can also be potential far away from the usual start-up hotspots. The conditions for founding a company are as good as never before today, which encourages people all over the country to take their innovative ideas to the market and sometimes build real hidden champions. Such an example is Lampenwelt.de. Founded in 2004 in Hessen, Germany it dominates the e-commerce of lamps and is no longer a Start-Up but a profitable Grownup with an annual net profit of 1.9 million EUR in 2017 (Source bundesanzieger.de).

Cultural change is now. Actively managing change

Self-responsibility in projects.

If the right framework is set, e.g. metered funding, the teams must be able to enjoy absolute autonomy within these borders. At the time, most employees only begin to learn how to deal with uncertainty and how to deal with it in a structured way. They are already acting more independently and pragmatically. With the appropriate freedom, the drive that was often lacking before the crisis can now be developed.

Leading by example.

Managers who make the same observations of their colleagues as Nora can consolidate agile behaviour patterns by continuing elements from the crisis, such as shorter planning horizons and frequent but concise communication. Based on employee feedback those elements should be developed further and implemented as the new standard.

Cultural change is now. Actively managing change

Keep the communication barriers down.

The boundaries of communication between silos have been softened. There is more exchange and network effects that fuel fast workflows. Promote this! The introduction of new communication software such as MS Teams, Slack etc. is an important cornerstone that has now made it into our everyday life. But it mut taken to the next level. Try out different (also informal) formats for the exchange between departments to establish a network between employees. Proceed here in an equally experimental and agile way and develop formats based on employee feedback.

Structured embedding of the new into your own DNA.

As quickly as the behaviour of employees has adapted to an explorative environment, it can fall back into old thinking patterns and behaviours when “normality” comes back. Without a structured anchoring in the company, even the best values cannot be established. Precise observation and documentation are the prerequisites for the development of an own, new working style, which can manifest itself as a framework in the core business in a sustainable way. These new rules of the game have the advantage that they come from and are carried by the employees themselves – it was invented here!

So was the crisis needed after all?

Nobody really needs it, but it does drive people to top performance and creates impressive surprises. Our dear innovation has a real chance here – if you let it.

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Mots clés: Mobility innovation

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Tobias Vogel Consultant | Lean Startup

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Johannes NiessenPartner

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