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Abstract

paper, going against the cycle and the herd is psychologically very hard. It takes a lot of discipline to be brave when everyone is fearful.Yet companies who successfully practice anticyclical investment in innovation are the ones who ultimately have much steeper growth trajectories.<figure id="f036"><img src="https://cdn-images-1.readmedium.com/v2/resize:fit:800/0*XZ0nCU4PwgCWKEzK"><figcaption>Photo by <a href="https://unsplash.com/@krisroller?utm_source=medium&utm_medium=referral">Kristopher Roller</a> on <a href="https://unsplash.com?utm_source=medium&utm_medium=referral">Unsplash</a></figcaption></figure>A crisis like the one we are living through right now accelerates many megatrends that were already happening before. A few obvious ones are eCommerce and delivery-based business models, more flexible work, drones, and autonomous mobility, and the like. The only certainty is that a lot of things will change and that the new normal will look very different.This change opens up many new opportunities. Changes in consumer preferences and industry structures open up entirely new value space or grow existing ones.New industries might be propelled into the mainstream, while others will see their first seeds growing and sprouting. Massive change creates a new playing field, which ultimately disadvantages companies sticking to their guns, and conveys an advantage on any company pushing for innovation when times are hard.<h1 id="c383">Ambidexterity, once more</h1>While the impulse to cut costs at all corners and try to weather the storm is natural, the counter-intuitive move to increase spending in vital areas of innovation now is essential. Preserving resources in a core business that is currently not working is undoubtedly the smart thing to do, yet while the one hand is busy managing that, the other hand needs to get busy working on the new.This is about <a href="https://hbr.org/2004/04/the-ambidextrous-organization">organizational ambidexterity</a>, the ability to separate narratives for different parts of the organization, and have each of them act independently and in the best interest of the whole. It is also about the concept of “today” and “tomorrow,” a

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s well as the different horizons of different parts of the organization.A company that wishes to preserve itself cannot get stuck in what they do today. It needs to think about the future.Hence while a part of the organization might be forced into hibernation — to cut costs to the bone and weather the storm — another part of the organization might be able to utilize additional resources effectively right now to ensure there is a future for the whole organization. The innovation teams should run an entire range of new experiments exactly right now, as everything in a tectonic shift.Experiments tell us something about the nature of our reality. And when would they be more needed than when the nature of that reality is about to shift?<figure id="2816"><img src="https://cdn-images-1.readmedium.com/v2/resize:fit:800/0*7jcK33MgewMMErq8"><figcaption>Photo by <a href="https://unsplash.com/@cloud_mind?utm_source=medium&utm_medium=referral">Tobias Bjerknes</a> on <a href="https://unsplash.com?utm_source=medium&utm_medium=referral">Unsplash</a></figcaption></figure><h1 id="680c">Be brave, when others are fearful</h1>Now is the time to be bold and invest in innovation. Small teams should run a lot of experiments to understand the shifting nature of our economic reality and prepare the organization for tomorrow. New business models are needed after the crisis, and the time to invent them is now.Cutting innovation budgets at this juncture will only guarantee to be laggards after the recovery, or even become entirely irrelevant.Is this an easy thing to do? Absolutely not — which is also why it will lead to higher returns. The path less traveled will yield advantage in unpredictable times. Everything is about to change, and we need to adapt to survive. Therefore 2020 should be the year of innovation when every company embraces change and increases its spending and efforts rather than cutting back.If you have any thoughts, responses or questions to add, I would love to hear from you in the comments below, or feel free to reach out to me directly via <a href="https://www.linkedin.com/in/smueller1512/">LinkedIn</a>. Thank you for reading.</article></body>

2020 should be the year of innovation

The economic implications of the COVID-19 pandemic and the shutdowns in many countries will see most businesses take a severe hit. When everyone makes a loss anyways, does the size really matter?

2020 will be a terrible year economically. Depending on the source of the forecast, the global GDP is estimated to either stall or even contract year-on-year. And this is the status in April — we do not even remotely know the end of it yet. Whole industries are being reduced to shadows of their former selves, with countless bankruptcies happening or expected.

Among the larger global crisis narrative, no one expects 2020 to be a good year.

Most shareholders will be happy if their investments even persist and do not go into bankruptcy. The creative accounting of the last decade to actively manage share prices will not be necessary this year. No one will be measured by the previous year’s results this year.

In this environment, companies that have the resources should focus on their innovation efforts. Failed experiments and increased spending will not hurt their stock market story this year. What is the difference between a large loss and a slightly larger loss in 2020? The difference is the reality companies will be able to return to after normalcy has returned.

Anticyclical investment in innovation

Anticyclical investment is an often proclaimed value that few actually live in reality. While it sounds great on paper, going against the cycle and the herd is psychologically very hard. It takes a lot of discipline to be brave when everyone is fearful.

Yet companies who successfully practice anticyclical investment in innovation are the ones who ultimately have much steeper growth trajectories.

A crisis like the one we are living through right now accelerates many megatrends that were already happening before. A few obvious ones are eCommerce and delivery-based business models, more flexible work, drones, and autonomous mobility, and the like. The only certainty is that a lot of things will change and that the new normal will look very different.

This change opens up many new opportunities. Changes in consumer preferences and industry structures open up entirely new value space or grow existing ones.

New industries might be propelled into the mainstream, while others will see their first seeds growing and sprouting. Massive change creates a new playing field, which ultimately disadvantages companies sticking to their guns, and conveys an advantage on any company pushing for innovation when times are hard.

Ambidexterity, once more

While the impulse to cut costs at all corners and try to weather the storm is natural, the counter-intuitive move to increase spending in vital areas of innovation now is essential. Preserving resources in a core business that is currently not working is undoubtedly the smart thing to do, yet while the one hand is busy managing that, the other hand needs to get busy working on the new.

This is about organizational ambidexterity, the ability to separate narratives for different parts of the organization, and have each of them act independently and in the best interest of the whole. It is also about the concept of “today” and “tomorrow,” as well as the different horizons of different parts of the organization.

A company that wishes to preserve itself cannot get stuck in what they do today. It needs to think about the future.

Hence while a part of the organization might be forced into hibernation — to cut costs to the bone and weather the storm — another part of the organization might be able to utilize additional resources effectively right now to ensure there is a future for the whole organization. The innovation teams should run an entire range of new experiments exactly right now, as everything in a tectonic shift.

Experiments tell us something about the nature of our reality. And when would they be more needed than when the nature of that reality is about to shift?

Be brave, when others are fearful

Now is the time to be bold and invest in innovation. Small teams should run a lot of experiments to understand the shifting nature of our economic reality and prepare the organization for tomorrow. New business models are needed after the crisis, and the time to invent them is now.

Cutting innovation budgets at this juncture will only guarantee to be laggards after the recovery, or even become entirely irrelevant.

Is this an easy thing to do? Absolutely not — which is also why it will lead to higher returns. The path less traveled will yield advantage in unpredictable times. Everything is about to change, and we need to adapt to survive. Therefore 2020 should be the year of innovation when every company embraces change and increases its spending and efforts rather than cutting back.

If you have any thoughts, responses or questions to add, I would love to hear from you in the comments below, or feel free to reach out to me directly via LinkedIn. Thank you for reading.