Crises stifle innovation.

Research by McKinsey and others shows that organizations that focus on innovation during crises outperform the market average. Moreover, they’re likely to continue growing rapidly in the years to come.

However, recent financial pressures have caused many organizations to make suboptimal decisions from an innovation perspective. Frequently, they focus too much on survival and not enough on investing in the future.

Innovation is deemed too risky and is often replaced with projects that can deliver immediate results. Yet prioritizing long-term innovation is the key to surviving crises.

And so, how to keep innovation alive during crises? How to get leadership support for innovation?

As part of our Learning Lab on Innovation Strategy, Leadership, Governance and Portfolio Management, we discussed these topics with seasoned corporate innovators Suzan Briganti (CEO at Swarm Vision), Morten Benn (Partner at Nosco), Greg Ratcliff (Chief Innovation Officer at Vertiv), and Louise Kyhl-Triolo (Principal at Heidrick & Struggles).

Here’s a summary of the conversation we had.

Innovation Is Crucial In Crisis- Not Optional

Whenever a crisis occurs, uncertainty and instability are at their peak. Innovation usually helps deal with both uncertain and unstable situations. Unfortunately, innovation investments are likely to be cut in times of crisis, as they are seen as ‘optional’, states Louise. Nothing could be more wrong than this.

Organizations should double down on innovation in a downturn, despite the risk. While it might sound counterintuitive, prioritizing innovation in times of crisis is essential to surviving and unlocking further long-term growth opportunities. Downturns can easily alter your operating environment. Therefore, if you want to protect your competitive advantage and not fall behind your competitors, you can’t help but adapt to that new environment. And innovation is usually necessary for this.

"Changing directions may not be a comfortable transition for all organizations; this is where you can outperform your competitors”.

How To Keep Innovating In Times Of Crises?

Each crisis has its own challenges and opportunities, and each calls for different decisions. As a result, there is no silver bullet solution for staying innovative in an economic downturn. Nevertheless, the following two best practices can help you stay innovative in tough times:

Focus on Customer Needs

Crises typically lead to defensive reactions. An organization in defensive mode reduces operational costs, shrinks budgets, postpones investments in tools, training, and talent, and overshadows internal and external customer needs. Ultimately, this could decrease employees’ morale, affecting their performance and ability to come up with innovative ideas or think outside the box. In turn, this will affect the ability of organizations to meet consumer expectations.

If you want to protect your competitive advantage and not fall behind your competitors, you have to turn today’s ambiguity into tomorrow’s opportunity. How? By playing offense and investing in innovation. To this end, consider your employees’ needs first and ensure they have time to focus on innovation and can do so in a safe environment. Thus, focus on your customer needs: have they changed? What are their main pain points? What matters most to them? Accordingly, in the context of ongoing uncertainty, you can:

  • Offer products that connect with your consumers’ needs for simple and more affordable solutions.
  • Provide game-changing solutions if their needs have completely changed. It may seem incredibly risky at first glance. In order to mitigate this risk, companies should embrace open innovation and seek out collaboration opportunities.

Kill the “Zombies”

Projects that fail to fulfill their promise and clog the innovation pipeline are known as zombies. In other words, innovation is sabotaged by zombie projects. And so, if these projects can't be saved and turned into something useful,make sure all the “zombies” draining your organization’s innovation energy are cut as soon as possible from your innovation portfolio. In another article, Scott D. Anthony et al. identify some criteria you may find helpful to successfully kill the zombies:

  • Analyze your portfolio based on simple, transparent, and predetermined criteria. These criteria should allow you to determine whether or not a project can meet a real market need; whether or not it can do so more efficiently than current and potential competitors; and, finally, whether the project will be able to meet overall financial goals.
  • Bring impartiality to the evaluation process by involving a third party from a different division or outside the company.
  • Learn from your mistakes and codify them. As for the third criterion, it’s self-explanatory: conduct action-after reviews to preserve and share lessons learned.
  • Define success broadly (and communicate it widely). Whenever you innovate, your future success is uncertain. It’s, therefore, a success when you learn that a concept is not viable. Furthermore, it encourages future efforts if failures are widely broadcast- after all, innovation is more likely to occur at companies that take the risk to try.

How To Get Leadership Support For Innovation In Times Of Crises?

Leadership support for innovation is paramount, and it’s even more so during crises. However, it’s common for leaders to make decisions that may not look wise from an innovation standpoint.

Most leaders have a genuine interest in innovation. Nevertheless, they sometimes fail to deliver on their innovation promise. This happens when innovation is promised to contribute to growth but doesn’t meet the market’s needs; or when leaders present a declining top line in a growing market. In short, sometimes leaders’ aspirations for innovation don’t match their execution.

As Morten points out, the reason behind this gap is two-fold: on one side, the Chief Innovation Officer – who owns innovation skills and resources – doesn’t always sit on the executive board. On the other side, leaders haven’t been educated or acculturated to be innovators. Setting aspirations for innovation is crucial to the success of the business, but turning them into tangible actions is equally important. The goal is to create shared innovation targets and steps that everyone in the organization can relate to and aspire to.

For instance, setting an aspiration like “We will be the #1 player in the xx market with the most innovative and comprehensive portfolio in the industry!” is just a pointless, vague statement unless followed by a more concrete affirmation like “Innovation will deliver 15% top-line growth over the next three years (new business lines/new offerings) to fulfill our customers’ needs”.

Easy to say, hard to do. Leaders might not know how to make aspirations more tangible nor have the needed skills to do so. A crisis could make all of this worse. Hence, how can you train your leaders to support innovation?

“Leaders don’t have to become the best innovators. They just need to learn how to lead innovative teams. This will forever change how they see themselves and interact with others”.

Morten believes that it all comes down to working closely with leaders and involving them in the innovation process.

But first, make sure your innovation strategy is aligned with the business goals, as leadership support heavily depends on this. As mentioned, each crisis requires different decisions. In making each decision, leaders keep strategic priorities in mind. Hence, to ensure that innovation is part of those strategic priorities, your strategy must be aligned with the organization’s goals.

“Leading and inspiring others requires firsthand knowledge and appreciation of innovation”.

At this point, you can start building trust and intimacy. Involving one or more leaders in the innovation process itself is one way to accomplish this. In the role of innovation “sponsors”, leaders have the opportunity to get their hands dirty: they get real access to the project, to the innovation meetings, and contribute to the relevant decisions.