Is COVID19 the best time to innovate? I would love to answer that with a resounding ‘yes’, but looking at previous research the answer seems to be more nuanced. Yes, necessity is the mother of invention. And yes, external events trigger innovation. However, uncertainty impacts how we make decisions and if you have never brought a new idea to practice or introduced a new offering, you are in for a challenge if you have to do so for the first time during a crisis.
External events trigger innovation
So, does an economic crisis cause companies to innovate more or less?
Research of European firms shows that the 2008 financial crisis, substantially reduced the willingness of firms to invest in innovation. Firms reduced their investment, including investment in innovation where returns were uncertain and long-term.
However, this reduction in investment was not uniform across companies. Before the crisis, incumbent enterprises were more likely to expand their innovation investment, while after the crisis a few, small enterprises and new entrants were ready to “swim against the stream” by expanding their innovative related expenditures.
So we should expect innovation to come from smaller companies. Expect large firms to go in hibernation mode, till the COVID19 crisis has cleared.
Necessity is the mother of invention
"Necessity is the mother of invention". This saying appears in the dialogue Republic, by the ancient Greek philosopher Plato. A need or problem encourages creative efforts to meet the need or solve the problem.
That still rings true and indeed a lot of creative solutions have come from very dire circumstances, such as wars, natural disasters, and man-made disasters like the Apollo 13 event.
However, research has shown that it takes a happy mood to foster the ability to think about problems in new ways. In this experiment, participants in happy, sad, and neutral moods completed a set of classic mental tasks. The individuals in sad moods adhered to the tasks till they received evidence that was problematic. In contrast, individuals in happier moods were more likely to abandon the mental task set on their own, rather than wait for evidence of its inadequacy.
In other words, research indicates that in order to make the best out of this COVID19 crisis, you need to be somewhat optimistic about the future. Otherwise, you are unlikely to come up with new approaches proactively.
If you are depressed by what is going on, you will find it difficult to change routines and try out novel things. You are likely to only come to action when current routines no longer suffice.
It explains why so many of us are working so much harder trying to get the same results. We need an additional trigger, that makes us realize that a novel approach is needed.
In uncertain times fast movers win
Research also indicates that it is more important to execute a time-based strategy in an unfamiliar, emerging, or fast-changing market than in a familiar, existing, and stable market.
Speed-to-market is generally positively associated with new product development success, but market uncertainty moderates this direct effect. Speed-to-market is more important under conditions of high market uncertainty. Technological uncertainty does not affect the speed-success relationship.
… and experience matters
Uncertainty is inherent in the innovation process. Innovation is an organizational activity that is fraught with a high level of uncertainty.
And practice makes perfect. So the more experience you have had with bringing ideas to market, digital transformation, and introducing new offerings, the more likely you are to succeed under the current circumstances.
Among others, because you will have more tools in your toolbox. For example, a learning-based approach to innovation to improves the chances of success in the environment of emerging markets with emerging technologies (source). Such a learning-based approach probably also will serve you best during COVID19.
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