05.10.2020

Is this the right time to think about innovation?

This question may sound counterintuitive when you consider that German economic output shrank by 10.1% in the second quarter of 2020, according to a report by Germany’s Federal Statistical Office. According to the U.S. Bureau of Economic Analysis, economic output in the U.S. actually fell by 32.9% in the second quarter.

Both large and small companies are struggling with the effects of the coronavirus pandemic – everything from large airlines, to catering businesses, to individual freelancers.

But the “creative destruction” of the crisis also creates a need for innovation. An article by our Project Lead Marian Sander.

Especially now, in times of crisis, innovation is needed. This is also confirmed by the clear majority of leading decision-makers from large companies in German-speaking countries surveyed in our #NextLevelDigital study. In fact, 65 percent state that they see a high or very high need for action in the development of digital business models. According to the participants, this is therefore the second-most-important field of action, after data strategy, which 67 percent of of them named. Likewise, 65 percent assume that the developments of digital product and service innovations that have now been initiated will be maintained or even further expanded during and after the crisis.

It seems as if a well-known wisdom is being confirmed: Necessity is the mother of invention.

And indeed, the digitalization accelerated by the coronavirus pandemic is already demonstrating its disruptive potential: Digital services are making traditional products and business models obsolete overnight. There’s a good reason that the famous economist Joseph Schumpeter, almost 80 years ago, referred to innovation as “creative destruction.” 

In recent weeks and months, I have often had to think back to a realization I had several years ago, during a workshop with the head of strategy at a European rail company: He said, “If we are honest with ourselves, we must regard Skype as a serious threat to our business model and as a competitor.” The potential of this insight even back then is now becoming clear in the coronavirus crisis: While the number of users of videoconferencing systems has exploded, public-transportation operators are recording heavy losses.

Digital services know no sector boundaries 

The coronavirus crisis shows more clearly than ever before that digital services recognize no sector boundaries: A company such as Zoom – considered part of the media, telco and IT sector – replaces, to a certain extent, products and services from the transport and logistics sector. Of course, we knew this effect even before the coronavirus crisis: Mobility services such as Uber put pressure on the business model of classic car manufacturers. In the meantime, streaming services such as Prime Video from the online retailer Amazon are attacking the business of classic media companies. In many cases, a digital service is much more cost-efficient, flexible and user-friendly.

That’s why, at this point, the following thesis should be put forward: Any physical product that can be replaced by a digital service will be replaced by a digital service. The similarity to Murphy’s Law – “Anything that can go wrong will go wrong” – is deliberate. Because this is undoubtedly what will happen to all those who miss the chance to react to the changes now: Everything will go wrong.

Fighting the crisis with innovations

In a world in which sector boundaries and market barriers no longer provide reliable points of reference, the focus on the customer or consumer becomes all the more important.

The key challenge is to redefine the appropriate role in the lives of consumers, based on comprehensive knowledge of their needs and “pain points” – both of which need to be addressed.

What may sound theoretical can be illustrated with a few examples from the current coronavirus crisis. 

  • The tool manufacturer Hilti, for example, has found that the requirements for the occupational safety of tool users on construction sites have changed fundamentally due to the coronavirus-related distancing rules. Accordingly, Hilti is launching a new digital tool on the market to enable layout measurements to be carried out by just one person. This increases worker safety in the present, and at the same time significantly optimizes the efficiency of this construction phase for the post-coronavirus era in the future.
  • Infineon recognized that even during the coronavirus crisis, crowds of people can’t be avoided – but they can be controlled. That’s why Infineon developed a new radar technology and the corresponding software algorithm, within three months, to count people as they enter buildings or individual rooms via different entrances, thus enabling efficient crowd management. Building occupancy and office capacity will also be better analyzed in the post-coronavirus period, thanks to this technology.
  • Ottobock has recognized that the specific information needs of orthopedic technicians, therapists and other clinical experts on complex medical-technology products are a critical success factor for customer loyalty and have a significant influence on trust in the brand. Accordingly, Ottobock digitalized large parts of its Ottobock Academy materials in April and created a comprehensive online training program.
  • Ikea quickly recognized the impact of the coronavirus crisis on its sales channels and decided as early as March to distribute 4,000 of its 9,500 products in China via Alibaba’s Tmall platform – an innovative step in sales for the furniture store, considering that the business has so far concentrated mainly on physical trade.
  • Robot manufacturer Kuka is seeing an increase in demand for automation in production during the coronavirus crisis, and is joining forces with T-Systems to retrofit analog robots via intelligent networking.
  • Even before the coronavirus crisis, Adidas recognized the potential of additive manufacturing techniques using 3D printing. In the corona crisis, the sporting goods manufacturer is specifically expanding its capabilities in this area and combining them with artificial intelligence to stabilize supply chains, increase resilience and improve customer demand planning. 

These examples make it clear that it’s not only digital “pure players” from Silicon Valley who can exploit potential in accelerated digitalization, but also traditional European companies. And indeed, a crisis also offers the opportunity to act anti-cyclically and gain competitive advantages, while others try to secure a core business that may soon be largely obsolete.

But how do you succeed in inventing when supply chains come to a standstill, customers disappear and employees can work together only at a distance?

More on this, and on the question of how to successfully balance innovation and risk during the coronavirus crisis, will follow in Part 2 of this article.

Header Image: shutterstock/Peshkova

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