The coronavirus pandemic upended life as we knew it. What consumers want, how they buy it, and what businesses have to do to fulfil the demand has shifted in a few short months.
The rapid shifts are likely to have consequences beyond the pandemic, according to research by McKinsey. A survey the business consultancy conducted in April 2020 found that 90% of executives polled expected fundamental changes in the way they do business for some time to come.
That’s not necessarily a bad thing.
Seventy per cent of participants in the poll agreed that the pandemic changes will be opportunities for their businesses to grow. Previous crises support this expectation. For example, companies that invested in innovation during the 2008 recession outperformed the market by up to 30% within the following five years, McKinsey research suggested.
But just 21% of the executives McKinsey surveyed felt very confident their companies had the expertise, resources, and commitment to pursue new growth successfully over the next 12 months.
European entrepreneurs seize the crisis
Rolling lockdowns that started in China and moved west to contain the spread of the virus hit Dutch startup iotspot hard, said Marnix Lankhorst, the company’s CEO. Customers such as one of the Big Four accountancy and consulting firms and a multinational insurer closed offices and sent home employees who had been using iotspot’s smart workspace tools.
“We had order cancellations early on, and this resulted in cash flow problems,” Lankhorst said. “But just after two weeks and the initial shock, we managed to turn things around.”
The startup tightly controlled its cash, he said. Right after the Chinese lockdown, iotspot rapidly switched from Chinese to European manufacturers to buy supplies such as sensors. Then, the startup redesigned its services to offer help in getting offices ready for employees to return safely after lockdowns ended.
“Companies needed solutions to keep their staff healthy,” Lankhorst said. “And that we were able to provide to them. It was what our European clients needed the most, and after the initial struggle, we managed to win a lot of additional business.”
Financial markets continue to be volatile. The pandemic continues to negatively impact the service and manufacturing industries. However, businesses are working hard to adjust and move forward.
“It is hard to know exactly what to expect in the coming year or two,” said Claes Lundin, director and co-founder of Above, a Swedish company that designs, prototypes, and engineers smart products and services. “But I’m optimistic.”
Now is the time to innovate, Lundin said. Design and innovation services are all about gathering knowledge and finding alternative ways of solving challenges or grasping opportunities, he said. “Putting the trust in that knowledge and mindset, I believe our industry is very fit to adapt to a changing environment.”
Above’s core services stayed the same, but the company reinvented how it interacts with clients, he added. “We ran larger remote workshops than ever before and shipped physical prototypes to complement digital client presentations. Redesigning our processes resulted in lowering cost acquisition and the environmental impact, especially with international clients in the US and Asia. And this is very important for us as our purpose is to drive positive change.”
Based on the pandemic lessons learned, Lundin had these recommendations:
- Manage cash aggressively, but be aware of how the savings might impact investments promising future growth.
- Stay very close to your existing clients, speak openly about the challenges, and grow together.
- Consciously focus your business development efforts towards industries less affected by the pandemic. In an uncertain business landscape, it will be much harder to assess your individual clients’ ability to invest. You need to be highly effective and therefore need to follow the macro patterns of where investment goes.
Lankhorst said, “Try to be as flexible as possible and prepare for future scenarios. Beyond the first panic, there are opportunities for a lot of companies.”
Road map to innovation
Motivating employees to be focused, quick, and flexible is the biggest challenge to driving innovation during a crisis, according to McKinsey research. These essential steps will help, the research suggests:
1. Discover: Analyse how the crisis has changed customers’ behaviour. Recognise new patterns and understand how they will impact the business. Rapidly convert findings into new products or services.
2. Evolve: Assess which parts of the business have been impaired and are unlikely to recover after the crisis is over. Brainstorm what will generate the most value. Experiment with new business models.
3. Choose: Revisit the innovation pipeline. Challenge core assumptions supporting each initiative. Determine which initiatives to pivot, continue, or cut.
4. Aspire: Define capabilities and strengths likely to persist beyond the crisis to challenge previous aspirations and set new ones.
5. Accelerate and scale: Ramp up the supply chain and other resources to quickly make and launch new products or services.
6. Extend and mobilise: Leverage external partnerships with, for example, competitors and businesses from different industries, to realise a higher return on innovation investment, mitigate risk, and help shape regulatory policies. Instil an agile culture to drive the innovation process and persist despite hardships the crisis imposes.
— Sofia Simeonidou is a freelance writer based in the Netherlands. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.