Business strategy in times of crisis has traditionally been cautious and conservative: double down on core business, stick to what you know, and strip back innovation spending until the storm subsides.
However, as with many traditional methods, this approach no longer cuts it in today’s rapidly changing market. Unconventional times require fresh strategies.
In fact, a McKinsey study of the 2008 economic recession showed that innovation-focused companies outperformed the average by 10% during the crisis period itself, and by 30% in the recovery period following the recession.
So why is product innovation so important for performance? And how do you create an innovation roadmap that works in a crisis? Let’s take a closer look.
Why is product innovation important in a crisis?
There are three essential reasons to keep innovation front of mind in tricky times:
Changing landscape = new opportunities
Whatever the type of crisis - economic, political, social - it’s a moment of huge global change. It doesn’t make sense for businesses to stand still.
Prime examples: the sharing and re-selling economy that grew from the 2009 recession, the origins of the e-commerce boom in the 2002 SARS epidemic in Asia, or the rapid growth of the electric car industry due to the climate crisis. We know that the pioneers of those fields are still reaping the rewards today.
Shifts in existing offerings and re-allocating resources
Innovation isn’t only about brand new products. It’s also about looking for new avenues in areas where your company is already successful. Reorienting and expanding what’s working, and being brave enough to ditch what isn’t.
For example, the food suppliers and fashion retailers that performed best in the 2020 pandemic were those who not only upped their capacity for online vs in person sales, but also tweaked or expanded product families and services that responded to changing customer behaviour and needs.
Warming up for the long game
Research shows that an economic recession is precisely the time to prepare for the future. We all know that the effects of a crisis reach far beyond the immediate crisis period.
Just look at the work-from-home phenomenon – it was sparked by a crisis period, but left behind a permanent societal shift. The proportion of the working population based at home is lower now than in the peak of the pandemic, but will never fall back to pre-2020 levels. Which creates incredible long term opportunities for companies who were quick off the mark when the need first emerged.
How to approach product innovation in times of crisis
With these objectives in mind, how can we take an approach which is both pragmatic and innovative?
Get curious – about now and tomorrow
You’re reading the Human First blog so you know that we’re passionate about putting the user at the center.
Start by asking the right questions. Not just what users say they want today, but digging into how the crisis is affecting them, to figure out what they’re going to need tomorrow. Stay tuned-in by prototyping and getting feedback in real time.
Don’t just think outside the box…
…when perhaps you need a new box.
When coming across the reaction ‘we can’t do that’ / ‘that won’t work’, question whether this is a fact based on real-life obstacles, or an assumption based on existing structures and processes. And this is a tricky task, because those structures and processes may have been in place for most of your team’s working life.
Take Dyson as an example. In a time where people are spending a lot more time at home, they could have focused innovation efforts on what they’re known for, the home appliance. But due to their comprehensive approach to product innovation, they identified emerging opportunities in a rapidly evolving health space, and were able to enter the air purification market.
Rooted in their existing expertise, creativity and user-centric design, but applied in a whole different ‘box’.
Prioritize better decision making
Of course, when you start to get curious and challenge assumptions, you open a new world of opportunities. So knowing how to choose the right ones is equally fundamental.
Arming team members with skills in Design Thinking and workshop facilitation will make decision making more agile and less wasteful, for a fully future-proofed organization.
Reaching for new heights, while staying grounded
You might be surprised to know that as an innovation consultancy, we don’t recommend suddenly redirecting your whole budget towards innovation. Even while recognizing why product innovation is important, Design Transformation should always be backed by strong business and tech foundations.
A good benchmark for design-focused companies is the 70/20/10 approach, meaning:
- 70% of resources are assigned to the core of the business and driving consistent growth
- 20% to fuel projects close to the core business or ‘future core’
- 10% saved for transformational innovation
This method preserves stability and gives space to expand the portfolio into parallel areas, while also allowing for disruptive innovation.
In conclusion: whereas in the past we associated innovation with risk, the truth is turning out to be just the opposite. Companies who don’t invest in innovation are leaving critical bases uncovered.
If you’re interested in building a product strategy that sets up your company for long term success, we’d love to chat. Contact us to schedule an intro call with our product innovation experts.