Innovating Now for a Post COVID19 World

COVID19 will change the way we behave, conduct business, and indeed how we innovate for years to come. Exactly how much change we’ll see and what those changes will actually be is still unfolding.  But big life changing events inevitably reshape our long-term thinking, values and behaviors.  And the social disruption caused by COVID19 has broken more habits and established behaviors than any global event since WWII, opening the door to unprecedented change. When the dust ultimately settles, hopefully we’ll emerge healthier, more ecologically conscious consumers, and with a greater sense of community.  But how can the innovation community help nudge us in that direction in the face of inevitable economic and social challenges?

First and foremost, if we are in a position to do so, we should of course be rolling up our sleeves, and trying to help with the unfolding crisis.  For example, in my own small way I’ve been trying to make connections to help a few local companies temporarily repurpose their existing infrastructure to manufacture hand sanitizer, and PPE.  This kind of repurposing is a win/win, as it can provide both much needed PPE supplies, and also help keep people productive and employed.  

While there is an obvious need to help with the many pressing problems we face, there is also value in trying to get ahead of the numerous change waves that are building. But thereby lies a dichotomy, as while massive disruption ultimately provides an opportunity to change and influence the future, it also makes it far harder than normal to predict it! It’s such a rapidly evolving situation, and people are so far away from whatever new normal will emerge on the other side of this, it’s not the time to make many, if any hard and fast long term bets.

But the actions we take now do matter, and if done right, can build foundations for the future.  We are presented with a huge opportunity to nudge, seed and begin to establish future habits, and to create safe harbors that will thrive as the storm clears. We may not know where we’ll end up, but we can start rowing in the right general direction. 

1.  Actions Now Matter.  Just because the future is uncertain doesn’t mean we cannot influence it.  With habits broken, emotions high, and unusual situations abounding, there is a massive opportunity to create peak-experiences that will be encoded into memory far more strongly than usual, and that will in turn disproportionately influence future consumer behavior.  What we do today may not guarantee future business, given that we are very likely heading into a very challenging economic period, but every little thing we do now to build a solid foundation helps.   Consumers will remember companies who did the right thing, either for them, or for others.  They will remember breweries, distilleries and CPG companies switching production to hand sanitizer, or even car makers who switched to manufacturing ventilators.  Companies who offer no fuss refunds will be trusted in an immediate future where people will be feeling uncertain.  And of course, companies offering remote and online services are not only initiating new habits, but if they do it well, are also creating positive emotional tags for their brands.  And this is amplified because word of mouth has never been more important, as people are spending more time on social media, swapping news, experiences and recommendations.  But as always, there are two sides to this equation   Psychology tells us that humans dislike losses about twice as much as they like gains, so opportunity comes with a minefield of chances to seriously damage future business.  Companies that refuse to give refunds for cancelled or delayed services may be helping out their short-term cash flow, but are seriously damaging customer relationships for the future (Airlines, Ticketmaster, Sports teams especially take note).  And there will be far less tolerance for large organizations.  No matter what the business reality of contracts or commitments, it’s hard, for example, for a sports fan who cannot pay their mortgage to feel sorry for a team run by a billionaire, and employing millionaire superstars, when they cannot get a refund for an infinitely delayed game. Perceived unfairness creates a very strong emotional response, and consumers will remember and punish companies who they perceive as unfair, if only in the short to medium term.  

2.  Cost Effective Anti Fragility.  If nothing else, this crisis has revealed how fragile many of our supply chains have become.  Our endless search for efficiency, cost reduction, and boosting bottom line and margin has left us vulnerable.  Globally distributed and limited source supply chains are cost efficient, but fragile to natural disasters and political upheaval.  This crisis has exposed this vulnerability, but it is a challenging problem to solve.  We know how to build anti fragility via redundancy and buffers, but it adds cost. As anti-fragility is a largely invisible benefit to consumers, they will be reluctant to pay for, especially in a recession.  Companies who do build in redundancy and buffers will be vulnerable to disruption from more fragile competition.  The good news is that without tough problems, we wouldn’t need innovation, so this is an opportunity. I suspect there are going to be widely different solutions in different industries, and how much fragility we can tolerate will vary from industry to industry.  We can obviously tolerate less in pharmaceuticals, medical supplies, food and infrastructure, perhaps more in discretionary entertainment. Maybe the answer will be innovative collaborations between government and industry to protect key industries, or market leaders leveraging scale via smart buying and storage of key raw materials.  But whoever solves the cost/antifragile contradiction will have a long-term competitive advantage.  

3.  The Rise of Citizen Innovators and Leaders.  We have a cognitive bias to seek innovation, or anything else for that matter, where we’ve found it before.  We actively recruit people from universities where we’ve found good people before, and use personality tests to identify those who fit the profile of past successes.  Similarly venture capital firms cluster around silicon valley, or other start up hot spots. It’s a smart bias, and one with a solid evolutionary pedigree, as we are the progeny of those who fully exploited rich pastures before seeking new ones.  But like most heuristics, this works up to a point, but also misses opportunities if followed to a fault.  Smart people and good ideas occur outside of silicon valley, and while serial innovators are good places to look for new ideas, often truly disruptive ideas come from unexpected places, based on new and different perspective. To this point, one thing I’ve loved to see during this pandemic is the number of innovations coming from unexpected places.  Gin distilleries and breweries making hand sanitizer.  Pizza companies and fashion houses making face masks.  It reinforces that innovation can come from places we may not expect, and that we have a largely untapped talent pool that we could take more advantage of. When I was at P&G we were at the forefront of open innovation, at a time when outsourcing about half of our ideas was groundbreaking.  But one of the opportunities COVID19 may have thrown us is open innovation 2.0.  It has shown us that we may be able to cast the net even wider, and actively seek both ideas and talent from still unexpected or underutilized places. Whether that is locations that are not traditional start-up hot spots, or expanding open innovation to seek ideas from small businesses, or people working the front lines.  Anecdotally, when I do behavioral audits for the hospitality industry, I get some of the best insights from the maids, servers and bar staff, often not the place people go first for innovation.  

I’ve also talked before about how this crisis has brought some natural leaders to the fore, and also shown us some weak spots in our systems and organizations.  My hope is that we’ll learn from this to not only cast the net wider for innovative ideas, but also to tap into a broader cross section of people within companies in solving problems or challenges.  We’ll also have given many people more autonomy, perhaps reluctantly in some organizations, but let’s make sure we reward those who thrived on it, and not simply go back to business as usual when this is over.   

4.  Beware of Researching Moving Targets.  We love data, and hate uncertainty, and there is no doubt that good intelligence wins wars.  But out of date intelligence loses them, and in a rapidly evolving situation like this, even if we get current insights, many if not all of them will be out of date before we can actually act on them.  The bottom line is that it’s a really tough time to try and predict the future. I believe a couple of fundamental issues make this a time when most of our focus should be on influencing, rather than predicting the future.   

– A significant challenge when trying to predict social change is that there are typically confounding variables pushing future behavior in opposing directions.  In a rapidly changing situation like the one we face, the challenge of predicting which variable will predominate grows exponentially.  For example, many are hoping this crisis will drive people to buy local when we start to come out of the other side.  And if you survey people today, I’d bet that would be a conclusion. However, these good intentions will almost certainly be tempered, at least in part, by the harsh economic realities that many will face.  Many people will in reality simply buy what they can afford. And we can apply this dichotomy to a wide range of post COVID19 consumer behavior, including environmental responsibility, eating healthy, exercising, travel, and eating out to name just a few.  There is always a challenge in separating who people want to be from their actual behavior, and that will be amplified by the challenging financial realities many will be facing in the coming months or years. Asking people today what they will be doing in 6 months is more difficult than it’s ever been. =

– Compounding the above are a couple of insights from Behavioral Economics.  Firstly, as Daniel Kahneman said, we don’t know our future selves very well.  It is also well established in psychology that our current emotional state strongly influences how we believe we’ll behave in the future, but that our actual behavior will be influenced by the often different emotional state we are in at the time we act.  This difference between our current and future selves is amplified at a time of upheaval and emotional stress.  And this is further compounded because most decisions we make have a mixture of conscious, rational evaluation, and largely unconscious emotional gut feelings. Often these pull us in different directions.  For example, our rational self may want to heat a healthy, locally sourced but relatively expensive meal.  However, our gut instinct under pressure may push us towards a cheap, comforting, but unhealthy burger and fries. There is always some disparity between what we think we’ll do and what we actually do in the moment, when our gut instinct typically has more sway than we realize.  It’s an inherent flaw in most survey versus behavioral research, but it is a flaw that is amplified during a time of great change, and high emotions.  

I’ve seen a lot of speculation that we will emerge from this crisis as better, healthier, more ecologically conscious consumers, with a greater sense of community.  I hope that is true, but at risk of sounding like the Grinch, how much of that is what we want to see happen, and how realistic will that be if the world is facing a major recession or depression?  Innovators live in the future, part of our role is to predict it, part of it is to shape it.  I believe this is a time where we can be most effective shaping rather than predicting it, by planting seeds that will nudge us towards a realistically better future, but doing so with a lot of agility and flexibility.       

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Pete Foley

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