A crisis is the most powerful source of innovation – that is the firm conclusion of Professor Carlos Osorio, who has years of experience working in the field of digital transformation and innovation. He and his team have analysed numerous businesses’ behaviours across countries to see what exactly makes some companies perform better than others during times of major uncertainty and ambiguity. In short, the answer is that the best-performing companies do not panic – they use the situation to their advantage, and innovation plays a major role.
How to handle disruption
When shocked out of their usual “smooth sailing” by an unfavourable turn of events, many companies have a hard time. A shock, or disruption, occurs when technology, big changes in customer expectations, or catastrophes have an important impact on the market structure.
Some regular causes of disruptions are technological advancements or new competitors that force companies to bring their processes and know-how up to date. Less predictable causes, or “oddities of nature” (like the coronavirus outbreak), require a different approach.
“Catastrophes” demand better optimisation of business processes, the right allocation of scarce and costly resources, use of best practices, and more. The tricky part is resisting inertia and the temptation to repeat good practices from the past, which might not work in the present.
In short, when the crisis hits, it is essential to:
- respond to the emergency,
- maintain operations,
- prepare for tomorrow.
Meanwhile, the golden rule is not to panic. Emotions affect our cognition and performance. Panicking raises our level of frustration, increasing the likelihood and frequency of mistakes and, eventually, failure. In turbulent times, the average person can manage 5-7 problems without making mistakes, which is impressive, but stress and panicking diminish that ability.
Companies that perform better in crisis
In addition to having a systematic approach to innovation, here are some other criteria characterising organizations that remain successful even in times of crisis:
- their actions are consistent with their values,
- their activities are compatible with their mission,
- they started digital transformation 10-15 years ago,
- the have routines in place for working under uncertainty.
The recommendation is to introduce innovative solutions from the very beginning and keep doing so in times of uncertainty. A study after the 2009 crisis showed that out of 6,000 companies analysed, 91% were on the edge of the abyss while only 9% entered a new era by continuing with innovation. When pursued correctly, as a process, innovation allows us to take advantage of high-risk opportunities while mitigating the impact on an organization.
It might come as a surprise that some well-known organizations were born in times of crisis: General Electric, General Motors, IBM, Disney, Hyatt, HP, Microsoft, Burger King, FedEx, CNN, etc.
Top management’s role
Company leaders should keep several important “do’s and don’ts” in mind. It might seem the head of the company should be the central figure making decisions on how to keep the company afloat during a crisis. But correctly choosing and utilizing the company’s human resources proves to “pay better interest”.
Be a coach not a boss
If you want people to follow you, do not be bossy. Give employees challenges above their capacity without telling them precisely how to achieve the outcome. Also, leave the doors to your power and support open, and equip your team with the resources they need to reach their target.
The best ideas usually come at the end. So it is essential to create a safe environment for brainstorming and offering stupid ideas. A “no judgment” policy has to hold. “Ideation” is type 25 among the 67 types of innovation that exist.
Provide social support
Create a context of psychological safety and freedom for decision-making. A combination of trust and support will serve as a motivator for your team.
Diversity leads to better performance. You might even take it as far as to swap roles with a lower-level manager for a pre-determined period to stimulate diversity and different points of view. Professor Osorio gave the example of a CEO who exchanged places with a division manager two levels below him for an entire two months.
Enhancing diversity is not only putting people with different capabilities in the loop. It is also about evaluating how people deal with uncertainty, come up with creative solutions, tolerate risks, think critically, etc. Team members should be different in terms of professional/technical characteristics, gender, nationality, areas of experience, seniority, behavioural traits, and innovation-related capabilities. That required to be able to effectively address 50-60 problems at the same time, which is what the typical company usually faces.
Don’t feed the HIPPOs
The highest-paid individual should not be the only one to make crucial decisions. You have to find ways to prevent this from happening because they might not be objective and might not see the full picture.
Don’t control closely
Putting somebody under strict control kills creativity. No control at all is also ineffective. The goal should be subtle control that embraces lofty challenges, inspiration for greatness, trust in people’s capacity to discover and deliver, and no micromanagement.
Don’t keep all the same structures/processes
A change in structure or processes is sometimes inevitable, but the team must be aware of what is being done and the benefits. Remember that your team members have their own hidden assumptions, fears, and goals, so you want to communicate any strategy change properly. For instance, just announcing that “We’re not going to fire anyone” can save a lot of people’s nerves and minimize frustration.
Don’t neglect soft skills
Relying solely on a CV is insufficient since abilities and experience are only one factor in fostering innovation. Socio-emotional (or “soft”) skills accompanied by sharing the company’s vision help make someone a perfect complementary asset. HR should do a thorough talent analytics job and not just handle the paperwork.
To summarize, when a company runs into an unprecedented situation like Covid-19, it has two options: boost its efficiency through innovation or burn out. If a fire starts in the house, we do not quietly lock the affected rooms hoping the fire will pass – we leap into action. On the corporate level, the same type of behaviour will bring the most fruitful results. The role of upper management is to create an emotionally engaging vision for your talented and innovative staff and engage them in the process of dealing with anything that has “immunity to change”. Innovation is risky, but its rate of return is among the most generous in management.