In 2001, the vaunted glass manufacturer Corning nearly collapsed. The company had invested heavily in fiber-optic cables, and its market all but disappeared after the dot-com bust. But instead of slashing its R&D budget and concentrating on core products, Corning continued to invest in innovation, searching for ways to integrate its products into up-and-coming applications.
The company’s commitment to innovation during its toughest years paid off. In 2007, Corning Gorilla Glass was reformulated to provide the screen for the first iPhone. Today, Gorilla Glass is found in more than 6 billion mobile devices, and Corning is worth over $28 billion.
Corning’s steady focus on long-term innovation in the midst of crisis holds an important lesson for companies battered by the COVID-19 pandemic: Maintaining a pipeline for innovation today is crucial for emerging from the pandemic stronger tomorrow. While many businesses are simply focused on staying afloat right now, history shows that innovation can’t wait.
As a professor of innovation management at Babson College, I have long championed the importance of breakthrough innovation. Breakthrough innovation involves more than just exploratory R&D. Companies must build dedicated infrastructure to incubate promising opportunities and accelerate business lines that show potential. My research indicates that companies that build robust pipelines for innovation not only see a greater return on their R&D investments but also outperform their peers in terms of market value.
Doubling down on innovation in the midst of a crisis can have even greater benefits. Companies that prioritized breakthrough innovation at the onset of the 2008 financial crisis outperformed their peers in terms of market value by 10% during the recession. Five years later, those same companies were outperforming competitors by 30%.
Despite the potential long-term benefits of maintaining an innovation pipeline during the pandemic, a survey from last summer found that nearly one-third of executives were deprioritizing innovation in favor of cutting costs and buoying core business models. For example, the VP of a chemical manufacturing firm I recently interviewed said that in the first month after the pandemic hit, they redirected their R&D personnel to focus on making their plant operations COVID-19-safe. Companies that spent years building innovation teams frantically repurposed them for crisis management, tasking them with developing short-term fixes instead of planning for business in a post-COVID-19 world.
Although nearly all of the executives in the survey plan to reprioritize innovation after the pandemic, by then it will be too late. Innovation has a long time horizon, and companies must invest consistently in order to see payoffs. Research shows that investing in innovation in fits and starts typically fails to produce results.
As difficult as it is to look beyond the day-to-day, the time to shape your company’s success in the post-pandemic future is now. With economic recovery on the horizon, here are three steps companies and innovation teams can take to position themselves for breakthrough innovation in the months and years to come.
First, companies should take stock of how the landscape around them changed over the past year. Some adaptations will turn out to be temporary responses to the pandemic, but others represent more permanent shifts in the way the world does business. What will the new equilibrium be after the pandemic is over, and what markets does it open up that are ripe for innovation?
For example, grocery stores drastically expanded curbside pickup and delivery as an urgent response to the pandemic, but many anticipate continued demand for these services as part of the new normal. That presents an opportunity for breakthrough innovation within the industry, particularly since curbside pickup as it currently exists is widely demanded by consumers yet barely profitable for grocers. Already, Whole Foods has tinkered with a “dark store” that only offers pickup, while Kroger has partnered with the technology company Ocado to build grocery fulfillment centers manned by robots.
Next, companies should look internally at how their own rapid adaptations to the COVID-19 pandemic worked. Many businesses found organizational capabilities they didn’t know they had, or that suddenly gained value given the circumstances. Breweries and distilleries pivoted to making hand sanitizer, restaurants shifted to assembling at-home meal kits, and manufacturers such as GM started producing ventilators. Most of these pivots are temporary—GM stopped making ventilators in September—but the lessons from the experiences could spark new product lines and business models. Restaurants, for example, are considering how the capabilities they recently honed for producing to-go meal kits and products optimized for delivery can complement in-person dining in the future.
With this information in hand, companies should reevaluate and reimagine their existing innovation strategies in the context of the new normal to come after the pandemic. Which projects and priorities are most relevant to the post-COVID-19 future, which could be refocused to solve a current problem rather than a past problem, and which no longer make sense?
For example, many companies with products and services for offices are retooling their domains of innovation intent for a world in which more people work from home. Grundfos, a global water-pump manufacturer, had a strategic focus on making office buildings more sustainable. The need for water conservation remains as strong as ever, but the company is adapting its innovation portfolio to emphasize applications for other settings. Mirvac, a real estate and property management company, had numerous office buildings in its portfolio before the pandemic. Their designated innovation program, Hatch, is experimenting with urban farming, solar panels, and other sustainability initiatives they believe will have value in the changing urban landscape post-COVID-19.
Prioritizing the future is challenging when many companies are still struggling to survive the present. Yet we know from past experience that investing in innovation pays off, especially when that investment comes during a crisis. Starting small today is better than not starting at all, and companies can see significant benefits even with just a handful of projects and one or two people working on innovation full-time. The COVID-19 pandemic is an enormous challenge that has forever changed the business landscape, but it’s also an opportunity to lay the groundwork for breakthrough innovation that will set your company ahead in the post-COVID-19 world.
Dr. Gina O’Connor is a professor of innovation management at Babson College and an instructor in Babson Executive Education. She studies corporate strategic planning and how companies can develop capabilities for breakthrough innovation.