Friday, September 17, 2021

The best of times or worst of times for innovation

 Lately, when I talk to people in large organizations, universities and corporations, I feel like I'm in the middle of a country western song, or a Dickens novel.  People and leaders tell me they are distracted, dismayed, disappointed, exhausted, and wondering what the future will hold.  It seems difficult to make decisions in the era of COVID, where every peak we reach seems to be a false peak.

It could be the worst of times

It's difficult to 1) find people 2) keep people 3) decide where they should work (in the office or at home).  Working with and through COVID over 18 months has been a huge distraction, but worse it has created supply chain issues.  Many companies cannot get accurate forecasts about raw materials, and some costs have gone up.  

In this environment of constantly changing factors, where it can be difficult to understand the best information or plan for the future, where markets seem to shift constantly and employees and consumers are inconstant, it seems exceptionally difficult to do more than to simply hold on.  In this moment, in the early fall of 2021, it seems that most businesses are doing exactly that, holding on, battening down the hatches, waiting out the storm.  Very few decisions about strategy, or new direction, are getting made.

Many employees have had enough, of (sometimes) low pay, or uncertain futures, or simply don't want to go back to the office, or in some cases are deciding to take on an entirely new course or trajectory in their lives.  Many service industry jobs are left open, and I worry about the future of health care, where so many doctors and nurses, and other first responders, have worked incredibly hard and without a lot of thanks or reward.

In this "worst of times" scenario, we are seeing a significant pull back in many larger organizations in regard to strategy, their future and innovation.  In very uncertain environments, it seems logical to wait out the storm, keep doing what you do best, and not spending a lot of time trying to understand a constantly shifting and evolving future.  Since most innovation only pays off quarters or even years later, few companies want to invest in costs today that may not pay off in the future.

It could be the best of times

It was recently reported in my home state of North Carolina that new company formation grew at the highest level in decades.  Much of that is because larger firms are holding the line on growth, and people are leaving larger companies to start their own new companies in response to slow growth or uncertainty.  In every economic downturn or period of market uncertainty, this same phenomenon is repeated.

What will we see from the explosion of new companies?  If history is any guide, we will see a really mixed bag of outcomes.  Many of these new companies will fail.  Some will create interesting new products, services and business models.  A few will upset the order of existing industries or markets, the way Airbnb or Uber did in a downturn not so long ago.

When many companies freeze or falter, there is always an opportunity for smaller, nimble firms that are willing to risk more to innovate.  And in this market, at this time, I think we are going to see a significant opportunity to innovate around business models and experiences.

People have learned to live differently due to COVID, and no matter how much some people and businesses may want society to shift back to the ways we were living and working before the pandemic, a lot of people have enjoyed living and working at home.  Some have even given up city life for new homes in more exurban or even rural locations.  Companies that can serve these customers may find new opportunities. 

Like boxers who have taken a hard jab to the jaw, many larger firms are swaying, uncertain, staggering just a bit.  They've lost their stride, and the opportunity for smaller, nimble firms to strike may be in the next year.  In this regard, the time is ripe for entrepreneurial firms and some small and midsized businesses to strike with innovation.  

The conditions are relatively ripe, and unlike in other downturns there is still plenty of money and venture capital available.  In fact, given what the government is doing to prop up the economy, money is probably the least of an innovator's or entrepreneur's worries.  

The wide open opportunity

I scanned the list of startups and entrepreneurial firms in my area, and the list is full of AI and ML companies, low code opportunities, and cloud opportunities.  Of course, to be a part of one of those teams you need a lot of technical skills.  I'll stipulate that there is a big opportunity right now to create low-tech opportunities as well. There are plenty of needs and gaps in the market that are waiting to be filled, and, what's more, plenty of people who have good experience and knowledge leaving larger firms and looking for new opportunities.

Components are in place and in play:  money, needs and talent.

The difference between the two views of the market is risk.  Larger firm will continue to see a lack of clarity, significant uncertainty and will consider the market too risky to invest in.  Smaller companies will see a breadth of opportunity, plenty of financial and human resources, and significant opportunities or gaps in the market place.

While large firms argue with their employees about where they should work, and when they should be in the office, and continue to focus on short term goals and outcomes, smaller firms and entrepreneurs should have a field day.

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posted by Jeffrey Phillips at 6:32 AM


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