The German Innovation Game: COVID-19 Edition

Unforeseen crises such as the Covid-19 pandemic pose an extreme challenge for German innovation leaders, especially in terms of dealing with fears, operations and liquidity. But they are also the biggest opportunity in years to overtake competitors.

Germans are known for their disciplined, serious and strategic play. In politics, business, innovation and, of course, in football. Germany is not only one of the world’s leading economic countries, but also FIFA World Champion. At least in the last decade. In late January 2020, the new decade brought a new virus and along with it, the challenge for everybody of how to handle it.

This challenge is also true for me. Although we are living in today’s information age, I personally found it extremely difficult translating all the breaking news into a clear innovation strategy. This is true for our own R&D and innovation company as well as a challenging partner for our customers.

Instead of trying to hide this unclearness, I talked openly about this. In my team and with our customers. We came up with the idea of sharing this uncertainty, in order to puzzle together faster a more specific picture. More concretely, we asked people, in person and via our newsletter, if they would like to discuss strategy and opportunities of Covid-19 in a roundtable.

The responses were overwhelming. Within 18 days, we were able to set up a digital process for three different topics and gathered insights from nearly 50 innovation leaders; cross-industry and cross-country.

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Screenshot of our Innovation Roundtable Discussion

Of course, every new crisis will create new winners and losers. John F. Kennedy once said: “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity.”

We wanted to discuss how German innovation leaders could and should play this innovation game. A game full of dangers and opportunities. And a country where not only beautiful cars, but also the expression “German Angst” were created.

The Top 5 innovation trends

The Top Opportunities we identified are the following five (starting with №5 to №1) and, of course, I would like to share them:

№5: Radical innovation for more diversified businesses

Looking at the stock market, we already noticed the first winners and losers of this crisis. Beside the fall of airlines and the travel industry, we realized, on a more general level, that new tech companies are evaluated better and companies with a strong adherence to “old business“ are punished more. Big companies with monothematic businesses suffered more, and more often, compared to more diversified companies with a multichannel sales strategy.

Furthermore, we not only recognized a difference in customers’ behaviors, but also mindset changes among leaders and workers. In our opinion, this will result in more radical innovation approaches, where new technologies will be used to conquer new markets or segments in order to be more resilient to future shocks. The innovation playground, where companies just wanted to try something out, is getting tighter, but the need for a more focused play and with it an invest in new technologies in the field of new businesses and new channels will increase.

№4: Hygiene & health in nearly everything

This virus will go away, but the awareness for hygiene and health will remain. This will lead to increased health & hygiene aspects, even beyond the health industry, in nearly every product or process. From cars to delivery, trains to public transport, from nutrition to restaurants.

Contactless solutions are only the start. We see already that most of the stores now make it possible to pay contactless with a cellphone or smart application, where a couple of months ago cash was the only payment method available. New interfaces and antibacterial surfaces will follow shortly to answer the needs of consumers and workers.

Hygiene & health will be evaluated more highly everywhere. When we think about (shared) cars or public transport, we will expect new contactless solutions such as voice integration, gesture control or holograms to have very good chances for production roll out. This last example being something we had already worked on in 2017, the others in 2020 for BMW for the CES in Las Vegas.

№3: More local trade networks and supply chains & automation

The Corona pandemic brought home the points that highly diversified trade networks and long supply chains are associated with higher risks and that more local supply chains will be more stable and reliable. Within this crisis, countries and companies have reevaluated the geopolitical impact and the resilience of business in comparison to the sole world market prices.

A more local trade and production in high wage countries will favor automation in order to compensate the higher labor costs. This “glocal” shift was already very tangible in the discussion about the national production of pharmaceuticals and masks, including the stronger influence of national governments all around the world. It’s not surprising that Bayer announced they want to produce their anti-malaria drugs “Resochin” in Germany again.

With this revaluation and a more local approach for supply chains, we expect more production and service in Germany. This should also be true in other industries and with it a higher degree of automation to compensate for the higher costs.

№2: Distancing rules & even more automation & chatbots

Before the pandemic, automation had been gradually replacing human work in a range of jobs, as companies looked to cut labor costs and improve profit. Due to the newly decreed social distancing rules, and as precautions for future hazards, this topic is now seen from the standpoint of the ability to make a profit at all and to protect workers.

Robots don’t cough, sneeze or spread droplets through speech; they don’t touch surfaces; they reduce the likelihood that sick people will infect others; and they make it far easier for people to socially distance themselves.

Companies expect that this “new normal work” with a much higher extent of automation & chatbots (especially with voice assistance) will create a more resilient and independent workflow. Beside the effect of a strategic shift in more local trade networks and supply chains the adaption of existing factories will reinforce the extent of automation.

№1. Smart digitalization

The biggest opportunity so far, we see in digitalization; especially in the combination with AI applications to make systems with human interactions even smarter. Times seem to be over where the older board member might ask to print out the digital presentation for a meeting. (We really wish for that.)

Everybody from the board to the assembly worker was forced to work, communicate or to buy things digitally. That may be the biggest shift in working culture within this century. This will not only drive customers’ expectations, but also enforce the internal critical mass for digitalization and AI topics throughout nearly all companies and industries.

Some companies are focusing, inter alia, on digitalization of sales as they expect a relatively quick return on investment. This could include internal intentions, focusing on user centric collaboration within sales (AI sales tools, sales gamification apps, smart platforms or digital assistants), as well as external intentions, focusing on user centric sales channels to be more resilient and successful.

The trends are one thing, and maybe some of them are not surprising, but it felt good to step out of companies’ self-affirmation area and to discuss openly with others. In our further debate, we agreed that, beside the opportunities, the “proof is in the pudding”. As budget restrictions will affect most innovation departments it will be a difficult balancing act to prepare the innovation intentions with the shaken innovation strategy due to Covid-19.

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Innovation strategies: survivors, lurkers & doers

Innovation strategies differ, of course, with branch, size and company culture, but within the unforeseen general impact of the crisis measures, we identified at least three clusters that may also be interesting to share.

The first one is simple and sad at the same time. Airlines and, for example, companies with a high degree of event and marketing-based business go through difficult times because their business principles are hit the hardest. Their innovation game plan these days is mainly focusing on “near-term survival”. Understandable.

Secondly, we identified companies that play “wait & see” because they do not have a clear innovation strategy yet. This lurking for others to start and then run afterwards is a quite safe game plan to not take the wrong direction. Especially when internal leadership and stakeholder problems were already existing before Covid-19. However, when too many companies wait for others to start this creates (unnecessary) downtime and may bring up more losers than winners.

Thirdly, a couple of innovation leaders already see this crisis as a big opportunity. Especially, because they believe that competitors will jam on breaks and play “wait & see” which gives companies with constant innovation tempo the chance to overtake (seamlessly). One said, “a chance we have waited years for.”

Learnings from the past

This conclusion is also confirmed by research of the last crisis: The power of fear and its “infection rate” were also very high back in 2008. When there was light to see at the end of the tunnel, confidence and the economy were growing very fast again.

But, more importantly, economists from ZEW found out that companies that invested only 1% more in innovation than competitors profited by more than 6% the year after. And maybe more severely, companies who did not invest more were also, after the crisis, not able to catch up. These scientific insights are also confirmed by BCG, who found that the top innovators performed 4% better per year between 2008 and 2012 compared to companies not counted as top innovators.

Top-Innovators-Diagram

Source: BCG

As John F. Kennedy mentioned, danger and the opportunities are part of the game for every crisis. But we can predict quite well already, what will determine winners and losers in the future. On the one hand the caution not to underestimate risks. On the other hand the courage to act purposefully and fast(er than others). But this does not make it easier to realize it.

In this context it is remarkable that one of the most symbolic economic segments, the German Bundesliga, could be a role model for many companies. With the start of the 1st and 2nd divisions starting on May 16th it is the first professional division worldwide that started playing again.

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The German risk concept did not only convince our disciplined serious and defense politics, it was a collaboration of all stakeholders. It will be still at stake if this intention can be completed. But the German Bundesliga has now the opportunity to win next weeks´ TV slots and thrill spectators all over the world. Without competition.

Are you ready to win the innovation game? Then talk to our experts now.

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