Lessons From the Pandemic: Crisis as a Catalyst for Innovation

In many industries, the pandemic introduced a window to innovate more. The crisis has accelerated the use of technology by companies to do things they never considered before. A key element of innovation is having the latitude to fail. During the crisis, companies had no choice but to take risks to survive and thrive. In effect, they adopted a startup mentality — a mindset organizations typically embrace when they’re at their most disruptive. There’s a willingness to fail, largely because there isn’t much to lose. The pandemic forced many companies to rethink, even reinvent, how they do business.

This is new Amazon CEO Andy Jassy’s metaphor conveying that companies remain so beholden to their business models that they resist indisputable megatrends that are creating an inflection point for the industry. Boards should be mindful of this trap. Jassy gives an example of a decision Amazon made two decades ago that today accounts for roughly half of its retail business.

Innovation stems from thinking about how to change the customer experience. This is about more than just monitoring the data and analytics around evolving customer preferences, needs and wants. It is also about recognizing that technological advancement is the primary driver of the rapid pace of change in today’s marketplace. In essence, innovation is about preparing the organization to be part of the digital age. If the company doesn’t advance its processes, products and services, its competitors will. Worse, if companies have digital-skeptic tendencies and do “digital things” because they think they need to — and not because they want to differentiate their products and services — they’re not likely to be successful.

Boards should encourage the organization’s innovation mindset and approach. Directors should inquire about the organization’s incentive structure. Does it reward innovation? Does it accept failure? Or does it reward people for focusing on what they’re doing today? Who is being rewarded and promoted — the people driving the business forward and creating the future, or those riding the wave created by someone else?

Board members should understand the company’s innovation plans and road map for the business and whether those plans consider how customer preferences and pain points may shift in the foreseeable future. Dashboard reports linked to those plans should inform the board periodically as to progress. Understanding the digital economy, emerging technologies, and relevant megatrends affecting the industry — and the ability to relate this understanding to the business and its strategy — are now critical boardroom skills.