Development of innovations in a crisis: change strategies

Now the word "crisis" is one of the most common in our vocabulary. The current crisis is also special, as it concerns literally everyone. Therefore, it is useful for the head of any company to think about how to respond to this new reality. As you know, to choose the optimal solution, it makes sense to consider as wide a range of alternatives as possible. And to find them, it is worth studying the techniques of leaders who have succeeded in crisis situations.

When we talk about innovation, we often imagine something no less revolutionary than the iPhone or Tesla. But breakthrough developments rarely appear on the market: they require large investments and involve huge business risks. There is another approach to innovation management – the constant introduction of small changes that improve a product or service ^[4,7,9]. In this case, innovation activity cannot be the privilege of a special unit, it permeates the company inside and out. The emergence of new ideas, their testing and implementation becomes part of the organizational DNA.

During the pandemic, some companies were faced with a choice – to change quickly or die. For example, after the restaurants were quarantined, the suppliers of exclusive and rare products suddenly lost their sales channels. They had neither an alternative customer base nor skills to work, for example, with households. Under these conditions, those who were able to reorient themselves on the go got a head start: quickly find a way to reach new customers, reduce the size of the product packaging and the cost of delivery, as well as expand its area ^[3,6].

Interestingly, before the crisis, these companies did not consider the possibility of working with end consumers, but now they are not going to abandon them (unlike restaurants, these customers pay immediately, and not 1-2 months after delivery). Some suppliers go further – they offer not just products, but sets with instructions for "assembling" a Michelin-starred dinner at a price almost twice as low as in restaurants. After all, it is quite possible that for some time people will be reluctant to have lunch and dinner outside the house, in addition, during the period of self-isolation, the number of home cooking enthusiasts has increased.

The crisis sometimes leaves no choice, but even in peacetime, a company can put changes on stream, ensuring a competitive advantage. This requires a willingness to experiment and sensitivity to users.

One of the striking business cases confirming this thesis is the story of the rise of the Chinese corporation Xiaomi. The company released its first smartphone in 2011, and in 2014 it became the largest supplier of smartphones in the Chinese market. When the Xiaomi smartphone appeared on the market, evil tongues began to call it an "iPhone for the poor." CEO and co-founder Lei Jun has never hidden the fact that he was inspired by the example of Steve Jobs. But, according to him, there was a fundamental difference between the two companies from the very beginning: Apple has always imposed its vision of the product on the market, not paying attention to feedback. The position of Xiaomi was exactly the opposite – from the first day it produced smartphones in small batches, not trying to bring them to full perfection, then carefully monitored customer responses and quickly improved the devices in response to them. The software was updated weekly, and this also encouraged engineers to seek user feedback. One of the tools for collecting feedback has become a kind of Xiaomi fan club - a couple of million adherents of the brand, united in social networks ^[1,5,10]. They are happy to evaluate each new "feature", express their wishes, vote for certain innovations.

Continuous improvement of a product or service is much easier to put on stream in Internet companies - there is not even a need to come up with complex ways to collect opinions about innovations. This information is tracked based on objective data – changes in traffic, time spent by the client on the site, conversion of visits to purchases and other indicators. It is also possible to establish an assessment of potential innovations using A/B testing and other analytical methods of product management.

Professor of Harvard Business School Stefan Tomke calculated that the tourist service Booking.com annually conducts more than 25 thousand tests of ideas proposed by employees ^[3,7]. It has become routine to the point that two users are simultaneously opening the site booking.com , often see two different versions of the page. Even those innovative ideas that the management does not believe in are tested here. One of the most important corporate principles is that any employee has the right to test any hypothesis without the permission of his superiors. Perhaps such continuous innovation is one of the reasons for the success of the company, which in less than 20 years has turned from a small Dutch startup into the world's largest online platform for finding hotel rooms and temporary housing.

The experiments were put on stream by such giants as Amazon, Facebook, Google, Expedia. But they are used not only by digital companies: for example, FedEx and H&M are also constantly experimenting to find the best points of interaction with customers or improve product design. Trial and error is especially important for companies exploring new market opportunities: there are no obvious strategies in this field, and experiments become the most important source of information about consumers.

Not all companies actively use the method of innovation through experiments. Testing requires special tools and resources. At the same time, the risks of failure are high (according to experience Booking.com , only 10% of hypotheses turn out to be worthy of implementation). So the system is effective only with a very large flow of experiments. However, the reason is not only the desire to save money. To ensure the continuous generation of ideas, a corporate culture that encourages curiosity is needed, an environment in which it is safe to offer even controversial ideas, and anyone can do this, not just employees of the R&D department or management.

Democratization is an important element of a corporate culture aimed at innovation ^[3,8]. It implies the involvement of a large number of ordinary employees and equal conditions for the selection of ideas for everyone – the options proposed by the management are tested on a general basis, and decisions are made on the basis of data, not authoritative opinions.

One of the important questions that arise when a business requests innovative ideas: what exactly are we looking for? The theory cannot give a direct answer to this question, but, as one of the most authoritative experts on innovation management wrote Clayton Christensen, she helps set the framework for thinking. In his book "The Law of Successful Innovation", he suggests studying customer requests, focusing on what "work" a product or service does for them ^[6,9]. The true goal of the buyer is not to satisfy a specific need, but to change his life for the better. The selected product or service is a means of such a change.

Christensen's textbook example is a milkshake. A study of two peaks of sales of this product in one fast food chain showed that the first one occurred in the early morning on weekdays, and the second one in the afternoon on weekends. In the first case, the cocktail is "hired" as a substitute for breakfast on the way to work. And in the second, it is bought for children, that is, it "helps" the buyer "to be a good parent." So, in the first case, an additional incentive for choosing will be the convenience and reliability of the packaging, as well as the consistency of the drink, so that it can be stretched for the entire time of the road. And in the second, supplements that children like can play a decisive role.

The concept of "work" allows you to better understand the client's need (to take into account not only functional, but also emotional, social aspects of the problem, to consider them in relation to each other), to build innovations around it, as well as to see non-obvious competitors and analyze their strategies.

Experts today are trying to understand what exactly ensured the rise of Zoom Video Communications Inc. During the pandemic, this video conferencing service became not only the most popular, but also "popular" – now it is used for online parties, broadcasts of shows, remote showing of apartments to potential tenants. Over the past six months, the company's share price has more than tripled. It is curious that Zoom Video Communications Inc. has declared itself on the field with very serious players such as Skype, Facebook Messenger, FaceTime and has achieved outstanding results.

Obviously, the company did not offer any breakthrough technology, but it was able to push competitors apart due to the optimal combination of functions. Perhaps the advantage is that Zoom allows you to connect up to 100 people for free, while providing an acceptable signal quality, is an excuse to "hire" a service for business communication (even opponents of long corporate calls have their own incentive – dynamic avatars that simulate presence). Generation Z might have liked the functions for self–expression and entertainment that social networks usually performed - a filter that "improves" the user's appearance on the screen, or the ability to change the virtual background. It is possible that success is ensured by the fact that the service, thanks to its simplicity, managed to pave the way to universities. Thinking about what kind of "work" Zoom does for customers will help reveal the secret of its success.

Figure 1 shows a model of business strategizing of innovations in a crisis.

Fig. 1. The model of business strategizing of innovations in a crisis. Compiled by the author on the basis of ^{[2, 8]}.

The first technique is universal. It consists in accepting the crisis situation as a new reality and not indulging in painful regrets about what would have happened if everything had turned out differently. That's what all leaders do: as politicians – Franklin Delano Roosevelt during the Great Depression or Winston Churchill after the outbreak of war with nazi Germany, as well as business leaders – Steve Jobs after the scandalous dismissal from Apple, or leaders of South Korean companies in the conditions of the severe financial crisis in Southeast Asia in 1997. It is impossible to modify the past, so regrets only take away energy and paralyze the will.

Another, also universal, feature of a leader is the ability not to get lost, analyze the situation and demonstrate confidence that current difficulties can be overcome. This is how Louis Gerstner behaved, for example, when he accepted an offer to become CEO of IBM, which was in the deepest crisis: its capitalization fell three times compared to its peak value, it was rapidly losing the market, had a huge excess staff of employees (400 thousand!). He did not accept the almost obvious proposals to bring the company out of the crisis, which are commonly called quick fix (quick fix), in particular, he did not divide the company in order to improve manageability. Having understood the situation, he proposed a new strategy that allowed to restore capitalization in just three years. In other words, with his calmness and confidence, he saved IBM from bankruptcy.

An important aspect of confidence is optimism, faith in the ability to overcome seemingly insurmountable obstacles. But optimism cannot arise where there is fear. That is why US President Roosevelt, addressing the nation at the height of the Great Depression, uttered the famous phrase: "The only thing we should be afraid of is fear itself." Leaders in a crisis should become "donors" of optimism for their followers.

The next most important feature of leadership in a crisis situation is the mobilization of energy. At the moment when others give up, real leaders find additional internal resources, inspiring followers to fight. A vivid example of such mobilization is the evacuation of Soviet factories from the western regions of the country to the east. The factories, whose equipment was unloaded from the echelons to completely undeveloped sites, began to produce products for the front literally in a matter of weeks. Such a management style, called a management researcher By Alexander Prokhorov mobilization, cannot and should not be used constantly. But in turbulent conditions, it may be necessary.

In order to find innovative solutions, the leader needs to abandon the usual forms of behavior. This advice is always applicable, but it becomes especially relevant in a crisis. A perfect example of unconventional thinking is the story of Billy Bean, the general manager of the Oakland Athletics baseball team, told in the book Michael Lewis. The problem he faced seemed insurmountable at first glance: as soon as a player of his team reaches the "star" level, he is immediately outbid by teams with a large budget. How to compete in such a situation? The solution is to apply scientific methods of statistical analysis to the analysis of the game. The manager radically changes the strategy of completing the team with players, actually refusing to acquire "stars". This causes a natural resistance of professional scouts who are responsible for finding and attracting players. But Bean stands his ground and achieves a phenomenal result.

An important task of a leader in difficult times is to give a special meaning to the activities of his followers. After all, if a person is convinced of the importance of what he is doing, he will work with redoubled energy even in conditions of risk. An example of an effective solution to such a problem is the project unfolding before our eyes – the work of a group of volunteers led by a well-known biophysicist, corresponding member of the Russian Academy of Sciences Fazli Ataullakhanova. In ordinary life, Fazli is a classical scientist engaged in fundamental research, heading research laboratories in Russia and the USA. In the context of the crisis caused by COVID-19, with the support of RUSNANO, he launched a project aimed at preventing severe complications of coronavirus infection.

It has been established that high mortality from the new coronavirus is caused by blood clots that occur in blood vessels and interfere with blood supply to the lungs. According to Fazli and his colleagues, it is possible to ease the course of the disease and reduce the likelihood of its fatal outcome if anticoagulants that prevent the formation of blood clots are injected into the patient's body in time and in the right doses. To do this, you need to properly conduct a blood test using a special sensitive method and carefully monitor the dynamics of its clotting. To bring this idea to life, it is necessary to conduct a study as soon as possible, observing the course of the disease of many hundreds (preferably thousands) of patients. Fazli was able to attract and train dozens of volunteers who are currently working in 12 clinics, monitoring the quality of blood sampling for analysis and collecting test results. Fazli provided the necessary equipment for the participants, and in order to create more comfortable and protected conditions, rented accommodation within walking distance to the clinics.

This example illustrates another necessary trait of a leader's behavior in a difficult situation – caring for team members. It is clear that the crisis is the crisis that does not allow you to create ideal conditions for work. But the very desire of the leader to do the maximum possible for his followers does not go unnoticed, instilling in them faith in success.

In conclusion, we draw attention to an important characteristic of anti-crisis activity, noted by a well-known researcher of the phenomenon of leadership Warren Bennis. He called the crisis a crucible through which a leader passes and which contributes to the formation of leadership character. The crisis forces people to reconsider habits, traditional views, abandon prejudices, acquire new knowledge and skills. Weak people are afraid of this crucible, strong people use it.