In times of global crisis, CEOs are focused on two things – cash flow and runway.
With something catalytic events such as Covid-19, years of activity is condensed into weeks. This means CEOs need to make time critical decisions that will make the difference between the company thriving or surviving, all under an incredible intense timeline. To do this effectively and provide the best chance of successfully navigating this uncertainty there are three things a CEO should focus on.
Shoring up and protecting the core business are the immediate priorities of the CEO. However, as companies pull the normal cost saving levers, retrenching into a complete focus on cost savings is dangerous and can create longer term issues
We recently surveyed 300 global CEOs at large companies to get an insight into how Covid-19 had impacted their innovation programmes. Worryingly it revealed a 200% increase in businesses cutting innovation spend during the crisis. in March, before extensive Covid-19 restrictions, just 8% of CEOs surveyed said they would not be investing in innovation activity this year, with that rising to 25% during the current crisis.
Yet, according to a recent Gartner report those who invested into innovation during a downturn outperformed their peers by 5x in terms of growth when the market returned.
A great example of two companies that took different approaches in the great financial crash of 2008 was Motorola and Samsung. Samsung doubled down on R&D investment, patents and investment on innovation enabling them to launch the galaxy in Q4 2008 which drove an increase in year on year sales by 28% and a 6% surge in market share. Whereas Motorola cut investment and in the same period saw a 45% drop in sales and a 10% slide in market share
However, it’s not just enough to sustain or increase investment in innovation. To move forward and use innovation as vehicle for growth during a crisis, rather than a cost-line that doesn’t deliver payback, requires a fundamental rethink in both how innovation is defined, governed and measured.
Another tactic for a CEO to fuel future growth is to think about how you enable the next generation of startups and potentially provide support the companies innovation ecosystem, via the staff they are having to exit to save immediate costs.
In our report, nearly a third (29%) of the 300 C-suite we spoke to said they were implementing cost cutting measures, including redundancy, due to the pressures of Covid-19.
There is a number of key benefits for creating this pathway. It shows that the company living its people first values by truly empowering it’s people, it shows the company helping to take a proactive role in helping the local economies in the communities they serve return to growth and actually helps retain the existing talent and attract new, when the market returns.
This process is tried and tested. Ten years ago, Nokia was faced with making over 40,000 job cuts. It opened centres in Europe, India and the US to help those faced with redundancy to find a new job, either inside or outside the company. It also formed ‘Bridge,’ an entrepreneurial stream for employees that had an idea for a startup. Since its inception, Bridge has helped over 1000 start-ups get their beginning, in which 18% went onto secure commercial deals with Nokia. The scheme is also credited for fuelling the rise of the Finnish tech ecosystem, which includes success stories like Supercell and Rovio.
Many CEOs will be worried that the current economic climate is not conducive for startup success. They couldn’t be more wrong. It is no coincidence when you look back across history some of the largest companies started during times of economic downturns. This is not just the most recent ones of Uber and Airbnb – companies such as Microsoft, Disney and IBM were all founded during deep recessions.
Times of rapid disruption provide ample opportunities for innovation and for startups to succeed. Covid-19 is reshaping every industry – consumer needs have changed and new market segments are opening up. CEOs have opportunity to play a leading role in reshaping this future, not only through its own innovation efforts, but also in the departing talent it has to let go.