As many countries ease COVID-19 restrictions, we know we will have to work with different environments for the foreseeable future. Innovation will be critical not only to overcome this crisis but also to prevent others. At Hello Tomorrow, we believe that collective intelligence has found ways to maximize and navigate through challenging situations, and we want to help our community come together in the best way we can. Recently, we launched a survey targeting corporate leaders to collect and analyze the current priorities, challenges, and success factors of innovation managers during these times.
With data gathered from over 250 contributions, we were able to categorize the sectors based on the development of innovation activities and budgets. As interest and demand for digital solutions and a better healthcare system increased, it was not surprising that the healthcare sector also did its best in a pandemic situation, just like the software industry.
Due to decreased global activity, restrictions and budget cuts are expected in every sector. Our analyses reveal that budget cuts based on short-term forecasts can affect a company's long-term ability to adapt and grow. To prevent this, companies will have to do more with less.
According to innovation experts, the following will be selected as priorities for the next 12 months:
Understanding emerging trends to identify threats and opportunities (62% of respondents)
Strengthening core activities (58%)
Developing new jobs (54%)
Reducing costs (31%)
Increasing visibility (31%)
So, how can we adjust priorities and make the most of this situation?
Overall, we identified four main challenges that companies must overcome and would like to offer some tips regarding the following topics:
Budget Decrease:
The economic downturn is putting pressure on companies' finances, and businesses must navigate these tough conditions. The priority is to maintain liquidity and sustainable EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), especially for capital-intensive heavy industries, but this short-term vision actually presents an obstacle to long-term growth. Companies need to redefine their focus areas and platforms to create value in the long term. This contradiction has been highlighted by all participants in our research and many public figures.
As businesses need to transition from thriving to merely surviving, innovation must no longer be taken lightly and should bring significant value. Innovation was already a growing trend before the crisis and has now become a necessity for companies with limited budgets. While companies often struggle with a single key factor, they will need to develop faster innovation cycles: Time. Indeed, turning innovation and research into something tangible may take months, if not years, and the restrictions imposed by corporate boards often delay decisions and actions.
There is a need for a faster pace to accelerate innovation cycles and increase a company's return on investment. To move faster, businesses will need to enhance agility in their working practices, select the right engineering and design methods, or follow different paths to develop partnerships with companies or startups that are already developing a solution or technology. It is crucial that innovation leaders learn as quickly as possible from the successes and failures of their peers, and we hope to facilitate this with this survey.
One idea is to free innovation departments from their parent companies by gaining operational and financial independence. By maintaining a continuous dialogue with the parent company's business units, various companies have started to change and develop autonomous innovation departments within their organizations. Subsidiaries like Dassault Group's 3DS are independent, focused structures that are relatively distant from corporate pressure and ultimately enhance the overall innovation performance of the company.
However, innovation departments will need to align with expected public funding. Taking France as an example, the 2025 Productive Pact prioritized certain sectors that will benefit from state support, such as digital support, food and agriculture, industry, and alternative energy.
To avoid bankruptcy and layoffs at all costs, France will also provide rescue plans by allocating billions of euros for large industries that are severely impacted. With government-backed new loans and investment funds, 550 million euros will be allocated to research and innovation nationwide. More than 20 billion euros will also be allocated to the aviation sector to support the treasures of aviation companies and continue research for the expected zero CO2 emission “green planes.” The automotive industry will benefit from 8 billion euros to help French manufacturing units, boost sales, and enhance research on electric and hydrogen vehicles.
Such measures and funds will take time to reach innovation departments, and therefore, it is crucial to maintain a minimum innovation capacity now in order to utilize these funds later. Innovation budgets and teams must be preserved at all costs to fully benefit from external assistance when the time comes.
This cost reduction challenge progresses alongside the other issues we identified: digitization, fostering collaboration, and making the most of an uncertain future.
Digitization and Remote Work:
2020 was undoubtedly the most pivotal year for companies' digital transformation, and the need to accelerate, control, and simultaneously ensure safe transformation has also become imperative. The past few months have forced businesses to rediscover themselves in terms of communication methods, team cohesion, or value creation. These changes should not be considered temporary, and as a result, organizations need to evolve in this direction for their culture to endure regardless of the sector or activity.
Our survey reveals that thanks to the autonomy and flexibility offered by digitization, companies with a proper and efficient digital strategy achieve the most successful results. Others understand that a productive and coherent digital strategy will be a top priority in a hyper-connected world and plan to exert serious effort towards it.
Indeed, in the transition from offline to online, access to a company's information-communication processes and even products and services now requires a digital infrastructure. Implementing digital platforms that can be universally understood, independent of geographical boundaries, will be particularly challenging for international groups where complex and slow processes are often deemed necessary. Since new digital business models and digital products represent the driving forces of progress and even future competition, conducting training and active learning sessions will be necessary.
In addition to digitization, social distancing has also led to new working habits: The rise of remote work. Millions of workers separated from their social ties solely through the power of a mobile device and the internet are expected to be efficient in difficult conditions. Such changes in the work environment have often highlighted the overlooked: work is human-centric, meaning it is the living and breathing individuals who are responsible for value creation. Following this, personal well-being has become a priority for many. Fortunately, this trend has not gone unnoticed by innovation managers. By refocusing companies on their core activities, employees are being illuminated, and new ways to find team cohesion are being tested. These practices often involve flexible hours and regular work updates. To keep spirits high, many companies organized daily virtual check-ins, even online lunches and after-work dinners.
Many steps have been taken to ensure a harmonious working environment within the company; however, external relations, such as those with customers and suppliers, require different strategies depending on external actors.
Maintained and Developed Partnerships:
Uncertainty is experienced by every participant in the global economy, and dependency on customers and suppliers is one of the biggest threats companies face today. This interdependence is a reason to support collaboration and share best practices as needs and capacities change.
Every company needs to adapt its business, and new solutions need to be developed in innovation departments, making collaboration and investment sharing one of the top priorities for innovation managers. While 15% of our survey participants plan to rely solely on internal resources for innovation, 62% of companies plan to work with other companies and new businesses. Unsurprisingly, technology-focused companies in our research will also rely on the support of research laboratories (44%), hoping for a reduction in distancing measures and a full capacity execution of manipulations.
In addition to keeping existing relationships alive, companies still need to build new ones. One of the best ways to connect with potential partners is through physical events. Events representing various nations, sectors, and companies have never been more important for fostering collaboration. However, most borders are closed, and while internal policies do not necessarily halt mobility, they limit it, physical events have been canceled worldwide. Hello Tomorrow experienced this crisis for the first time with the postponement of the Global Challenge. We are working to provide our participants with the best experience on October 22 and 23, 2020. Companies are currently facing significant challenges in meeting and establishing trust with different actors, and alternatives have emerged to temporarily (re)connect. As a result, our survey shows that 86% of innovation managers will turn to online events to meet potential partners; 39% trust existing relationships with known partners, and 27% believe that physical events will not significantly change collaboration soon.
Our findings highlight the need to develop new collaboration platforms. Regardless of the industry, company size, and needs, innovation should centralize actors to facilitate changes, and communities like Hello Tomorrow will be essential to achieving such a goal.
Understanding and Navigating Uncertainty:
Overall, companies and societies must acknowledge that uncertainty is a key factor to be considered in every plan and decision they make. As stated, 62% of our survey participants think that closely monitoring trends in one’s market is the most important action to address a fast-paced environment.
This type of business intelligence requires a comprehensive analysis of a company's environment. It involves predicting the economic, social, technological, environmental, legal, and political transformations of the sector and providing critical insights for the future. Since it enables businesses to understand the needs and expectations of current and potential customers, where efforts should be directed, and which technology is most suitable for their individual structures, there are numerous advantages to developing innovation strategies. Indeed, while companies in a sector share many similarities, each also has unique features that need to be presented, making them more informed and prepared for challenges and opportunities.
It is important to acknowledge that understanding a sector's trends, especially in these challenging times, will not be easy. Decision-makers must distance themselves from daunting findings as difficult as it may be and recognize that uncertainty comes with change. Those who succeed will understand that accelerating the pace of learning between a continuously evolving world is necessary, and it will be those who find the right balance while planning for the future. Such a business requires agility. Companies must efficiently test and learn from every situation, re-test, and even pivot. Only then will a business truly be flexible and successful.
Looking Ahead:
In the long term, 62% of the people we asked believe the crisis will have lasting effects on their businesses and markets, and 71% believe the crisis will change their innovation priorities in the next 18 months.
As noted in this article, the need for greater efficiency, digitization, and collaboration will be crucial for the future of companies. However, sustainable actions will also be important. Many advanced economies are reviewing their global and cost-cutting policies to strengthen local industries. These initiatives favor shorter supply chains and local businesses, progressing alongside more environmentally friendly practices that are now on everyone's mind. Our participants believe that environmentally friendly practices are vital in meeting new consumer expectations and building a resilient world, playing a central role in tomorrow's innovation. Emerging and disruptive technologies known as 'Deep Tech' are seen as key providers of necessary transformations by companies and governments, and short-term economic pressures should not delay investments that create long-term technological advantages.
Overall, the current constrained environment is seen by many as a glimpse of what could come with climate change in the future (uncertain conditions, resource depletion, population growth...). We know that an already fragile system will be subjected to significant strain, and we believe the time has come to strengthen its foundations.
We would like to thank everyone who contributed to our survey! We also hope to gather your feedback for a deeper look at how deep tech has developed in the context of the crisis and discuss it with you at our Global Challenge in October.
