Covid-19 Redefines Innovation Resilience                                      

 Covid-19 Redefines Innovation Resilience                                      

 

 

 

 

 

By Nicos G. Sykas, Strategy, Communication and Innovation Consultant

The linear models and static tools developed for the symmetrical ecosystems of the past cannot manage the asymmetries and non-linearities that characterize today’s dynamic environment. 

Covid-19 related market and societal shifts have caused substantial uncertainties that need to be navigated – and seized as an opportunity to grow and change. Resilience is not a destination; it is a way of being. A “resilient organization” is not one that is simply able to return to where it left off before the crisis. Rather, the truly resilient organization is one that has transformed, having built the attitudes, beliefs, agility, and structures into its DNA that enable it to not just recover to where it was, but catapult forward – quickly.

Amid the uncharted waters of the coronavirus crisis, leaders should expect a significant increase in the number of “unknown unknowns”. Yet we also see new business models emerging amid these uncertainties.

Post Covid-19 innovation trends and challenges include: 1. Permanence of customer behavior changes. 2. Supply chains will merge into resilient ecosystems. 3. Business to Consumer e-commerce (especially door-to-door models). 4. Business to Business e-commerce. 5. Co-existence of physical and digital means and channels. 6. Remote meeting services and remote working. 7. Digital – smart governments will become mainstream. 8. Online education. 9. Social media. 10. Hygiene products. 11. Health insurance. 12. A transformation in health care delivery. 13. Expectations for physical, emotional, financial and digital safety. 14. Response to misinformation and fake news. 15. Artificial Intelligence and Augmented Reality applications in marketing e.g. virtual shopping assistance, product testing etc. 16. Big Data Analytics, dynamic scenarios, real-time response.

Innovation resilience is based on two dimensions, stability and adaptability, which contribute to maintaining a high level of innovation efficiency, while at the same time adapting to change. Stability involves standardization, modularization, institutionalization, and systematic planning, and focuses on the efficiency of innovation in a low-changing, predictable context. Adaptability is targeted at flexibility in high-variation and unpredictable environments that require companies to conduct adaptable, innovative mechanisms, like exploration, experimentation, and improvisation. Innovation resilience is the capability of an organization to cope with the uncertainties associated with its innovative activities through effectively integrating stability and adaptability.

A resilient system can be stable when a given shock is small, and can be adaptive in a time of greater shocks. The two poles are not opposite, but interdependent, and stability is an essential condition that provides foundations for constructing adaptability. Stability and adaptability are not separable and conflicting, but are interdependent. This two-fold character provides a common platform for addressing diverse issues such as stability and change, efficiency and flexibility, exploitation and exploration, and formalization and flexibilization.

Innovation is a highly risky process, and the innovative outcomes are uncertain. These uncertainties include whether the technology will be feasible, whether the market will still exist, whether a different and successful business model will emerge, whether the rules of the industry will be changed, and so on. The probability of risk outcome can be calculated from historical data; however, it may be not possible to quantify the uncertainties, which can produce a variety of unpredictable outcomes. In more radical and disruptive innovations, organizations have to deal with highly unique issues, and have to face more uncertainties that cannot be predicted.

We live in a highly non-linear world characterized by fluidity, volatility, randomness, extreme uncertainty, disorder, variability, complexity, interdependencies, asymmetries and catastrophic risks. Resilience, robustness and antifragility should be standard features, built-in properties in the architectural design of brands, startups, large corporations, financial systems, communities, public policies and crisis management plans.

As Nassim Taleb mentions in his book The Black Swan – the Impact of the Highly Improbable “The modern world, being Exremistan, is dominated by rare –very rare– events […] Furthermore, the sources of Black Swans today have multiplied beyond measurability […] Plans fail because of what we have called tunneling, the neglect of sources of uncertainty outside the plan itself.” Complexity implies Extremistan – an environment that can deliver large events. Complexity plus asymmetry leads to explosive errors.

Covid-19 –the unknown and unprecedented risk– has quickly mutated into a “black swan of black swans”, triggering severe economic, financial, political, and geopolitical disturbances. Through the cultivation of organization resilience, it may be possible to develop an innate ability to proactively adjust to sustainability risks and uncertainties, and to seek opportunities from them.

In his book Antifragile, Things that Gain From Disorder Taleb notes that “An option is what makes you antifragile and allows you to benefit from the positive side of uncertainty, without a corresponding serious harm from the negative side […] Let us call trial and error tinkering when it presents small errors and large gains […] The antifragile needs to select what’s best – the best option […] Trial and error… is not really random, rather, thanks to optionality, it requires some rationality. One needs to be intelligent in recognizing the favorable outcome and knowing what to disregard […] We can, from the trial that fails to deliver, figure out progressively where to go […] Innovation is precisely something that gains from uncertainty: and some people sit around waiting for uncertainty and using it as raw material, just like our ancestral hunters […] When someone has more upside than downside in a certain situation, he is antifragile and tends to gain from volatility, randomness, errors, uncertainty, stressors and time. And the reverse.”

Taleb presents the barbell (or bimodal) strategy as a way to achieve antifragility: “I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas (robust to negative Black Swans) and taking a lot of small risks in others (open to positive Black Swans), hence achieving antifragility […] But the barbell also results, because of its construction, in the reduction of downside risk – the elimination of the risk of ruin […] For antifragility is the combination of aggressiveness plus paranoia – clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself”.

In his latest book Skin in the Game: Hidden Asymmetries in Daily Life Taleb builds the link between antifragility and innovation “I make the case for risk loving, for systematic ‘convex’ tinkering, and for taking a lot of risks that don’t have tail risks but offer tail benefits […] I have shown in Antifragile that making some types of errors is the most rational thing to do, when the errors are of little cost, as they lead to discoveries. For instance, most medical ‘discoveries’ are accidental to something else.” Innovation loves adventure, uncertainty and risk.

Building capabilities out of asymmetries involves that the firm is capable of doing three things well:

  1. Discover the asymmetries and discern the potential between them.
  2. Turn asymmetries into capabilities by strategically embedding them within an organizational design configuration that exploits them and sustains their development.
  3. Match asymmetry-derived capabilities to market opportunities.

New strategy tools, dynamic capabilities and cross-disciplinary approaches are needed to: a) Manage asymmetries and achieve a sustainable competitive advantage through innovation resilience, b) create transformative, disruptive innovations with exponential multiplicative results and benefits for government, business and society.

In response to the above challenges, I developed a new dynamic Innovation Model which offers the following unique advantages and benefits:

  1. Expands creativity in the innovation process. This novel holistic approach involves multifunctional teams and the best configuration of critical factors, attributes and distinctive capabilities from the four basic types of innovation: product, process, organizational and marketing. The combinatorial property improves the chances of achieving more breakthrough innovations. The number of combinations of interacting elements increases exponentially with the number of elements, leading to a sudden increase in the detection of hidden opportunities.
  2. Embeds Antifragility property in the structural design of new innovations. This involves a bimodal strategy which helps organizations exploit positive Black Swans (produce exponential multiplicative results) and avoid negative Black Swans (mitigate risk, increase resilience and robustness). This is achieved by modifying the exposure accordingly –through a number of tools and techniques– in order to maximize exposure to positive asymmetries (opportunities) and minimize exposure to negative asymmetries (dangers).
  3. Uses uncertainty, volatility, variability, randomness, disorder, chaos, complexity, asymmetries, stressors, disturbances, risk and time as a raw material for the production of resilient innovations.
  4. Fosters replicability and transferability of innovation outcomes.
  5. Maximizes the scientific, social and economic impact of innovation.

This powerful tool can: a) Help Organizations create more and better innovations and b) boost competitiveness and employment and accelerate economic recovery.

The flexibility and modularity of this cross-cutting tool allows a wide range of applications: Startups (improves success rate), Large Corporations, Public Sector Innovation, Scientific Research (turns Big Data into useful intelligence), Circular Economy, Blue Economy, Cultural Heritage, Creative Industries, Smart Communities, Social Innovation, Social Entrepreneurship, Hotel and Tourism Industry, Health Services and Products, Education, FinTech and RegTech, Cybersecurity, Crisis Management, National Security System, Economic Diplomacy, Nation Branding, Political Marketing and the new EU Research and Innovation Program Horizon Europe 2021–2027.

The strategy implementation for this new Innovation Paradigm is presented analytically in a 180-page practical Guide I have prepared – the blueprint for creating resilient innovations under conditions of extreme uncertainty. This pioneering innovation approach can turn Cyprus and Greece into Regional Innovation Centers –ideal destinations for the creation and establishment of Startups– attracting Foreign Direct Investments and boosting Conference Tourism.