Innovation is a concept that needs time to consolidate and get results in the medium and long term; it is undoubtedly a change in the way companies are managed.
No company, anywhere in the world, was prepared to face the unforeseen tsunami caused by COVID-19 in our society. Therefore, no manager can be held directly responsible for the impact that the pandemic is having on businesses. However, they are responsible for the business plans they prepare during the last quarter of each year, generally with a view to increasing turnover, based on the same parameters.
Rethinking the value chain
But the market is moving on due to new specialized competitors that were born with a solid and strong base of technology and innovation, breaking the established value chains. And this innovation, without a doubt, tends to bring a higher degree of dynamism and impact on business development.
In this context, many managers are already being forced to adapt or entirely rethink their business strategies, or to develop new strategies in those companies that had not done so previously, so they can face the new challenges from now on. In any case, the questions asked throughout the strategic process must be much more demanding from the perspective of commercial management, cost structure, talent and financial management.
In other words, the current demand implies thinking about reshaping the value chain.
The lack of data to make decisions
If there is something that this crisis is probably bringing out, it is the lack of data across all of business management to make data-driven decisions with a greater degree of objectivity. This is mainly due to the slow pace of the digitalization process in companies, which directly affects the execution of tasks.
Even though some companies truly believe they are “digitally advanced”, the reality is that on many occasions only isolated tactical tasks are developed, lacking the robust strategic thinking that allows accelerating the process of integrating people, technology and data. This demand requires innovative ideas from those who are responsible for managing resources, both human and technological.
More R&D, less impact on GDP
In the world of business, digitalization is often associated with innovation and development. For instance, taking as a reference markets with a high internet penetration, above 85%, it can be seen that the impact of COVID-19 on GDP by 2020 is 1.5% lower on average in those countries that stake on a higher level of investment in R&D.
South Korea will see the smallest decline, of 1.2% of GDP. In contrast, Italy and Spain, with lower rates of investment in R&D, will suffer the greatest negative impact, with a sharp drop of between 8% and 9% of GDP by 2020. And although France behaves similarly to these two countries, its higher investment (above 60%) in R&D will enable it to face the crisis under the best of circumstances.
Meanwhile, China, with a lower internet penetration but an investment in R&D at the same level as Australia, will be able to continue growing by 1.2%, under the worst-case scenarios.
On the other hand, the group of emerging markets formed by Mexico, Brazil and the rest of the Latin American countries, Nigeria and South Africa will suffer a joint negative impact of −4.2%, less than the more developed countries. Their lower investment in R&D, far below average, will make it difficult for them to recover at a faster pace during 2020.
A responsibility of top management
In other words, company managers have the task of thinking differently, with a much more strategic focus, looking at the value chain from another angle and staking on innovation and development as a way of making companies sustainable in the medium and long term.
Companies that continue to use digitalization as a tactical concept, rather than implementing it strategically, run the risk that any unexpected event will erode their business more than it should. And that is the responsibility of top management.
