Wharton@Work

March 2021 | 

Crisis Innovation: Build Capability, Seize Opportunity

Crisis Innovation: Build Capability, Seize Opportunity

Crisis-driven innovation has a long history. Atypical circumstances such as wars and economic downturns create new needs, which in turn lead to new solutions — the radio, stainless steel, and Toyota’s lean manufacturing process are just a few stand-out examples.

Wharton professor and Vice Dean of Innovation and Entrepreneurship Karl Ulrich says today the pandemic is no different, and the move from crisis stage to a “new normal” is engendering a new set of needs to meet. “Wharton’s dean recently stated, I think correctly, that we have an opportunity to take advantage of everything we've learned from the pandemic and to roll it into business as usual. That’s also true for other organizations.”

But for many companies, taking advantage of those opportunities requires capabilities that, ironically, have been hampered by the very circumstances they seek to find solutions for. Disruptions to strategies, processes, and infrastructure — and prolonged survival mode — have put innovation on hold or slowed its progress in some organizations. For others, old ways of doing things are simply not as effective as they once were. For those reasons, there’s no better time to rethink and retool your approach.

Ulrich, who co-directs the Mastering Innovation: Strategy, Process, and Tools program, has been teaching a science-based model for generating, selecting, and developing ideas and taking new products to market for over two decades. He and co-director Christian Terwiesch shared their rigorous process for managing what is often treated largely as a creative endeavor in their book Innovation Tournaments. It’s a process that is in demand more than ever for geographically diverse companies and newly remote teams.

“Things we counted on happening organically require more structure and process,” says Ulrich. With a remote workforce, “you can't rely on random encounters, conversations, and problem solving. You need to be more deliberate about innovation. If you don't have a framework in a remote world, a lot of things aren't going to happen.”

That framework, along with the necessary skills and tools, is taught online in Mastering Innovation. Ulrich and Terwiesch’s model is applied even before the first classroom session, as participants begin an innovation tournament. Working in small groups, they explore and submit ideas for web- and app-based solutions. During the week, those groups select and develop one idea each, bringing classroom theories to life in a method that participants can later lead in their own organizations.

Determining Demand

Generating and selecting potential innovative solutions are internal parts of the process. To succeed, though, a product or service needs a market, and Ulrich stresses that consumer testing is still the best technique. “You have a hypothesis that you can create value by offering this new product or service and the best single indicator of success is consumer purchase intent,” he says. “Exposing consumers to the product concept to test their likelihood of purchase is a noisy estimate, but there is no excuse for not doing it, even in a foreign market.”

As innovation efforts ramp up, many firms are looking to expand their footprint, and understanding how traditional approaches differ in other geographies is critical. Ulrich and co-author Lele Sang explore what is acknowledged as one of the most challenging markets today in their new book Winning in China: 8 Stories of Success and Failure in the World’s Largest Economy. The valuable lessons distilled from the eight companies they studied can be applied to other formidable markets, including lessons around determining demand.

Witness Amazon, which went into China in 2004 as its e-commerce market was taking shape and exited in 2019 when it had captured less than two percent share of that market. It’s a complex story, but it shows that even when the demand is clear, the path to success can be anything but. As Ulrich and Sang note, it takes garnering a “significant share of demand in a market category with sustained competitive advantage.”

Do You Have an Advantage?

Achieving that second benchmark means that if demand exists, you have the capabilities required to be competitive in meeting it. Not only must you be able to bring the product to market, but you must also do so better, faster, and/or cheaper than the other players. Succeeding in China, a country perhaps best known for being slow and bureaucratic, requires speed and agility (and as Ulrich and Sang note, some luck).

“The Chinese market at the grassroots entrepreneurial level is extremely dynamic and fast paced,” he says. “The reason in part is that the prize is so big. That reward, along with so many competitors, leads to an environment in which those who are fast tend to win. And when everything is fast, agility becomes critical. When you're trying to coordinate globally, you're at an intrinsic disadvantage — one you can't escape.”

Wherever you’re planning to introduce a new product or service, understanding such built-in disadvantages is key. So is having a solid, repeatable process for generating and selecting ideas, determining a realistic assessment of demand, and building on your potential strengths — what Ulrich and Sang term “alpha assets.” As post-pandemic opportunities emerge, now is the time to maximize your firm’s chances for innovation success.