Innovation takes many forms, and it will likely come from unexpected places in the next normal. Here are 3 ways business leaders can drive innovation regardless of what happens in the world.

Decades from now, economists, historians, and business school professors will look back on 2020 as a turning point in American history.

This spring, the nation’s longest economic expansion on record came to a halt. Fears about the coronavirus pandemic caused domestic markets to crash and sent the country plunging into a recession. While U.S. stocks have mostly rebounded to pre-pandemic valuations, the economic recovery has only just begun.

Assessing the Damage

In the startup world, VC deal-making activity halfway through the year had increased substantially over the previous quarter, but it was still down almost 20% compared with the same period last year. Stay-at-home orders and the universal pivot to remote work undoubtedly created obstacles for entrepreneurs seeking meetings with prospective investors.

Despite these struggles, data from Docsend shows that at least one metric — pitch deck activity on its document management platform — indicates VCs are going shopping again. The fact that founders are sending out more links and VCs are reviewing more decks suggests that investment activity could pick up significantly to close out the year.

If we do see an uptick in fundraising, the outcomes could mirror those of past recessions. The dot-com bust tested scrappy, young companies like Amazon and Google and made them into the titans they are today. The Great Recession fueled a similar wave of innovation that led to the birth of Uber, Credit Karma, and even Bitcoin. This isn’t surprising — throughout history, some of America’s most iconic companies started amid recessions.

Challenges and Opportunities

Despite business closures and the sudden shift to remote work, companies everywhere are still developing products that defy the imagination and working on business models that will define the next normal. These innovators are the ones who will lead the U.S. into the next era of economic prosperity.

That won’t happen overnight, though. Unemployment remains historically high, despite three straight months of positive job reports. For many of the 16.3 million unemployed Americans as of July, financial aid from the government is the only source of household income. In some cases, their former jobs are not coming back.

Uncertainty lingers, and the road back to economic prosperity will be a long one. This convergence of economic, political, and social crises makes planning for the future more challenging than ever. It also provides innovators with unique opportunities to make an outsize impact on society.

Following the Leaders

During the last economic expansion, lean startups tapped into the potential of the internet for social networking and transformed the cell phone into a platform for apps that we now consider essential to our lives. Teenagers in dorm rooms and former corporate executives in startup incubators figured out how to move faster and build better than corporations with thousands of employees and seemingly endless resources.

The companies they launched are now some of the world’s most powerful organizations. Will tomorrow’s disruptors follow the same formula? Don’t bet on it.

Today, established corporations have more advantages over ventures — even if fundraising does pick up. The surge in stocks while small businesses floundered and VCs took a breather illustrates an important point about today’s economy: The resource inequality between America’s largest companies and potential disruptors is bigger than ever.

Prior to the pandemic, leading organizations in nearly every industry raced to adopt digital infrastructures and new technologies. As a result, many have adapted quickly to the new normal — and some have even thrived. Throughout the summer, major tech companies have continued to hire, and only recently has employment in the sector begun to show signs of slowing.

If you’re leading a company through the current crisis, now is the time to become more innovative and creative than ever. Regardless of how big your company or industry might be, winning in the next normal will require you to think bigger and move faster.

Instead of trying to outrun smaller, more agile industry disruptors, you’ll be trying to keep up with the giants that are disrupting commerce as we know it. In this race, innovation is the best weapon. With that in mind, here are three tips for pursuing it:

1. Seek transformation rather than incremental improvement.

In a crisis, savvy executives will make business model innovation a core business objective. Like most business leaders, you probably understand the need to make innovation a strategic priority. Hopefully, you’ve identified some unique advantages you have over other potential disruptors in your space, and you might even be working to maximize those.

Your ability to leverage existing customer relationships, market expertise, and capital allows you to reduce risk in your innovation efforts in a way that early stage startups cannot. Depending on your industry, regulatory complexity might make it hard for outsiders to take you and your competitors by surprise. Just don’t assume that these barriers will keep disruptors at bay forever.

Most large corporations have focused their innovation efforts on incremental improvements associated with their core business models, but optimizing current business models or reshaping your core won’t transform you into an industry leader. As the world changes thanks to technological evolution, the most innovative companies will aim to influence that change however they can. If you hope to be one of them, your end goal should be transformation rather than progress. By clearly communicating that mindset to the rest of your organization and mobilizing staff members to act on it, you can ignite creativity and begin taking concrete steps toward real change.

2. Formalize your commitment to innovation.

One of the first steps you should take toward achieving transformative innovation is organizing the team that will lead the charge. Implement a formal process for managing and prioritizing ideas to identify and validate business models that drive transformation. Many organizations are unaware of assets, IPs, and ideas that are available to commercialize as separate high-growth companies. Instead of starting from scratch, seek out existing concepts and models that interest you, and then explore ideas for turning them into revenue.

The further away these ideas are from your firm’s core operating model, the more advantageous it is to develop and launch new ventures outside of existing business units. Rather than changing your entire corporate governance structure, create an internal or external autonomous business unit that is empowered to validate, design, and commercialize new business models in a less constrained environment.

3. Lean on technology and external partners.

Technological improvements in cybersecurity, artificial intelligence, blockchain, high-tech manufacturing and robotics, and biotechnology aren’t just fueling the growth of new industries — they’re shaping the job market, too. These advancements are creating demand for niche technical skills and the visionaries who can deploy them strategically.

As you seek to innovate, you’ll face intense competition for a limited supply of this talent. By implementing automated technology into core business processes, you can gain valuable efficiencies that let you reallocate capital and human resources to new ventures. Of course, deploying these technologies effectively also requires specialized skills, and integrating them into your existing systems could be a significant lift. If you’re unsure whether you have the in-house talent to develop and execute viable transformative ideas, look for partners who can work with your team and lead the commercialization of new business models.

More often than not, attempts to innovate a business model will fail. That doesn’t mean you shouldn’t try. The insights you gain with each attempt will better prepare you for the next effort. Instead of placing your bets on a single idea, take a portfolio approach to launching new corporate ventures. Plan to launch 20 new businesses over the next five years, knowing that most ideas will fizzle out.

Above all else, be disciplined about execution milestones and stage gates for continued investment and development. When it’s time to move on, move quickly. Otherwise, you’ll still be chasing the leaders when the next recession hits.

About the Author

Brenda Schmidt is the CEO of Coplex, a corporate startup studio that partners with entrepreneurs, industry experts, and corporate innovators to establish high-growth tech companies. She previously founded Solera Health and has spent her career educating, speaking, advising, and leading in the name of creating social impact.

Featured image via Shutterstock.