Our viewpoint

Crisis, change, and new normals

people in queue outside of the store
Key takeaways
Change as an imperative
1

When a crisis is particularly severe or unusual — or both — staying the same is simply not an option.

Innovation: incremental and radical
2

Incremental innovation progresses in relatively small steps and seeks to do things better. Radical innovation progresses in leaps and bounds and seeks to do things differently.

The “new normal” may not be what it was
3

Historically, humanity has staggered on by innovating its way out of trouble, by learning lessons, and by correcting mistakes.

Change as an imperative

In 1962, in his book Capitalism and Freedom, Milton Friedman wrote: “Only a crisis — actual or perceived — produces real change.”1 This axiom has been much debated during the past six decades, but it is pretty difficult to refute in light of current events.

The fact is that when a crisis is particularly severe or unusual — or both — staying the same is simply not an option. We are witnessing this now. The COVID-19 outbreak is largely without precedent, and so is the reaction to it.

With much of the global population in lockdown and our day-to-day routines rendered nigh on unrecognisable, it is tempting to recall the celebrated line from LP Hartley’s The Go-Between“The past is a foreign country. They do things differently there.”2 What remains to be seen, of course, is whether differences will persist once the crisis is over.

This is not to imply that we will embrace permanent quarantine and declare ourselves lifelong devotees of self-isolation and social distancing. But might we decide that some of the less dramatic policies, practices, and ideas to which the pandemic gives rise, actually work just as well as — if not better than — those that we knew before?

After all, necessity is the mother of invention — and crisis is the bedfellow of opportunity. Today, although entire industries are at a standstill, innovation in response to the pandemic is proceeding at pace and in many forms. So, to what extent might a global story of negative, shorter-term disruption become one of positive, longer-term transformation?

Understanding innovation

In attempting to answer this question, we should perhaps begin by briefly reflecting on the conditions in which innovation is liable to thrive. To do this, in turn, we first need to define “innovation” itself.

Broadly speaking, innovation can be split into two camps: incremental and radical. Incremental innovation progresses in relatively small steps and seeks to do things better. Radical innovation progresses in leaps and bounds and seeks to do things differently. While both represent the effective exploitation of new concepts, it is the latter that appears more apt right now.

Innovation is also a matter of meeting unmet needs. It is not about novelty for its own sake, which frequently results from initiative overload and is scarcely preferable to aimless inertia.

There are many barriers to innovation, including inflexibility, aversion to risk, lack of freedom, and budgetary constraints. Most of these are necessarily shattered in times of turmoil. There are also many enablers — not least environments that generate challenges, inspire both action and intellectual stimulation, and provide a degree of “framing”.

Consider, for example, a game-changer from a less tumultuous age — the iPod, which was conceived after Apple CEO Steve Jobs invited his employees to explore the notion of “a thousand songs in your pocket”.3 Jobs appreciated that successful innovation is principally about identifying the “right” problems and then finding the “right” solutions — precisely what is required today.

Innovation everywhere

Despite citing Apple and Jobs by way of illustration, we should not suppose that innovation is the sole preserve of “geniuses” — especially in times such as these. Nor should we assume that all meaningful innovation is confined to the most rarefied realms of science and technology.

Granted, in our present situation the truly decisive breakthrough will emanate from the sphere of medicine. By enabling billions of people to take their work home amid unprecedented efforts to contain and delay COVID-19’s spread, IT has underlined its apparently limitless potency. And where would we be now without the web-driven interconnectedness that so shapes 21st-century society?

Yet a more grass-roots kind of innovation is also flourishing as communities, families, and individuals accept that the conventions of old may no longer apply. Moreover, many of these bottom-up initiatives are substantively removed from data ubiquity, automation, cyber-physical systems, and other advances associated with IR 4.0 — the fourth industrial revolution.4

Some even qualify as what has been called “common innovation”.5 They are directed towards collective wellbeing rather than undertaken in the pursuit of profit, market share, or some other strategic objective. Unlike innovation in the Schumpeterian sense, which involves sweeping away what has gone before, they are only quietly disruptive. They are the stuff of “ordinary” people and everyday existence.

Within organisations, meanwhile, the urgent need for both top-down and bottom-up innovation is further emphasising the value of diversity of thought. Nobody can claim a monopoly on great ideas, which is why anyone who is able to contribute to a decision-making or problem-solving process — irrespective of rank, pay grade, or outlook — deserves to be heard without fear of being ignored or scorned. In the face of a communal and frighteningly unfamiliar threat, this message could finally be gaining real traction.

Onwards and upwards

So, will all these changes, all these innovations — whether big or small, whether devised by experts or laypersons, whether implemented by policymakers or the proverbial man or woman in the street — endure when this crisis eventually recedes? Probably not. Many will undoubtedly be recognised as what they were intended to be: emergency measures, imaginative stopgaps, ingenious but temporary fixes created in anticipation of the familiar’s return.

Yet some will surely survive, because crisis not only produces real change: it also reveals what is possible. It supplies arguably the ultimate proof of Parkinson’s Law, which states that work expands so as to fill the time available for its completion.6 Give a team a pleasant, stress-free decade in which to perform a task and the chances are that the job will take 10 years; give the same team three frenzied, highly pressured months and the chances are that a conclusion will be reached within 12 weeks. In short: crisis redefines what can be done.

At Invesco, for instance, we have determined in short order that a global asset manager is able to function effectively even when the large majority of its employees are quickly transitioned to a remote working environment. Virtually all of our approximately 8,000 staff worldwide are currently working from home; prior to the pandemic, this number would have averaged around 22%. COVID-19 has also highlighted the importance of a comprehensive and strongly supported digital strategy.7 We may even have realised that travel, most notably by air, is not always essential for an international business.

Crucially, crisis also lays bare numerous overlooked truths. It shows us what we can live without. It shines a stark light on what is genuinely important. It reminds us that the people who really keep the world turning — “frontline workers”, to use the fashionable term — are often those whose efforts tend to go sadly underappreciated when all is comparatively well and calm.

In sum, then, there is good reason to believe that positives will emerge from the situation that confronts us today. Historically, humanity has staggered on by innovating its way out of trouble, by learning lessons, and by correcting mistakes — and the same should happen again now. We might find that when life at last gets back to normal, as we all hope, “normal” is not quite what it was; but experience suggests that this, on balance, may be no bad thing.

Resource links

  • 1

    Source: Milton Friedman, Capitalism and Freedom

  • 2

    Source: LP Hartley, The Go-Between

  • 3

    Source: YouTube, “Original iPod 1000 Songs in your pocket by Steve Jobs”

  • 4

    Source: Arnab Das, "Industrial Revolution 4.0: Ghosts of Disruption Past, Present and Future," Sept. 30 2018

  • 5

    Source: G.M. Peter Swann, Common Innovation: How We Create the Wealth of Nations, 2016

  • 6

    Source: C. Northcote Parkinson, "Parkinson's Law," Nov. 19, 1955, reprinted in The Economist, July 2020

  • 7

    Source: Investment Week, "Will artificial intelligence empower us or overpower us? A question of obsolescence," Henning Stein, Feb. 24, 2020