C-SIGHTS

Many industries have been risk averse in terms of adopting a “work from anywhere, anytime, on any device” strategy. They attributed this to their inability to effectively manage the risk associated with intellectual property and data privacy. Some reasoned that they lacked the technology to measure productivity while employees WFA, and that working remotely could make employees less engaged or motivated, hampering innovation. Few anticipated a crisis of this scale and its affect on their industry, which lead them to conclude that they didn’t need to enable infrastructure and culture to support WFA initiatives.   

The COVID-19 crisis, however, has proven nearly everyone wrong. Companies that had invested in a ”work from anywhere” or ”work on any device” model, and had best practices in place, benefited and navigating this crisis more effectively. Their readiness has made it easier for employees to be productive from day one. Thus, for those who were ready, technology has offered better ways to keep their people engaged and energized, although they are working remotely. 

Investing In R&D

We have seen in the past companies that identified the opportunities created by global economic crises to become more competitive, in terms of greater business productivity, higher customer engagement, and disruptive business models.

Sanofi-Synthélabo, the French pharmaceutical company, entered the economic recession that began in 2001 with a solid product portfolio. Throughout the downturn, the company maintained, and in some cases increased, its R&D spending to keep its product pipeline robust. Sanofi increased its absolute R&D expenditure from €950 million in 2000 to €1.3 billion in 2003. Because of its strong business and financial performance, the company gained market share and outperformed peers in the stock market. The company was thus well positioned to acquire Aventis, a much larger Franco-German pharmaceutical company, after a takeover battle, in the economic upswing of 2004.

Or look at Apple Computer. The company wasn’t in particularly good shape as it headed into the 2001–2003 recession. For one thing, revenue fell 33% in 2001 over the previous year. Nonetheless, Apple increased its R&D expenditures by 13% in 2001 to roughly 8% of sales from less than 5% in 2000 and maintained that level in the following two years. The result: Apple introduced the iTunes music store and software in 2003 and the iPod Mini and the iPod Photo in 2004, setting off a period of rapid growth for the company.

During the U.S. recession of the early 1990s, IBM under Lou Gerstner faced its first decline in revenue since 1940 and endured successive years of record losses. In this context, it began to rethink its business model. Struggling with sluggish economic growth, particularly in Europe and Japan, as well as increased price competition, IBM was forced to confront head on the inevitable decline of its traditional business, mainframe computers. Realizing that the company’s markets were shifting, Gerstner redefined the company’s business model, transforming IBM from a hardware producer into a computer services and solutions provider.

Leaders need to understand that during an economic crisis there is inevitably pent-up demand, and when the crisis ends, they want to be in position to take advantage of the tidal wave of renewed spending. In short, now is not the time to apply the break or switch off the engine to strategic tech initiatives. A downturn is also a good time to invest in people and upgrade the quality of your management teams. Competition for top people will be less fierce, availability higher, and the cost correspondingly lower.