Get used to the current features of the things you buy – because companies will likely reduce their spending on innovation, thanks to the pandemic.
In an article from The Kellogg School of Management at Northwestern University about COVID-19’s impact on innovation, the authors predict a looming decline in companies’ investment in new programs. Why? Besides lower demand, lower profits, reduced cash flows, and staffing issues, a significant driver will also be a lack of access to credit markets due to the recession.
The article points to the financial crisis of 2007-2010, during which there was a 28% drop in the rate at which new products entered the market, and an even higher rate for companies with limited access to credit. Which means less investment, fewer jobs, and less innovative products for consumers – from game consoles to life-saving medicines.
And it will probably go on for a while. Even after the last recession ended, the authors found there was a significant drop in sales from new products over the next 4 years. When weighing where to spend limited cash, on basic survival versus the uncertainty of innovating new products, survival understandably wins.
What to do about it? Beyond the authors’ observation that government stimulus and greater access to credit will help, PriSim also has a few suggestions and ideas on our website for leaders managing a “business in crisis”. And of course, a contrarian response to differentiate oneself from competitors would be to NOT follow this trend and to actually increase your company’s level of innovation.
In the meantime, try to be content with your current products – it may be a while before we get new ones.