- When we have faced crises in the past, we have responded with new innovations and adaptations that helped us survive.
- Today there are incredible amounts of technological progress at the same time that the number of crises are arising.
- History teaches us that when we rise to a crisis, when we imagine what could go right, and we work together to create that vision, we can impact the future in positive and enduring ways.
The Vital Relationship Between Crisis, Growth, and Innovation
We throw the word “crisis” around casually, but it holds potent meaning. It comes from the Greek word krinein, which describes the absolute final moment a doctor has to decide which action to take to treat a patient. Past that point, the patient will die.
Similarly, in meteorology, a “perfect storm” is the result of a unique combination of rare phenomena coming together to aggravate conditions. The environmental, economic, and social issues we are facing as global and local communities are coming together to create a perfect storm. Taking this common metaphor a step further we can say that today we’re facing the “perfect crisis.” True to the Greek origin of the word, conditions are brewing all at once—and if we don’t act to profoundly change things in this time of crisis, we could face collapse at all levels. But the good news is that the solutions to this crisis also pave the road toward a more vibrant, thriving, inclusive world.
In many cases, when we have faced crises in the past, we have responded with new innovations and adaptations that helped us survive, but also to find new ways of operating that made us more successful. But how does this happen and what is the relationship between crisis, innovation, and growth? When a research project led by Josef Taalbi at Lund University looked at innovation in Sweden, they sought to identify the causes and factors that lead to innovation and change by asking a few basic questions. They asked if innovation is:
- simply driven by making investments in certain areas?
- a response to crises?
- a response to new technologies entering the market?
- catalyzed by individuals who just happen to have the right idea?
The study looked at 3,377 different cases of innovation. They broke the innovation triggers into four categories.
1. Market opportunities in which an organization tried to capitalize on a consumer trend, changes in market prices, or meet a new demand.
2. Institutionalized search, where a company basically tried to throw money at innovation to create new opportunity for themselves.
3. Technological opportunity when a new technology had become available to the market or became affordable enough to become part of a larger product or solution.
4. Problem-driven solutions where a crisis occurred, an obstacle came up, or a problem happened and entrepreneurs, companies, or governments tried to address it through innovation.
They studied Sweden’s response to several triggers, including environmental problems, liberalization of the telecommunications industry and an economic and energy crisis. What they found was the two largest causes of innovation by far are problem-driven and technological opportunities, which can catalyze double to our times the amount of innovation that comes from institutionalized search or market opportunities.
By reviewing conditions like these, researchers found that there are waves of innovation that seem to come in patterns. Innovation doesn’t necessarily cause GDP growth, but there is an interplay between innovation and growth. Often a crisis occurs, innovation happens in response, then a society grows out of the crisis, and new technologies find a more robust markets with new applications and uses for the technology. This, along with new ways of combining these technologies, paves the way for scale-up that makes the new products and services more affordable and viable, creating new opportunities and even more innovations that play their part in catalyzing new growth.
Inevitably the next external or internal crises occurs, some of which (such as the environmental crisis) are caused by previous innovations, which instigate a new creative cycle. Overall, there’s a virtuous cycle of innovation and growth and crisis. In the Swedish study, new waves of innovation came about every 40 years, following economic crises in the 1850s, in the 1890s, in the 1930s, and then again in the 1970s. In the cases where it was most effective, innovation was directed at solving a problem or an obstacle. As the innovations matured, they became cost-effective enough to be commercially exploitable, able to be productized and included with other technologies for productized solutions.
Much of this was also dependent on platform or infrastructure readiness that enabled the next wave of innovations. This creates an “enabling platform.” For example, if you have the connectivity infrastructure provided by telcos, and mobile phone availability, you’re able to create and access apps, but not before. These enabling platforms become the foundation that enables the new innovation. This allows new solutions to diffuse out into the economy, enabling adoption and complimentary solutions in this self-reinforcing cycle.
What does this mean for us? Essentially, the abundance of new technologies and crises today means there are myriad opportunities to advance technology and create new solutions and new businesses to solve real problems. Those two things are what catalyze the most innovation. These examples show us that innovation is a societal response to change, and that we can rise through crises by innovating and collaborating our way through them.
But it can’t just be technology, a holistic approach of technological, policy, and cultural innovation is the most effective mix for overcoming obstacles. Our current global challenge of climate change carries the added risk of destabilizing our societies and economic infrastructure (through rising seas and increasing natural disasters and pandemics) to the point where we cannot innovate our way out of it. Change may be so drastic that we might not be able to maintain our way of life – we must go about meeting this challenge together, deliberately and intelligently.
The Brookings Institution conducts in-depth research that leads to new ideas for solving problems facing society at the local, national, and global level. After an extensive review of historical analysis, they see that crises continually bring unexpected benefits in the following ways:
- Rapid problem solving and innovation – a crisis can motivate innovative responses to what is seen as a clear and present danger.
- Increased resiliency for the next event – the impact of the disruption, and the innovation it led to can galvanize support to prepare for the next crisis.
- New levels of cooperation—even among rivals – problems that are bigger than individual interests of organizations or nations can necessitate cooperation and closer relationships, while opening an opportunity for more in the future.
- Systemic change – crises can overturn old norms and overcome resistance of the existing power structures to change, sometimes even by destroying those structures and practices.
- Dramatic policy shifts – crises can motivate the public to demand change or force leaders to make significant changes that, before the crisis, could have required immense courage or led to political suicide.
- Emergence of talent – when confronted with crises, people rise to the challenge and rally around projects or solutions that they can contribute to in order to better their world.
As an entrepreneur or an innovator, the historical combination of innovations and crises gives us not only a meaningful problem to solve but a meaningful economic opportunity. Today there are incredible amounts of technological progress at the same time that the number of crises are arising. We live in a perfect time to create innovations that have a positive impact on the future of humanity and the world we live in. Those who solve these challenges will be the most successful of our generation.
History teaches us that when we rise to a crisis, when we imagine what could go right, and we work together to create that vision, we can impact the future in positive and enduring ways. If we seize this moment, we can reach a level of stability and sustainability that will enable us to move forward, potentially indefinitely.