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The Impact Of A "Reverse Radical" Recovery On Innovation

Michael Holman, Ph.D., Vice President, Research
August 25, 2020

There's been a lot of alphabetical speculation about the shape of the economic recovery from the coronavirus recession, with V,- W-, U-, and L-shaped recoveries bandied about (along with nonletter shapes like the "swoosh"). Recently, economic opinion has been converging around the "reverse radical" shape, with a quick recovery but one stopping at a lower plateau than the pre-crisis level. What does this model mean for how innovation leaders should think about planning for opportunities in the aftermath of the pandemic?

original_c266554c6a528bd112773f0e37b4815e8dc79cf0Image Source: FiveThirtyEight

The key point to keep in mind is that the overall shape will be a result of the overlap of different-shaped recoveries in different types of businesses – as recent jobs data by industry from the U.S. shows. Each requires different innovation approaches.

the vulnerable

Some types of businesses just aren't going to be able to get back to anything remotely resembling normal until the virus is firmly suppressed: travel and tourism, live entertainment, some types of retail, as well as businesses tied directly to supplying these sectors, such as aircraft manufacturing. These industries have seen a sharp drop-off and are likely to remain at significantly depressed levels for some time. Innovation efforts for companies in this sector should focus on reducing the impact, pursuing tech like Pathr.ai's "spatial intelligence" platform that can help enable social distancing in retail stores – even though these solutions will only somewhat mitigate the disruption, not solve it. 

The Vital

Other businesses will be able to ramp back up rapidly on both the supply and demand side – industries like packaged food, personal and home care, some construction, and media can resume operations, and in some cases will even see stronger needs for their products. These companies can realize a rapid V-shaped recovery and should prioritize innovation that enable greater agility, such as ingredient informatics in food, to fully capitalize on the opportunity by staying on top of rapidly shifting trends.

The Victimized

Some businesses can restore operations and keep up safe supply of their products and services – but are simply going to see reduced demand as long as the overall economy is depressed. Many consumer durables like automotive, appliances, and apparel fall into this segment and will see some recovery but remain stuck at a somewhat lowered level until general economic conditions improve. At companies in these industries, innovation leaders should use the opportunity to start adapting their offerings for the work after the virus, from automotive companies looking to incorporate antimicrobial treatments into their products to apparel companies building greater visibility and adaptabilty into their supply chains.

The Varied

Finally, many B2B companies that serve customers in a mix of all of these categories – in industries like chemicals and materials or diversified industrials – will need hybrid approaches that emphasize both agility and building future-proof resilient options. In materials, flexible solutions like synthetic biology can create option value by enabling routes to various products from varied feedstocks, as companies like Conagen are showing.

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As companies grope their way toward a new normal and look to recover from the the massive supply and demand disruptions COVID-19 has brought, executives responsible for innovation need to have a clear-eyed view of where their companies stand. Building a new strategy for the post-crisis world while not losing sight of the long-term trends that will persist can be a delicate task, but an understanding of the industry-specific outlook should guide prioritization efforts.

 

 

FURTHER READING:

- Blog: Adapt or Get Left Behind: COVID-19's Disruption of Consumer Goods

- Blog: Antimicrobial Coatings at the Front Line of COVID-19

- Executive Summary: Emerging Materials Opportunities for the Apparel Industry

- Press Release: Lux Research Predicts Synthetic Biology Has High Potential As An Alternative Production Method For Chemicals

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