Times are certainly hard in the private sector. And yet, they also present us with a timely opportunity. The global health crisis of COVID-19 is a catastrophic disruption that’s also our best chance to rethink some of the conventional wisdom around economic expansion.
Amid the chaos, the right innovation leadership could restructure our technology economy for growth and, ultimately, accelerate our recovery.
Neoclassical economics would say the recovery from this crisis will largely set its own pace. After all, growth—in the traditional understanding—is dependent upon scarcity signals in the market (the “invisible hand”) and amassing productive factors (capital, labor) to meet demand with supply. While we can watch for signals and act to take advantage of them, this approach positions your business as reactive, not proactive.
This may have been effective during industrialization (based as it was on efficient manufacturing), but today we live in an innovation-based economy. McKinsey has reported extensively on the different rules of this new technology economy. Creativity and technological invention have replaced raw labor efficiency as the primary driver of economic growth.
In other words, growth (or regrowth) is not beyond our direct control. Rather, it depends upon our direct intervention and our focused efforts to evolve and reinvent. Innovation economies expand when businesses can amass less concrete forms of capital—knowledge, technology, R&D, patents, data, predictive insights, collaboration, creative space, and the like. This means investment in research from both the government and private businesses.
In many cases, it is a collaboration (whether direct or indirect) between public and private businesses that will result in the greatest innovations. Each industry has developed regional innovation clusters. Silicon Valley, Hollywood, the Rust Belt, and Broadway are all examples (for tech, film, manufacturers, and theatre, respectively). Even in competition, businesses tend to benefit from proximity to similar businesses. For example, a strong local business cluster gives an industry:
These advantages are far more valuable in an innovation-based economy than in one that relies on low-skilled labor. If properly understood and leveraged, such factors can strategically equip the recovery efforts for both your business and the economy at large.
Why now? Consider the unprecedented disruption in supply chains, business models that are evolving by necessity, and the increased importance of technology in business (for telework, remote hiring, e-commerce, and more). COVID-19 has exposed our weak points and forced businesses to change the status quo.
Navroop Sahdev, founder & CEO of The Digital Economist and a fellow at MIT Connection Science, has called for an economic transition towards creativity. As Sahdev told Forbes, “I see the current crisis as a catalyst for the rebooting of the global economy by retooling towards a human-centered, rather than a capital-centered, socio-economic and technological build out.”
This is the time to make changes not only for the present but also for the future. Our long-term economic growth is a tide that raises all ships. Already, the most promising growth in most industries is technology-related. It’s time to harness that advantage with a macroeconomic business strategy that will foster ever-increasing innovation. Here are a few things you can do:
It takes creative, data-driven insights to spur competitive growth in the market—and thereby in your business. Many businesses will work with innovation experts for access to specialized guidance and tools. However you do it, take an active role. Growth in the new technology economy is in our hands.