doks. innovation with innovation through the crisis
18. March 2020|18 Minutes

Through the crisis with innovation – an outrageously optimistic plan

“Flatten the curve” is currently the greatest challenge for global society, regardless of which country, region or city. The joint implementation of cross-border measures is unfortunately again subject to decisive restrictions. It may be short-sightedness, selfishness or simply the slander of facts – the few findings in connection with #COVID-19 are not used everywhere to flatten the curve. (source: Washington Post)

In addition to the health risks, the past few days have shown that the global economy is very sensitive to such a #pandemic. Although many experts are certain that the #COVID-19 valve has only accelerated the process of cooling the global economy down and that, in particular, the #Trump Economy was facing serious problems even before the global outbreak of the #Coronavirus (source: Project-syndicate) the consequences of the crash on the stock exchanges and the delayed consequences for society are serious. The crash of the stock exchanges on global trading venues raises completely new questions – what happens for example, when trading venues have to close completely (source: CNBC) or the US government does not take sufficient countermeasures, as it did after 9/11 (source: Forbes )? A very good German contribution by Daniel Stelter, part of BCG until 2013, shows well which phases this financial crisis will go through and what effects the #LeverageEffekt will have (source: Manager Magazin).

 

The situation for young companies is getting worse

There would be enough reasons for the german proverb “head in the sand”. The current situation for companies like doks. innovation GmbH is tense, if not critical:

  • Important events are canceled or postponed, so sales and marketing channels break off
  • Innovation meetings in small and large circles fail or are postponed
  • Customer appointments are canceled or postponed
  • Customer projects are stopped, paused or postponed
  • Investors are withdrawing or asking to delay upcoming financing rounds

All of the factors mentioned endanger the survival of young companies in innovative areas, especially if the sales generated are not yet sufficient to cover the running costs or even to develop a financial buffer. The same applies to freelancers, the creative industries, retail and many, many more.

After an initial inventory of the risks of the current situation, it is imperative to deal with possible countermeasures:

  • Short-time work allowance – basically attractive at short notice to reduce ongoing personnel costs, but aspiring start-ups and short-time working don’t necessarily go together. In addition, reducing or discontinuing development work in connection with any publicly funded research projects is not that easy – I will come back to this later.
  • State loans – regardless of the interest rate, the liabilities must be serviced later. In addition, these loans are in most cases only possible to cover liquidity bottlenecks in connection with investments or operating resources. Covering other costs, especially personnel costs, is usually not provided.
  • Federal or state guarantees – here, too start-ups are likely to find it very difficult to use this option effectively.

 

Optimism and foresight

I worked out a proposal over the weekend and had it forwarded to the Federal Government and the ministries (BMWi, BMVI, BMBF), which at least start-ups that have already been granted funding, this means who are in the middle of a research project and are currently possibly struggling to summon up the required own contribution, would keep a creative option open:

  1. In my view, the research project funds already approved do not need to be increased.
  2. For this, the funding quota conditions for the phase of severe restrictions by COVID-19 are suspended. In detail this means:
      • Funded start-ups can continue the project work, but do not have to contribute their own contribution.
      • The amount of funding remains limited by the maximum amount already approved.
      • The start-ups are committed to continuing to maintain and achieve the research project goals.

This would initially enable this group of young companies to secure jobs, continue project work and make an important contribution to the sustainability of our society.

 

An outrageously optimistic plan

What if we decided together this time to give innovation and development as much space as possible so that we can successfully take off with new concepts after the crisis is over?

I would like to make this plan based on an example and name some friends, partners and companions. It’s about a very central area that also has to perform exceptional at the moment – the logistics and mobility industry. Regardless of whether we use Lieferando or Delivery Hero, there are crucial questions in times of a pandemic (source: WSJ) when it comes to supplying households with fresh food:

  • Are there enough raw materials available for the production of ready meals?
  • How is the food handed over?
  • How does the payment process work?
  • How can the delivery process ensure that nobody is endangered?

In addition to these challenges, which are directly related to the current situation, there are also many general questions that examine the entire industry with regards to its future viability. While there was initially a hesitant demand immediately after the outbreak of the pandemic, sales in many areas of the supply of food are now increasing significantly. This also affects many online grocery stores such as REWE, PicNic, Amazon Fresh or others (source: Welt). This shows that older buyers in particular use the offers so that they do not endanger themselves unnecessarily during their daily shopping. Or buyers react to the changed demand situation, which has in part led to the sale of urgently needed goods. The planning security, which a check of the online shop of a grocer offers online, creates a completely new possibility of calculating the availability of the goods. In addition to the supposed convenience and time savings, these are likely to be decisive factors in the future. In order for existing offers to be expanded and new offers to be created, courageous investments and an equally courageous demand from partners, customers and suppliers are required. If we do not open up clearly in this area as a society and economy and quickly create the basis that will enable such business models to be financed in the long term, then this perhaps unique opportunity will simply pass us by.

What applies here also applies to other areas of logistics. Micromata developed an online franking platform for DHL, Wingcopter opens up the airspace for goods transport and the motion miners process data for efficient work processes. Regardless of whether concepts for the last mile such as ONO, Angel, Liefery, Easy2go or many, many others or already very successful companies such as Sennder, Magazino, Freighthub or Smartlane – all these companies need the security in the crisis that working on the development, their products and solutions is possible. This not only saves many jobs in these companies, but can also have a double positive effect after the time of the shutdown: The innovation boost can fuel the entire economy, if the time is used to engage in close virtual exchanges with potential customers to set up developments in such a way, that they can then be applied directly and seamlessly afterwards. This in return opens up completely new possibilities for the customer, saves time and costs in most cases and certainly paves the way for a significantly more climate-friendly use of resources and logistics.

 

The crisis as an opportunity

The list of examples could go on and on. Surprising in all of this is that Corona achieves, what the many climate discussions could not achieve: we are reducing ourselves and thinking about new ways. We have to seize this opportunity, we have to understand innovation as a complex, all-embracing movement and give supposedly radical offers real opportunities. This outrageously optimistic plan means:

  • Expanding and strengthening public investment – public funds need to be released without bureaucratic hurdles and conditions that young companies can rarely meet.
  • Private investors must continue to invest – the fluctuations on the stock exchanges show that the current economic system is extremely fragile and that we must work together to reorganize the global economy. Short-term liquidity ideas do not help anyone in such a time and the eternal game that at the end of such crisis always the one with the highest liquidity wins must finally come to an end. Innovations can only be successfully established if private money is invested.
  • Customers and partners must remain open – even in times of home office, canceled projects and appointments, there must be a general openness to not abruptly end the innovation processes from the drivers of innovation, the many start-ups, by pulling the rug out from under them. Indirect support for young companies through compliant payments in advance for pilot projects in B2B or courageous support for B2C innovations using crowdfunding or crowdinvesting can help ensure that promising ideas are not eaten up by the crisis, but can instead be realized.

We should have a collective plan and see innovation as an opportunity not to be as vulnerable in the future when there are similar crisis situations. That applies to my examples, as well as to medical care, tourism and travel providers as well as the many gaps in supply for urgently needed materials. No de-globalization, but the implementation of an outrageously optimistic plan.

 

Benjamin Federmann