What a Crisis Teaches Us About Innovation

Necessity, as the saying goes, is the mother of invention. As the COVID-19 crisis spread during the first half of 2020, organizations innovated at a much faster pace than they normally could have. Emergency room teams in Michigan rigged ventilators by adding a second tube to double capacity and ventilate two patients at a time. Chinese scientists sequenced the new COVID-19 virus in a record three weeks. Multiple teams from Oxford, London, and Boston developed a potential vaccine and began testing it in less than two months. And the U.K.’s National Health Service built a 4,000-bed hospital in just four days.

Why is it that innovation seems more possible during a crisis? More important, how might organizations sustain similar levels of innovation once the crisis has passed? In our work with both public- and private-sector organizations, we have identified five interdependent conditions that characterize a crisis and boost innovation.

• A crisis provides a sudden and real sense of urgency.
• This urgency enables organizations to drop all other priorities and focus on a single challenge, reallocating resources as needed.
• With this singular focus and reallocated resources, it’s now everybody’s job to come together to solve the problem, bringing a new diversity of viewpoints and perspectives.
• This urgency and singular focus legitimizes what would otherwise constitute “waste,” allowing for more experimentation and learning.
• Because the crisis is only temporary, the organization can commit to a highly intense effort over a short period of time.

Leaders can replicate proxy crisis conditions as a way to generate more effective innovation in noncrisis times. However, that requires a deeper understanding of the issues at play in each of the five conditions.

1. A crisis provides a sudden and real sense of urgency. Proximity to a grave problem creates a critical sense of urgency, focusing attention and galvanizing action. In the absence of an actual crisis, organizations can approximate some of those conditions and gain some of the benefits — provided they understand why people are so galvanized by a crisis and are so inert without one.

In the absence of a crisis, people seek the status quo. The same is true for company leaders, who tend to wait until a problem becomes acute — the classic burning platform — before addressing it. This is normalcy bias — our tendency to believe that future events will be similar to what we’ve experienced in the past.1 The normalcy bias explains why many governments were initially blasé about the COVID-19 threat and its potential to disrupt our lives.

We don’t consider changing until we’re faced with information or experiences that force us to accept that things are not normal. And the type of input we receive has a significant impact on how we react. During the pandemic, images on TV screens of overcrowded intensive care units and makeshift morgues produced the necessary visceral reaction to force us into action. This is an example of availability bias — our tendency to respond disproportionately to signals that are recent, visceral, personal, and acute.2

One other bias is at play here: People are far more likely to change their behavior to avoid a negative outcome than they are to change behavior to gain a positive outcome. This phenomenon is known as prospect theory.3 When the outcome we face is suddenly negative, acute, and imminent, people are motivated to act and ready to change their behavior (to work from home or avoid friends and family, for example) in a way they would not have otherwise considered. For organizations attempting to simulate urgency, this asymmetric reaction means that galvanizing action in response to positive opportunities will always be harder than doing so in response to negative threats.

Leaders can’t negate these three human biases, but they can mitigate them by changing how they frame risk and by choosing what gets their time and attention.

Leaders need to counteract the normalcy bias by being more proactive about gaining a realistic sense of future threats and opportunities rather than waiting for an immediate impetus to change. When companies wait too long, they reduce their options for easy, low-risk, incremental change and instead limit themselves to change that is faster, riskier, and more dramatic than it would have been if they had made changes sooner.4

Seeking out information can help to counter availability bias. To help leaders sense what’s coming, organizations need to spend more time and resources on scanning the horizon and articulating the different possible scenarios they face. The most enlightening scenarios are often those that are furthest from the status quo. One approach we have used is to create doomsday scenarios — for example, imagining that your company is being acquired by your greatest rival. To make the scenarios convincing, they are designed, scripted, and performed by professional actors at the start of a strategic planning session. By deliberately using prospect theory to counteract natural inertia, leaders are noticeably more open to new strategies and the need to change.

Leaders also need to apply the same level of urgency and the same type of analysis to understanding upside opportunities as they do to mitigating threats. And the same people — including, critically, the chief financial officer or chief risk officer — should join other C-suite executives in assessing opportunities, just as they would analyze threats.

2. Organizations can drop all other priorities and focus on a single challenge, reallocating resources as needed. In a noncrisis environment, organizations have many so-called first-order decisions to make — which problems to solve, which markets to enter, which of hundreds of potential products to develop. These decisions are hard to make because they inevitably involve trade-offs, given the opportunity cost of not taking the alternate path. In our experience, leaders often delay these decisions or sometimes fail to make them at all. The result is that projects and activities proliferate, meaning nothing gets the focus and the resources it needs.

But in a crisis, the first-order decision is effectively made for you: The crisis tells you where you need to focus with a high degree of precision. Nothing else is as important as solving that immediate problem. The only thing to work out is how best to do that — that is, which activities will best accomplish that outcome. We can think of these as second-order decisions.

For example, the potential shift to telemedicine has been a first-order, but somewhat contentious, decision for almost a decade. Some health care organizations implemented telemedicine half-heartedly while others didn’t, and leadership teams argued about whether it should be a priority. When the COVID-19 crisis hit, telemedicine became an imperative that was no longer debated. In less than two months, Hartford HealthCare in Connecticut readied 12 of its departments to offer more than 200,000 virtual patient visits.5 In Cairo, startup telemedicine company Vezeeta rolled out a telehealth application in March, three months ahead of schedule, and has seen increasing numbers of patients making use of it for consultations with physicians.6 Before COVID-19, company executives told us, they had thought the transition to online visits would take at least three years.

We know from years of research that many leaders are better at — and fundamentally more comfortable with — making these second-order decisions. Why? It’s partly because of how they rose to become leaders in the first place: often, by being very good at making decisions about the activities that will deliver a given outcome.7

Where leaders are often weaker is in deciding which outcomes should be prioritized. And in a crisis — an environment in which the first-order decision is made for them — they can revert to making decisions about activities. This plays to their strengths and is a major aspect of why many leaders love a crisis.

Once a clear, singular priority is established, the organization can jettison all other lesser priorities and reallocate resources — budgets and people — in a way that would have been unthinkable in a noncrisis environment. Compared with the benefit of solving this immediate problem, the relative value of virtually all other work falls to zero, and the usual opportunity cost analyses disappear.

For example, in the life sciences sector, teams with expertise in vaccine production have shifted their focus almost exclusively to producing a COVID-19 vaccine at scale. Similarly, gene-sequencing labs that had been using their sophisticated equipment for research projects reallocated all of their skills, equipment, and lab resources to COVID-19 testing. The Broad Institute in Cambridge, Massachusetts, and the Sanger Institute in Cambridge, England — both of which normally use cutting-edge DNA sequencing approaches for research and clinical trials for a wide range of diseases — took less than two weeks to turn all of their lab testing resources to the DNA sequencing of COVID-19 samples for patient testing.8

Even in the absence of a crisis, leaders can create the conditions for single-minded focus. First, leaders must become more disciplined about setting — and limiting — their organizations’ priorities. They must be clear about which outcomes are critical and which should be scrapped. In most organizations, this will mean choosing a much smaller number of high-priority goals than their organizations are currently working toward.9 These choices are likely to provoke debate and discomfort within the organization — but, in our experience, this is often the price of clarity.

Leaders then need to be disciplined and leave the second-order decisions — determining which activities to work on to meet the objectives — to those who are closest to the action, whether in operations, R&D, or other units and functions. The ongoing work for leaders will be to consistently and repeatedly communicate these first-order priorities to the organization.

3. Teams come together to solve the problem with a greater diversity of perspectives. With the reprioritization that a crisis enables, and the resulting reallocation of resources, the problem at hand is now subject to the insights, expertise, and experience of many more people than would typically come together on a project. This unleashes much more creativity than organizations ordinarily see. This is not because individuals are suddenly having a creativity spurt — if anything, stress makes people less creative than usual — but rather because they have come together to deploy their collective creativity on a single, shared problem.

Once leaders have clarified the first-order problem to solve, they need to increase the diversity of the people and teams they bring together to solve it. Resorting to the usual suspects, or homogenous teams of established specialists, may close off some of the more interesting ideas — and reduce the likelihood of success.

We know from empirical research that groups of people from different backgrounds, with different skills and experiences, tend to be better at problem-solving than homogeneous groups.10 But heterogeneous teams also inherently involve some friction, given that people have to work with team members who are different — and think differently — from them and thus have “crazy” ideas. Heterogeneous teams are much more effective than homogeneous teams but much less efficient.

In addition to a diversity of perspectives, constraints are critical. Research on innovation, creativity, and outcomes tells us that completely unconstrained creativity is often wasteful, and constraining innovation can be a powerful tool.11 As Charles Eames, the famed furniture designer, put it, “Design depends largely on constraints.”

In other words, teams need some specific parameters — boundaries and constraints — rather than a blank slate. This is the logic behind highly focused hackathons and similar design challenges. A clear understanding of the constraints on the creative endeavor is particularly important when the creative resources are distributed. Having a set of regulations and standards by which ideas will be judged can be particularly helpful when different groups work on a shared objective from different locations or perhaps come from different cultures and speak different languages.

For example, when the U.K. government realized that it had an insufficient number of ventilators to treat the likely influx of ICU patients, it pulled in a diverse group of manufacturers with different capabilities, cultures, and product lines. Among the companies responding to the challenge was Dyson, best known for making vacuum cleaners and hand dryers. There is no doubt that Dyson engineers are a creative bunch. But the government wasn’t sufficiently explicit about whether manufacturers should be inventing a new ventilator machine or repurposing their plants to manufacture existing designs. In the absence of clear operating specifications, companies generated a range of ideas, most of which failed to meet standard specifications for ICUs. The Dyson design was never approved, and the contract was terminated.

Leaders need to give time and attention to defining the specifications they are looking for, so that everyone is clear about what needs to be delivered. Clearly establishing these specifications helps to align often disparate groups around the same shared objective.

As long as parameters are clear, having a plurality of contributors generating a portfolio of different possible solutions is invariably a good thing, because it increases the chances that one of the generated solutions will work. This is the classic “multiple shots on goal” approach, where the objective is clear but the best ways of achieving it are not yet understood.

Finally, leaders also need to communicate to these disparate groups how their contributions are helping achieve the broader goal. Empirical research tells us that when people feel that they are part of something important, and when they understand how their individual work contributes to that goal, they are more likely to go the extra mile. Leaders play a vital role in creating and communicating the meaning of work — and they need to devote time and energy to it.

4. The importance of finding a solution legitimizes what would otherwise constitute waste, allowing for more experimentation and learning. Because of the severity of a crisis and the sense of urgency that it creates, and because organizations understand that it is now the No. 1 problem, leaders become much less concerned about the possibility that some, or even many, attempts at solving it will fail. Newly heterogeneous groups with different combinations of capabilities and resources now have the latitude to play, create, and suggest ideas that ordinarily would have been dismissed. In a time of crisis, the risk of not finding a solution is higher than the risk of wasting resources on unsuccessful solutions. That breeds a new tolerance for risk and a redefinition of what would, in a normal environment, be considered waste or failure.

It’s important to understand what we normally mean by waste and how this has led to an overemphasis on efficiency in most organizations. All too often, spare resources (what academics call slack) are considered to be waste — something that should be designed out of a system. As a result, slack has often been the target of management methods such as Six Sigma and Lean. When poorly implemented, these have become tools for mere cost savings rather than value creation.

Reducing all waste is fine if the only goal is efficiency. But if there are other goals, such as effectiveness, resilience, or innovation, then having some slack is absolutely essential if a team or an organization is to learn, experiment, and deliver its target outcomes.12 Having these spare resources gives people at all levels of the organization the time and capacity to stand back, reflect, think, and learn, and therefore the ability to try multiple approaches, knowing that some will fail.

One factor that helps leaders tolerate more so-called waste is that in times of crisis, we rarely use typical decision-making tools such as value-for-money comparisons or cost-benefit analyses. They have no purpose in a crisis. Instead, with a singular goal, organizations are freed from competing for time and resources and can try a range of approaches without the compulsion to justify them in purely economic terms.

In non-crisis times, leaders should take a hard look at the management tools they use to justify allocating resources to new ideas. Are these overly constraining the universe of potential ideas? For example, is a cost-benefit analysis being used to say no to risky projects? An approach based on slack and options will enable teams to experiment, because it emphasizes learning and choice around a very focused goal.

Leaders also need to value these projects for the learning and optionality that they provide their organizations — not just their ability to be monetized in the medium term. Ascribing value to the long-term optionality that new products or capabilities give them, rather than investing only in short-term functionality, needs to apply to investments in people as well as products.

Of course, slack costs money, which is why organizations often don’t distinguish between unhelpful waste and necessary slack. It is only the conditions of deep uncertainty (such as during a global pandemic) that allow us to become tolerant of what might otherwise be considered waste. But if you strip slack from the system in the good times, you’ll likely have to spend (i.e., waste) more on building catch-up capacity in the bad times.

Instead, leaders can deliberately build slack into organizations. Israel designs slack into its health care system to be prepared for the worst. For example, the government spends additional time and money training doctors not only to do the job they’ll do most of the time, but also to be able to operate in the emergency room or ICU if necessary. The investment in additional human capital — over and above the immediate need — makes the country’s health care system more flexible and less fragile when faced with shocks.

Another way to create slack — and become less concerned about waste — is to invest in multiple potential solutions, even if only some of them will actually work. This is akin to investors backing a diverse portfolio of high-risk startups when there is considerable uncertainty about which are likely to best meet the demands of a new, still-developing market.

For example, the Bill & Melinda Gates Foundation is now funding the development of seven potential COVID-19 vaccines in parallel, even though running parallel trials of different vaccines rather than sequentially testing them will, in Bill Gates’s words, “waste a couple of billion dollars” by backing both successful and unsuccessful vaccine projects.13

Leaders need to accept that the benefits of a true portfolio — a mix of high- and low-risk investments — will come only if the organization includes genuinely high-risk initiatives. And these need to be sufficient in number — not just one or two favored moon shots — to stand a chance of success. In our work with leaders, we found that too often their disposition is to default to lower-risk investments that will produce cash flow in the short term, even though this reduces their options for producing stellar growth over the longer term.

And finally, leaders need to be champions of slack in their organizations. They need to make the case for it, reminding people that slack not only creates a buffer against crises but also creates the conditions in which people can learn and the organization overall becomes a less risky and less fragile place. For initiatives that don’t yield success, leaders need to communicate that failure is an inherent — and, in fact, critical — part of the process.

5. Because the crisis is only temporary, the organization can commit to a highly intense effort over a short period of time. Crises aren’t normal, and leaders ought not to think that they are. Nevertheless, it’s tempting to see the massive effort that is possible during a crisis and wonder how an organization might be able to sustain it. The quick answer is, it can’t, and it shouldn’t try. But, as with the previous four conditions, there are some ways in which leaders can create proxy conditions of crisis, based on an understanding of how people cope during these periods.

The first reason this huge effort is possible is the fact that crises are usually time bound. Putting a deadline on when the end will come enables the Herculean effort required during this time in a way that would simply not be possible if we believed this needed to be sustained indefinitely.

Although the human costs of working at crisis-level intensity are clear, the benefits of time-bounding intense efforts are well known. The existence of a deadline (whether the date of a marathon, a final exam, or an innovation prize competition) helps to significantly amplify effort. Our experience of running 48-hour hackathons and one-week boot camps in MIT programs underscore this finding: When there is a deadline and people know they have only a limited time in which to give their full effort, the effort they can muster is huge.

Deadlines also help for longer and more challenging projects. One example is our work with the Defense Advanced Research Projects Agency (DARPA) of the U.S. Department of Defense. Having traditionally used grants to generate new ideas, in the early 2000s DARPA started using a combination of clearly specified goals and a race deadline to drive more rapid innovation. One of the organization’s most successful initiatives challenged teams to design and build autonomous vehicles that could complete a route through the Nevada desert by a preset date in 2004 — a neat combination of a clearly specified goal with a deadline.14 The findings from that project dramatically accelerated the development of autonomous vehicles for a wide variety of applications.

The popularity and longevity of the idea of sprints — now common in Agile methodology and design thinking — also show the importance of constraining not only the scope of innovation but also the time spent on it in each iteration. Time-bound sprints are a critical and sometimes overlooked part of the reason that Agile is so effective. By structuring the work (each iteration and learning loop) as a sprint rather than a marathon, teams can make faster progress in delivering the overall target outcome. Of course, these individual sprints will add up to a marathon, but short-term milestones make it possible to work more intensely because they enable motivation and energy to be sustained over the longer period.15

Leaders must design an appropriate cadence for noncrisis innovation, which will likely happen over a much longer time frame. This requires leaders to translate the first-order priority into long-term outcome metrics (often three to five years away) and then break the timeline into a series of shorter-term milestones (quarterly or semiannual markers). These shorter-term milestones help people assess progress along the way, generating insights about what’s working relative to what was expected so that the team can course-correct as needed. These shorter-term milestones also help people maintain their enthusiasm for the long-term goal, because progress feels more immediate and real — a critical part of limiting fatigue.

Leaders also need to clearly and consistently communicate both the long-term nature of the target and the status of the more regular milestone check-ins. By stressing that the purpose of the milestones is to gauge progress and learn (akin to check-ins between sprints), teams can sustain their experimentation and learning over a longer period of time.

The second reason why people are able to work so intensely during crises is that leaders remain engaged with the first-order problem until it is solved. By doing this, leaders help people maintain their enthusiasm and excitement for the project. In contrast, while the cadence of ordinary, noncrisis innovation may start with a sense of excitement and brainstorming, it dissipates all too quickly into the more grinding phase of manufacturing, testing, and scaling. Creating a proxy for crisis may simply require leaders to remain involved and interested in the business challenge to maintain the momentum, excitement, and enthusiasm for innovation from start to finish until the organization succeeds. They will need to be ready to continue to talk about the same strategy and target outcomes over many months or years.

In our work with both public- and private-sector leaders over a period of months in 2020, we saw how the COVID-19 crisis enabled new forms of innovation at a scale and pace that many of these leaders did not believe possible. The challenge now is to take these lessons into the post-crisis environment without losing their essence. We believe that by understanding the conditions that crises foster, leaders can create some proxies for crisis that make innovation easier and more likely — even in the absence of an emergency.