Swiss industry: necessity is the mother of innovation

• ‘Cash is king’: many companies have reduced working hours and put innovation projects on ice

• 94% of respondents reported that the shift to working from home went ‘better than expected’

• 78% of those interviewed said they would reduce their work travel in the long term

• Only 10% have adapted their supply chains due to corona virus

For many industrial companies, immediate challenges presented by the coronavirus crisis meant that innovation projects had to take a back seat. But is this just a temporary state of shock, or a development that’s here to stay? And what will coronavirus mean for the longer term? Zühlke surveyed 19 CXOs and innovation leaders on the effect of coronavirus on innovation in Swiss industry. The results show that the impact of the virus is not solely negative, but it also offers plenty of potential and new pathways of innovation. Which raises the question – can Swiss industry even survive without crises?

‘Cash is king’ or ‘progress through innovation’?

Almost half of the industrial companies surveyed had delayed internal innovation efforts or even halted them, and introduced short-time working. And almost all had subjected external investments to critical evaluation and reduced them. The phrase ‘cash is king’ recurred frequently. However, the other half have retained their teams on a full-time basis, managed to keep to their timelines, and have even increased innovation in certain areas due to a fear of disruption. 

Nonetheless, one factor common to all is that the crisis has triggered a drive to innovation. Many wish to use this time to get a few steps ahead of the competition. Even some smaller firms, without the protective bulk of a conglomerate, have maintained or expanded their innovation activities. However, not everyone is in such a comfortable position, with some facing a huge revenue drop and a hard choice between liquidity and innovation.

A time of unlimited possibilities

In a crisis such as the coronavirus pandemic, a company’s capacity for innovation is not determined by financial means alone. A lack of access to buildings, test sites, prototypes and laboratories limit everyday life just as much as travel restrictions and lockdowns. Production lines in international locations have to be started up without local personnel and entire facilities commissioned on other continents. It sounds like a horror scenario – and these are just a few of the examples from the survey. But the conclusion is always the same: ‘It is amazing what you can do when you’re left with no other choice.’ The various restrictions have forced companies to make rapid decisions and act accordingly, but have also shown what can be done with a creative approach and resolute will. And it would be wrong to dismiss these new approaches as mere workarounds, since all the examples cited represent significant progress and may well become the new status quo, in part or even in whole.

Working from home: a success story

The most prominent and universal example of the new status quo is working from home. An overwhelming 94% of respondents said that the shift went better than they expected, and many even found remote working more efficient than working in the office. Large companies in particular profit from consistent remote working, while SMEs are far more dependent on a traditional, local working culture.

But not everything works better remotely, with no one able to offer a sound digital replacement for the random coffee-break encounter. Some companies have introduced virtual coffee breaks and although this helps, it doesn’t truly compensate for the real thing.

The travelling salesman problem

Many people are familiar with the ‘travelling salesman problem’ as a computer science concept. Coronavirus has given this quandary a completely new meaning. Sales and support – fields not traditionally associated with innovation – will experience major change. That’s because travel is extremely expensive and time-intensive. Thanks to coronavirus, the paradigm that says sales can only be conducted in person has been broken. Consequently, 78% of respondents believe they will reduce their travel activities, and half of those are even considering a major reduction. It has become apparent that a shift from rare on-site meetings to brief, regular video calls facilitates better customer relationships and greater continuity. All of this raises the question: who will be prepared to pay for travel in the future? Either the customer pays in the form of a price premium, or the manufacturer accepts a reduced margin.

What does coronavirus mean for product strategy?

Coronavirus has brought plenty of movement, with various interview partners confirming that they have accelerated digital solutions. It has often been the company’s own sales force that has seen the greatest change, with a sudden push to bring digital solutions to the market. But customers are also increasingly receptive to a conversation about digital solutions, in many cases because they want to reduce their dependence on people located on site. This underscores the existing trend to increased autonomy of products in the field. The goal here is not so much to develop fully autonomous systems, but rather to reduce on-site complexity. This trend, in combination with the changes in customer relations outlined above, gives rise to sustainable new opportunities for optimisation, with plenty of potential for disruption.

Will coronavirus bring production back to Switzerland?

One current theory contends that the supply chain will be increasingly centralised and production may even return to Switzerland. But our survey only revealed two companies that foresee the possibility of greater localisation resulting from coronavirus, with others seeing no signs of a return to Switzerland. The main reasons for this are clear: although the crisis may have jolted supply chains, it hasn’t put a brake on production or deliveries. Swiss industry has a good grip on its supply chains and has optimised in line with its own requirements to such an extent that a major change makes little sense. For large companies, however, greater caution in warehousing and dual sourcing is expected, not least because the virus has sharpened awareness of other possible crises, such as natural catastrophes, geopolitical instability and new pandemics.

From unthinkable to possible

The interviews clearly showed that many things once thought impossible now function – and they even function well. Naturally, this is partly due to a sudden increase in receptiveness among customers, but it has come about primarily because companies have no more internal excuses and have had to break through old patterns. They now see the potential of new approaches. One interview partner said that they think in three zones: the ‘pain zone’, ‘Out of comfort zone’ and ‘learning zone’. Having gone through the first two, they are now consolidating and systematically analysing their findings to see what they can use in future. Drone flights, which had to be used to monitor the construction of new facilities due to a lack of local presence, will not disappear. The data gained from these frequent drone flights is simply too valuable to live without now. In future, we can expect a significant rise in autonomous drones deployed for industrial purposes. Here, we see the establishment of modern approaches that have a positive influence on efficiency, agility and quality.

It also shows that the supply chain, production and technology present very few problems, even in a crisis such as this. Swiss industry is strong and efficient, with established processes and products subject to constant optimisation. For a high-wage country such as Switzerland, this is a must. But this intrinsically leads to a weakness towards radical new approaches. And this is precisely where the crisis helps to break through existing patterns and show new pathways. Some industries will experience a disruptive phase in the coming years, and there will be major changes in the war for talent. Anyone who wishes to take refuge in the ‘old normal’ will have a hard time of competing with those who use the opportunities that arise from the crisis to their advantage and accept the change as something positive.

The tip of the iceberg

For me personally, it is always a significant sign when something works better than you thought it would. It is an indication that there is a whole iceberg below the tip that we can see. I believe that Swiss industrial managers would really benefit from taking the time to analyse these incidents systematically and determine what they can achieve if they invest in these areas in the long term and are open to potential change. This is not easy; these are hectic times, diaries are full, and, of course, the desire to take refuge in familiar patterns is a natural human trait. So it’s all the more important that we make active use of this time, in order not to squander this one-off opportunity. I am always happy to share my findings personally, and I am open to new questions and input. Simply get in touch by email or on LinkedIn.