Over the past two decades, companies have embraced the need for Digital Transformation. Driven by technologies, social and political changes, and globalization, many launched initiatives to adapt and stay competitive. However, the results of these innovation efforts are sobering, leading to what can be described as an innovation hangover.
COVID has not only shaken humanity's health but also exposed a delayed, potentially fatal moment of truth for countless startups and corporate innovations, driven by a growing risk aversion aimed at preserving the belief in the endless lifespan of legacy businesses.
The Reality of Globalization
Globalization and the pursuit of endless growth gave Western European companies a competitive edge by leveraging cost-efficient supply chains. Raw materials and components were sourced globally, while production and labor were offshored to low-wage countries. At the same time, administrative and managerial roles often remained in the home countries, whereas the lion’s share of value creation took place elsewhere.
But this optimization is hitting an economic ceiling. The cost advantages of global supply chains are shrinking as wages in emerging markets rise and geopolitical tensions disrupt trade. More importantly, this system has been built on asymmetrically exploiting global resources – cheap labor, raw materials, and weaker environmental regulations.
This imbalance is becoming harder to sustain, raising not only economic but also ethical and ecological questions. Events like COVID-19, the Suez Canal blockage, and geopolitical conflicts have exposed the fragility of these systems. Suddenly, companies faced logistical bottlenecks, skyrocketing costs, and a crumbling global order.
The Innovation Narrative under Fire
In parallel, we witnessed a decade of innovation hype: new technologies, agile processes, and massive investments were heralded as the cure-all for growth and transformation. But what remains of this promise?
In many cases, these innovation initiatives have been exposed as theater. With flashy innovation labs, accelerators, and hubs, companies showcased their dedication to change. Yet, these efforts often failed to deliver real impact. Instead, they became value-destroying machines, consuming more resources than they created.
In today’s challenging economic environment, it’s no surprise that such projects are being scaled back, paused, or outright canceled. Companies that once aspired to invest in the future are retreating, driven by a fear of further losses.
Innovation Hangover: Three Possible Scenarios
What happens next? How will businesses respond to this growing innovation fatigue? Three scenarios come to mind:
Doubling Down on the Innovation Myth: Some companies may continue to cling to the belief that innovation will eventually pay off. Their argument: if you spend enough money and effort, success is inevitable. But without clear strategies and tangible goals, this approach risks perpetuating the same innovation theater until the last shred of optimism runs out.
Abandoning Innovation Altogether: Another path is to stop investing in innovation and accept the end of an era of economic prosperity—or at least acknowledge the undeniable limitations of growth. This would mean abandoning efforts to address the challenges of tomorrow, effectively conceding defeat. While it might save costs in the short term and reallocate resources to the core business, this approach sacrifices any chance of future relevance.
Reparing Innovation with Purpose The third – and most promising – approach is to rethink innovation fundamentally. Rather than pursuing vanity projects, companies need to focus on entrepreneurial innovation with a Return on Innovation (ROIN). Like successful startups, they should be held accountable and focus on clear value propositions, lean experimentation, and resource efficiency, supported by gated investments to reduce risks, facilitate learning, and generate evidence. It’s about building innovation activities grounded in business fundamentals, either by extending the lifecycle of the current business model or delivering sustainable growth through future models.
The Future of Corporate Innovation is Entrepreneurial Exploration of Opportunities
The question is: can we learn from this moment of disillusionment and rebuild innovation with substance and focus? Or will the innovation narrative itself become another casualty of economic and social challenges?
The way forward is neither easy nor guaranteed. It requires businesses to act boldly and pragmatically. But one thing is clear: innovation must move beyond theater. It needs to deliver real, measurable value – or risk being relegated to the annals of failed experiments.
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