Editor’s note” Tom Snyder is executive director of RIoT, a North Carolina-based Internet of Things users group.
RALEIGH – In the past few weeks, I have been asked by several individuals and companies, and a few media organizations to weigh in on how COVID-19 will impact the future of entrepreneurship in North Carolina. It is a good question, and many experts have weighed in. The popular opinion emerging is that we will see a significant stall in momentum. I believe that opinion to be wrong.
By now, most of us have achieved some degree of “new normal” in how we are living during the COVID-19 situation. Every one of us has been forced to change. Change how we shop. Change how we work. Change our social behaviors. Change is hard.
Two predominant behaviors emerge from crisis: Those who have means become conservative. They change, but as little as possible. Those who do not have sufficient resources, innovate and invent. There are exceptions, of course, but these are the most common reactions to crisis.
Tom Snyder. Photo by Sarah Glova.
COVID-19 has been no exception. We quickly saw the largest, deep-pocketed companies slash marketing budgets, stop growth spending and furlough “non-essential” personnel. Venture capitalists and angel investors have largely stopped making new deals and advised their current portfolio companies to hoard cash. These are natural and reasonable behaviors. Safety first. Shelter in place. If you have the money to do so, bunker down and ride out the storm.
Most of society is not wealthy enough to follow that conservative approach. Nothing awakens necessity more than a crisis. And if the old adage is true – invention and innovation follow. COVID-19 has been no exception.
In a matter of days, a shortage of personal protective equipment led to significant innovation in home-sewing face masks and 3D printing face shields. This is crowdsourced design and manufacturing. Social distancing has given rise to new customer engagement methods, reimagining sales and distribution. Work from home and sidewalk pickup are reshaping the use of real estate. Slow moving industries like medical equipment see new competition producing vastly less expensive ventilators.
What often gets forgotten is that fundamentally, change is necessary. The most common reason that companies fail is because they fail to change as markets evolve. When that evolution happens slowly, companies are at higher risk to fail. Who wants to take the hard path and make a significant change when the status quo seems to be working?
A crisis serves as a forcing function. Change is suddenly a necessity. Those that adapt and address new market needs most quickly are the most successful. In the RIoT Accelerator, we work every day with companies to help them embrace change and solve market-driven problems. We recently launched MISSION-R to help companies recognize that as difficult as COVID-19 is, now is the time to capture opportunities the crisis creates.
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There is a fallacy getting regularly reported in the news. Each day, experts debate when we will go “back to normal”. What has been missed is that crises as significant as a pandemic result in irreversible change. Many practical changes are short-term. We will not need to socially distance forever. But cultural change is permanent.
The 1918 flu fundamentally changed healthcare, birthing centralized care in many countries. The industry opened up to all people and not only wealthy elites. There was no question of going back to the way public health had been conducted before.
More recently, the world never went “back to normal” after 9/11. Numerous new industries were born from or accelerated by that crisis. It fundamentally changed news reporting (use of social media), reinvented travel (body and luggage scanners), advanced robotics (bomb detection), surveillance (drones) and artificial intelligence (natural language processing, automatic translators).
There is no reason to expect that COVID-19 will not similarly spawn entirely new products and industries. It will accelerate adoption of new technologies and data analytics. In time, we will see that those who sheltered in place looked healthier in the short term, but fell significantly behind in addressing the new market reality. Long term, complacency is bad for business because markets always change. When change happens fast, corporate sheltering in place is an even worse strategic decision.
We see young companies taking the opposite approach. Pendo is hiring for the future. Bandwidth announced a new campus and major expansion. K4 Connect pivoted products to directly support COVID-19 in retirement communities. These companies, who thrived in the recent entrepreneurial growth period in the Triangle, understand that investing now puts them ahead of their competition. (Editor’s note: RIoT will showcase companies who have successfully grown business during COVID-19 in a webinar this Thursday)
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Those who are investing now will be the long term winners. The first chapter of the innovation and entrepreneurship wave in the Triangle was born out of the tech recession of 2008. We saw the same behaviors then. Large companies were laying off thousands and conserving cash as the stock market declined.
Through no choosing of their own, people who lost jobs were forced to innovate. Many realized they had been freed from the complacency of their old job and started new companies. New industries like coworking spaces and startup accelerators were spawned to support entrepreneurship. American Underground, the Wireless Research Center and HQ Raleigh are good examples.
The Triangle has been on an extremely healthy path since. This all happened, despite difficult access to capital during and immediately after that crisis.
We are again faced with a crisis that forces innovation. The same short-term capital challenges exist. There is no reason to expect a different result. Necessity breeds entrepreneurs.
