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How Leading Companies are Innovating Remotely: repost from MIT Sloan Management Review

By Ben Laker, Charmi Patel, Pawan Budhwar and Ashish Malik. Link to original article can be found here

The “new normal,” the “next normal,” and “the great reset” are phrases used by business leaders and politicians to describe the world in which we now live. Whatever your preference, there is widespread consensus that employees and customers won’t be returning to the old normal, ever. And how could they? Thousands of businesses, including Cirque du Soleil, Hertz, J. Crew, J.C. Penney, Le Pain Quotidien, and Virgin Atlantic, have already filed for bankruptcy — a 43% increase over this time last year — and thousands more are about to. Take HSBC, for example, which just accelerated its plans to cut 35,000 jobs across several countries. While this desperation isn’t surprising, given that the pandemic nearly collapsed the global financial system, other multinationals are behaving very differently, even when facing the same existential shock.

Within these more successful companies, the pace of innovation is actually accelerating, leading to better outcomes for employees and customers. During the first wave of COVID-19, for example, Mastercard and Microsoft collaborated to accelerate innovation across digital commerce and startup ecosystems, PepsiCo launched a new era of operational agility, and Apple committed to becoming entirely carbon neutral.

The Future of Work

To understand how and why these innovations occurred, we studied 1,000 innovation leaders across 17 countries between April and August 2020. Given recent scholarly research and executive insights that suggest innovation requires face-to-face interaction, we sought to understand how these companies successfully innovated in a remote work environment. By drawing on and analyzing data from multiple sources — including interviews, observations, and surveys — we were able to identify two innovation clusters, suggesting that companies worldwide typically responded to the disruption sparked by COVID-19 in one of two ways.

A cluster we’ve termed mourners adopted a conservative approach to change. These businesses struggled to adapt because the global pandemic triggered feelings of loss and void among workers, many of whom experience high rates of depression (53%), anxiety (55%), and even PTSD (32%), which are associated with loneliness, isolation, and low distress tolerance. For these reasons, 87% of mourners focused primarily on what they could control: firstly, re-creating and repurposing their offices, and secondly, expending enormous cognitive load pontificating about what work used to be like and what it might become.

These classic symptoms of decision paralysis arose because, amid the pandemic, many societal norms changed too quickly to be grasped and integrated into a coherent view of the world. As one employee told us, “Uncertainty doesn’t even come close to explaining it — ‘We can’t make any decisions yet, [so] let’s see where we are in a few months, and then go from there. There’s no desperate urgency; remember, everybody’s in the same boat.’” This viewpoint helps explain why, unlike our second cluster, less than 10% of mourners even think about innovation — and, rather worryingly, more than 90% still aren’t equipped to innovate using a remote work model.

Our second cluster adopted a radically progressive approach. We call them stormers. They include the world’s best innovators, including Twitter and Amazon, whose agile transition to the new normal expedited innovations, including a radical subscription-based service at Twitter, and a grocery delivery service from Amazon that expanded delivery capacity by 160%, and increased sales by 40% and profits by 100% — generating a companywide 37% increase in earnings. These two companies epitomize the stormer profile, 98% of which operate a platform-based business model in which users can function as buyers and sellers, readers and writers, consumers and creators — a growing behavioral trend referred to as prosumers, individuals that blur the line between production and consumption activities.

We discovered that this business model exists symbiotically with Rendanheyi, a philosophy meaning “employee and customer become one,” first developed at Haier, the world’s largest appliance manufacturer, and later intentionally adopted by Amazon, Apple, eBay, Facebook, Netflix, Twitter, Uber, and YouTube, among others. Within these companies, the concept of distance refers to the regularity of interactions with prosumers and the amplification of influence that connects the brands to new consumers — future prosumers. To illustrate, take Haier’s smart refrigerator, which scans items as they’re placed inside of it, can recommend recipes, suggest shopping lists, and inform consumers via a mobile app when they’re running low on supplies. Consumers who order this fridge are entirely in control of its specifications and can even speak directly to the assembly engineer via video call to alter it as it’s being assembled and programmed.

Twitter operates similar real-time communication practices, fitting its mantra of “Digital customer service is visible customer service.” The company trains its workers always to personalize customer interactions by signing their names to written communication. This method has significantly reduced the distance between employees and customers and has allowed workers to own customer relationships on behalf of the company. This approach is somewhat radical, as one vice president told us, adding, “Taking the time to interact with your audience always pays dividends. Though remember, effective support requires [that] you communicate frequently and set expectations.”

As soon as COVID-19 hit, stormers increased their interactions with customers; Twitter, for example, oversaw an average interaction increase of 29% compared to this time last year. Conversely, many mourners reduced their communication and connectivity to customers, due in part to office closures, a shift to working at home, and an overreliance on chatbots (which, incidentally, rank last in customer satisfaction). Stormers recognize that cultivating relationships is vital to turning customers into prosumers, and prosumers into loyal brand ambassadors. During this process, stormers can gain a better understanding of their consumers, which helps to inform decisions about what products and services to develop and exactly how to do it. In addition, we found that these interactions help stormers demonstrate commitment, share knowledge, and make customers feel valued and essential overall, which builds loyalty by more than 62%.

Six Steps to Creating Customer Value

Our study sought to share insight on how leaders can innovate under a remote work model in a way that develops episodic loyalty through the creation of customer value. Our findings identified six sequential steps that stormers take to achieve this. So whether you want to transform your mourner organization to a stormer or are trying to launch a new venture, here’s how you can do it.

Step 1: Define a schedule and stick to it. Employees need to be safe and secure, both emotionally and cognitively, before new ideas can begin to emerge. Working from home has made it difficult for many mourners to truly separate home life from work life, and more than 76% have replaced commuting hours with increased work hours. This is causing burnout, so re-creating a sense of order will provide structure and familiarity in times of uncertainty.

By keeping a similar schedule and meeting regularly with colleagues, albeit virtually, 84% of stormers have preserved the rhythm of daily life that existed before COVID-19, which helps maintain emotional and cognitive well-being. But to do this well, setting up clear systems for engagement is of paramount importance. For example, team updates are shared using asynchronous discussion boards and WhatsApp groups; check-ins occur using face-to-face Zoom or Teams meetings; and decisions are made using synchronous audio calls, not video meetings. Also, virtual lunches, during which work talk is banned, enable employees to maintain the type of casual conversation that helps build strong bonds across teams. These interactions provide the bedrock for stable dialogue, which underpins employees’ positive emotional and cognitive states.

Step 2: Introduce service culture. Once workers know how to communicate remotely, the next step is to invert the pyramid of importance and status so that everyone and everything focuses on supporting customer-facing teams. This concept was adopted by 94% of stormers, fostering collaborative working, supplanting individualism, and promoting collectivism. Stormers do this by removing the command-and-control structure — typically characterized by pyramidal org charts, old-school line management, layers of authority, and traditional, rigid pathways of progression and reward — that is the antithesis of their service culture. Absent such a hierarchy, customer-facing teams can flourish — with potentially immense ramifications for revenue and profit.

Step 3: Turn leaders into stewards. Removing command and control and introducing customer-facing teams necessitates that leadership and leaders’ responsibilities evolve. That’s because, within a functioning service culture, innovation isn’t confined to one team; stormers comprise interdependent and connected networks of small teams relentlessly pursuing increased customer value through rapid development cycles. Unencumbered by hierarchy or bureaucracy, these worker-led teams promote collaboration and reward collective achievement. Leadership, therefore, becomes somewhat redundant. Within 96% of stormers, old ideas of leadership have been replaced by stewardship, a concept that fosters collaborative working, supplants individualism, and supports collectivism, giving individual employees the autonomy to serve customer needs while working toward a common purpose as part of a team.

Step 4: Together, reduce customer distance. With stewards in place, everybody can work together to achieve a common purpose: creating customer value by reducing customer-employee distance. This approach transforms traditional customer communication into something far more profound, characterized within 84% of stormers as continuous, low-friction, and personalized interactions. These interactions enable real-time feedback from customers and provide a stronger sense of purpose and satisfaction to employees. Such radical empowerment, found within 81% of stormers, creates relationships that fuel further commitment to innovation — because employees are motivated to constantly seek value on behalf of their customers.

Step 5: Let employees own customer relationships. Radical empowerment can prosper only if employees are allowed to own the relationship with every customer, which goes against conventional advice from many managers. But entrusting employees with customer relationships significantly improves the likelihood of innovations occurring: 91% of stormer workforces told us that they appreciate the visibility of their contributions, which in turn helps enhance their motivation and productivity, leading to further innovation. The mourner’s challenge, then, is to enable and catalyze the relationship between customer and employee, providing an ecosystem in which innovations can occur — and, most important, placing faith in their workforce to identify meaningful innovations.

Step 6: Gamify. Amazon employee workstations feature a roster of games with retro-looking graphics, such as MissionRacer, PicksInSpace, Dragon Duel, and CastleCrafter, to make work more fun. Employees could compare their progress on an individual or group level. Winners received bragging rights and “swag bucks” redeemable for rewards. This gamification concept was also adopted by 76% of stormers to measure their employees’ contributions to innovations. We found that 81% of stormer workers who experienced such gamification at their workplaces enjoyed their employment more significantly as a result.

Ultimately, innovation is crucial to business sustainability, especially in this disruptive era. The six steps that our study identified allow workers to harness this newfound creativity and generate innovations that support product and service development remotely. All that remains, therefore, is for you to decide whether you’re a mourner or a stormer.

About the Authors Ben Laker (@drbenlaker) is a professor of leadership at Henley Business School at the University of Reading. Charmi Patel is an associate professor in international human resource management at Henley Business School. Pawan Budhwar is a professor of work and organizational psychology at Aston Business School at Aston University. Ashish Malik (@maliknewcas) is an associate professor of strategic human resource management at Newcastle Business School at the University of Newcastle, Australia.


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