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Jumpstarting Customer Demand Starts with Government

While policy makers understandably focus their efforts at present towards the immediate COVID-19 challenges related to wage supports and business solvency, attention will have to shift quickly to attenuating the factors that risk derailing post-crisis rebound and maintain, if not capture new, opportunities in global innovation supply chains. 
Dan Herman Phd
on May 05, 2020

In the span of just weeks, the global economy has been upended by the near-ubiquitous and near-instantaneous impacts of the global coronavirus pandemic. The result is the onset of an economic crisis that has struck at the heart of our economies. Rapid increases in unemployment in major consumer markets will create near-immediate decreases in consumer spending. Expectations of decreases of up to 50% in some consumer categories are common. By extension, corporate spending will decrease in all discretionary categories. The subsequent impact on high-potential growth companies, startups and SMEs, and by extension national economies, is immense. 

As a point of reference, the dot-com crash of 2000 saw over fifty percent of tech startups disappear while venture capital funding for startups took years to return to pre-crash levels. Few if any ecosystems can afford the same today. While policy makers understandably focus their efforts at present towards the immediate challenges related to wage supports and business solvency, attention will have to shift quickly to attenuating the factors that risk derailing post-crisis rebound and maintain, if not capture new, opportunities in global innovation supply chains. 

Chief amongst them is finding short to medium solutions to the lack of demand seen across economies. Given rapid increases in unemployment and subsequent deterioration, if not evaporation of consumer confidence across developed economies, this is not a short-term challenge. The global financial crisis of 2008-2011 saw consumer confidence remain below pre-crisis levels for nearly a decade. Avoiding this fate, and attempting to help startups and SMEs retain some form of momentum, requires a revenue-focused stimulus. 

Here, policy makers can play a significant role in mitigating the evaporation of organic consumer demand by ramping up efforts to procure in a trade-permissible fashion from innovative domestic companies. Borrowing from the highly lauded U.S. Small Business Innovation Research program (SBIR) and its cousins in Canada, the UK and other jurisdictions, challenge-based innovation procurement provides an immediate means of both addressing Covid19-related needs as well as providing innovative firms with infusions of cash to continue the development of their innovations and technologies. 

Successful innovation challenge programs include the Government of Canada’s Innovative Solutions Canada (ISC) program that I helped established in Canada in 2017. Like US SBIR, ISC acts as a valuable first customer to innovative Canadian startups and SMEs and acts as a seed fund for proof of concept development, prototype development and customer validation for high-potential firms with solutions to government department challenges. In Europe, the EU-commission backed Innovation Procurement Brokers program supports participating public agencies in the identification of their needs, and then acts as a broker to connect those needs with startups and SMEs whose capacities are best able to address them.

Today, as startups and SMEs struggle to find sufficient demand to keep their doors open, these approaches to stimulating economic activity represents a near-term solution for policy makers in innovation systems worldwide. Whether directed towards the immediate challenges that Covid19 has brought to the fore related to healthcare and social services, or more long-term applications related to data, detection and other digital services, no other policy lever offers the ability to address the near-term revenue challenges that will dictate which startups survive this period of economic crisis and come out the other side ready to win.


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