Too often, organizations respond to downturns by slashing resources, shutting down long-term innovation investments and instead focusing on short-term priorities. But a challenging economic environment calls for the need to innovate more, not less. Business leaders should look to capitalize on recessionary cycles and drive innovation today to set a strategic course for sunnier days.
Creativity loves constraints
The good news is that those organizations that make innovating in a downturn a priority will find that a constrained environment can actually foster creativity that leads to powerful waves of long-term growth.
Following the recession of 2008, Richard Florida who served as Atlantic senior editor, noted that companies would do well to think of an economic downturn as a ’reset”, facilitating innovations spurred by hard times to drive a post-recession economy. “It is not just a period of economy decay; a reset is a chance to start over,” he suggested.
However, too often, organizations put innovation on the back burner during economic downturns. Organizations that fail to focus on innovation during this next anticipated downturn do so at their own risk. Preetesh Sewraj, CEO and chief innovation analyst at Product of the Year, suggests that in an economic downturn, brands would do well to push the innovation agenda. “Too often, the immediate response to an economic downturn is to be overly cautious, which is understandable,” he explained. “However, brands that invest in themselves and offer more value will not only retain existing customers but will create opportunities to gain new ones.”
To ensure that the next economic downturn coincides with an innovation upturn for your business, consider these steps:
Eight action steps to take now to drive innovation
- Drive the innovation agenda. Truly successful innovation efforts always start at the top. CEOs must drive the innovation agenda. Rather than slashing innovation budgets, CEOs should encourage management and teams to deliver market-leading products and services.
- Innovate with purpose. Organizations would do well to prioritize investments in a way that moves beyond just profitability and centers on its core purpose. The Economist Intelligence Unit revealed the sixty-three percent of executives from across three global industries believed that having a sense of purpose and aspiration beyond their day-to-day commercial mission made their company more innovative and more able to disrupt or respond to disruption.
- Be ruthless in prioritizing. When it comes to prioritizing innovation investments in a downturn, be strategic. When resources are scarce, avoid “walking dead” projects and instead be ruthless when it comes to making decisions on when to pull the plug. Leaders should be asking key questions such as “How much risk remains?”, “What’s the upside potential of the investment?” and “What is the true cost of the next round of tests and what learning will they provide?” Avoid the temptation to prioritize short-term efforts that promise immediate payback over longer-term efforts with more questionable payback. Potential rather than performance alone is the right guide for innovation decisions. Focusing solely on the immediate, core business can lead companies to diminishing returns from investments while missing great growth opportunities.
- Move with your customers. Challenging economies expose unmet customer needs, making it a good time to identify opportunities for product or service development. Use this time to listen closely to the market and respond with innovation and research and development efforts where the market is speaking most loudly.
- Explore new markets. When casting your net in down cycles, remember to fish where the fish are. Consider the case of Groupon which launched its platform in November 2008 that allowed companies to reach consumers with easily accessed promotions and deals. Successfully filling a need for both consumers and businesses, Groupon effectively created a new category by seizing on a cultural and economic flashpoint, which resulted in one of the largest public offerings at the time.
- Expand partnerships.“Before you can multiply, you must first learn to divide.” The idea is that if you want to grow your business, you must learn to partner with others and give them a vested interest in your success. Slowdowns demand a more collaborative approach to drive innovation. Partnerships with universities, innovation partners, suppliers, research labs, governments, and even customers offer good opportunities to share costs, spread risk and combine resources.
- Invest in technology to drive innovation. The innovation process should be sustainable, not accidental, especially during a downturn. Using the right technology, companies can ensure their innovation is a repeatable process. Aggressively scout technology and develop a broader partner and supplier network to identify and vet opportunities. Learn more about how IP.com can provide support with our technology solutions to achieve sustained innovation.
- Address innovation gaps. Now is the time to undertake a sober assessment of the strengths and weaknesses of your innovation system. Fix the capability gaps now so that you can launch projects with fewer resources. When the upturn comes, this work will also pay dividends in terms of speed to market, quality of execution, and capacity.
Innovation thrives when faced with no other choice. But businesses intent on achieving long-term growth objectives need to build it bigger by innovating in and through a downturn. Those companies that emerge are stronger and ahead of their competition.