Upon hearing news of an impending recession, most companies opt for the traditional corporate practice of shrinking budgets, cost cutting, sweeping layoffs and freezing plans. As corporate turnarounds experts will tell you, it is important to stop the blood flow first when attending to an injured patient. But if the injured is a competitive athlete, how long will you prevent him from training before his skills and stamina take a turn for the worst too?
Innovation is like a muscle, if you do not exercise it, it atrophies. Once the necessary housekeeping to ensure relative corporate stability is over, an economic recession could become a great opportunity for innovation.
« Many of the world’s enduring, multibillion-dollar corporations, from Disney to Microsoft, were founded during economic downturns. Generally speaking, operating costs tend to be cheaper in a recession. Talent is easier to find because of widespread layoffs. And competition is usually less fierce because, frankly, many players are taken out of the game. » – Reena Jana, Bloomberg BusinessWeek, July 2009
A study by McKinsey & Co. conducted over a period of 18 years found out that companies that « retained or gained market leadership during the recession of 1990-1998 invested on strategic acquisitions and pursued new opportunities rather than focusing on reducing operating expense ».
The study remains relevant in today’s context. With the burst of the Internet bubble and the Sept. 11 terrorist attacks, most companies probably had crossed out the year 2001 to launch a new product or service. Yet Apple went ahead with the launch of the first iPod. In 2003 Apple went on to unveil the iTunes music store despite the lack of confidence in the high-tech sector during that period of time. The end-result? The sleek, white earplugs have become a common sight around the globe and synonymous to the Apple brand. Today, Apple has cemented its position as one of the most-loved (and profitable) global brands, and changed the way we buy and listen to music forever.
You may not be on the verge of inventing the new iPod but how frequently do you chance upon an excellent idea just to painfully realise that your competitor will be launching it in 3 months’ time?
Timing is extremely crucial when it comes to innovation; every moment can make or break. A recession is the best time to accelerate long-term, strategic projects – especially when competitors put theirs on hold.
Just as how there are many types of innovation, there are many strategies that a company can adopt during a recession. Innovationtools.com highlights several, which include:
– Redoubling your focus on customer needs
– Strengthening the positioning of your products and services using marketing innovation
– Embracing open-source innovation
– Looking for creative ways to extend your current products and services
In short, you can take advantage of the situation and get ahead of your competitors by focusing on the ideas with the greatest potential. Embracing open-source innovation and exploring creative ways to provide new customer experiences with existing products are some approaches that can significantly increase value while being cost-and time-efficient.
In the words of Bernard Meyerson, CTO of IBM’s systems and technology group, answering a question from Tiffany Meyers in the Entrepreneur magazine: « During a recession, people tend to say, ‘Let’s stop everything and save money until it’s over (…) Well, you’re not going to save your way to greatness. »
You cannot prevent or stop a recession but by taking a long-term, strategic view, you can certainly innovate your way out of it.