It always happens. In tough times, there is a tendency to retreat and take on a defensive posture. Survivalist thinking takes over as uncertainty in the business climate grows. But with the worst of times also come the best opportunities. Now is not the time to shrink investments in the future. Quite the contrary, now is the time for innovation. Here are five reasons to innovate now!
More of the same isn’t the same
As revenue sources are squeezed, companies must improve margin to help balance the revenue and expense engines of the company. In the past, modest cost reductions of five percent were seen as good, and such reductions were not difficult to achieve. But today’s climate demands more. Many companies are looking for ways to reduce costs but 25-35%. Reduction in cost at this scale is non-trivial and requires innovative approaches for success.
Doing more with less
An unfortunate reality of contracting economies is the reduction in work force experienced at many companies. Yet while the staff may be reduced, the demands for value delivery are not reduced. There are still competitive pressures; there is still a need to drive revenue and increase market share; customers are still pushing for new value. This all means that enterprises need to be much more effective and increase the innovation output per capita to meet the needs of the business.
Continued regulatory pressure
Another source of unwanted pressure on companies is regulation. These requirements rarely diminish at a convenient time. There is one bright note here though. These days, compliance can be turned into a competitive advantage. As companies embrace social responsibility, they are discovering that it can be a boon to both the top and bottom line. Integrating eco-innovation into your strategic plan can plant the seeds for new value creation.
Voids left by failed enterprises
The wreckage of companies that have not been nimble and innovative enough to make it through these times can be seen all around us. But, each company that runs aground leaves behind in its wake rich opportunities for companies that are willing to invest in innovation. An unserved customer community represents an opportunity to meet a need. If your portfolio includes a capability that could be redeployed to serve that need, you have a clear path to creating a new revenue source through delivery of high-value innovation.
The pendulum effect
No one effectively anticipates the recession. Companies react after the fact. This leads to overcompensation driven by the uncertainty. But during this period of contraction, latent demand is building. The result is always the same. Many companies are unprepared to capitalize on the recovery swing because they have stripped down their capacity to levels that are inadequate to service the opportunity. Those companies that have anticipated this emerge the winners. Now is the time to be thinking not just about how to navigate the turbulent waters of the recession but also where you want your company to be once the waters calm. Start investing in tomorrow today or you will be yesterday’s news.
Great post! I especially like the point you made that "Integrating eco-innovation into your strategic plan can plant the seeds for new value creation." For example, back in 1975, S.C. Johnson took a pioneering role in eliminating CFCs from its aerosol products -– six years before the law banned CFCs. By making the decision early, the company investigated alternatives and production methods before the competition did. S.C. Johnson's actions put it ahead of the competition when the government mandated the change.
Posted by: Andrea Meyer | April 01, 2009 at 04:23 PM
It is possible to plan for recessions before they happen - even this downturn was predictable, knowable, and visible to those who had honestly assessed their vision quality and applied some honest lenses.
You point about the pendulum is particularly salient. Reacting to a downturn is bad. Reacting to an upturn is worse.
As important as it is to plan for the worst, having a success plan (what will you do when you succeed?) is far more important.
Posted by: Jim Belfiore | April 02, 2009 at 07:37 AM
Hi Andrea, Thanks for the great feedback. I wholeheartedly agree with you that there is tremendous potential for eco-innovation as a strategic element in the innovation agenda. We are still very earlier in the maturity cycle of this arena. Those companies that take a lead role here have an opportunity to define the future battle ground and create dual value through both the product differentiation and the mindshare attainment that is up for grabs. Any time you can turn something from a "boy, I have to comply" issue to a "here's an opportunity to create long term value" situation, that is big win for the company and its customers.
Jim, Good point. Sadly, I think most companies are so focused on avoiding the reefs that they are not thinking forward to what they will do when they make it out to open water. This is, as you suggest, a huge strategic error. Companies must plan for tomorrow's success today even though it may seem far off. If they don't, they will most definitely be caught unprepared. The early stages of the turn-around market are still very dangerous, and a lot of incumbents will find their situations at risk because they assumed that no one else was thinking about tomorrow either.
Posted by: James Todhunter | April 28, 2009 at 01:31 PM