Tag Archives: recession


Innovation in Recessions

thick_arrow_up_5575Successful innovation in recessions was examined in a Harvard Business Review article, Roaring Out of Recession, by Ranjay Gulati, Nitin Nohria and Franz Wohlgezogen.  They looked at increases in sales and earnings during a recession, and the strategies that were employed.  The goal was to determine the best strategy during a recession.  The strategies were grouped into four general categories:


  1. Prevention-focused,
  2. Promotion-focused,
  3. Pragmatic, and
  4. Progressive organizations.

Prevention-focused organizations focus on cost cutting and avoiding losses–a purely defensive strategy.  Within this category, the authors examined two major subcategories:  employee reduction and organizational efficiency.  These types of organizations are risk-averse, and will “batten down the hatches” when a storm approaches.  As a general strategy, prevention is the worst, however, organizations that pursued organization efficiency (vs. employee reduction) were more successful in this category.

Promotion-focused organizations focus on building assets and marketing–a purely offensive strategy.  The thought is that during a downturn, by investing in your core assets and building your branding, you’ll hold onto your current customers and build new ones.  Compared with organizations that pursue the prevention-focused strategy, they tend to do better.   The authors divided this category into market building and asset building.  In general, building marketing worked more effectively than building assets.

Pragmatic organizations do everything.  The pursue both offensive and defensive strategies, in essence, throwing everything they have at the problem.  This strategy is significantly better than either defense or offense alone, but is still not the most optimal.  In this case, they don’t “fine tune” the amounts of each type of strategy, and waste resources.

Finally, there are the pragmatic organizations.  They too pursue both offensive and defensive strategies, however, they only pursue operational efficiencies (with respect to prevent-based methods), and pursue both marketing and asset/capital investment with respect to promotion-based methods.  With this strategy, the financial outcome compared with the next best method, as measured by sales improvement is nearly 40% greater, and the improvement with respect to earnings is nearly 160% greater.

So, the bottom line is you keep your employees, and make capital investments that improve operational efficiency and marketing development–two areas that are best addressed with innovation.  Your people are your best asset, again.

Economic Help from Innovation

Today, the US Labor Department released its unemployment report for jobs lost for the year ending March 2009. As expected, the number was substantially higher than originally forecast, setting employment at the highest level in decades.

With consumer and business spending depressed, now, more than ever, organizations are struggling to not only compete, but to stay in business. To survive, organizations are turning up the pressure on anything and anybody that can increase revenue and reduce costs. Not surprisingly, much of this has fallen on employees, who are responding by increasing productivity and sacrificing salary increases.

At some point, the obvious reductions are completed and further staff reductions are considered. However, this is probably the wrong place to look. Research has shown that almost 70% of business knowledge is in the minds of the employees, and general employees are 3X more likely to generate good ideas than a specialist. You could be cutting the very people who have the answers to your problems.

With this in mind, the obvious question is: Why not ask your employees (customers, partners, and other stakeholders) how you can increase your revenue, reduce your costs, and improve your competitiveness?

Flagpole Software (www.flagpole-software.com) has embodied innovation best practicesinto an easy-to-use website for exactly this purpose.

How Innovation can Help the Economy

Writers Chris Trimble and Vijay Govindarajan, authors of Ten Rules for Strategic Innovatorsfrom Idea to Execution, recently made the point that innovation is all about optimism and ambition, but with optimism as the first ingredient in the desire and ability to innovate. Of course, failure is possibility. A company that invests into the research and development necessary for innovation could fail in that project. That’s a necessary risk that comes with innovation and one that can’t be avoided. And only companies that avoid trying to blame others for their failures and instead learn the lessons available are the ones who will keep succeeding and moving forward.

Trimble and Govindarajan believe that those lessons need to be applied to the current state of the economy in order to succeed and keep moving forward, out of the current recession and beyond. Instead of placing blame and looking for scapegoats, as a country we simply need to learn the lessons of the recent economic failed experiments in the US that we’re all painfully aware of now (housing bubbles, subprime lending) and move on. Optimism is a key ingredient to doing so, and the spirit of innovation can also help the economy heal by letting the country decide exactly what went wrong and how to avoid it again in the future.

Where Will You be at the End of the Recession?

Now is the time to begin taking advantage of the amazing resource that you have in your business. The employees who work for you have all the talent, creativity and innovation that you need to move your company forward during the recession and position your business to be stronger than ever before.

Team meetings and employee feedback are a great way to find new ways of running your company and preparing for the day when you will emerge as a stronger business. You will be amazed at the results that you will achieve when you tap into the resource that is working in your business every day.

It is never truer than now that you never know where the next big idea will come from so dont discount anyone in your organization. Gather your employees together and foster the idea that you are all in this together. Encourage your employees to voice their opinions and to come up with new ways of doing business. In many cases, the employees who are actually doing the work know the best way to change and grow to make things as efficient as possible. Take these ideas and run with them and you might just have a brand new company at the end of the recession that is better prepared to win market share.

The Entrepreneurial Spirit Thrives During a Recession

One thing that remains the same during every recession is the emergence of the entrepreneurial spirit. As big businesses are finding it difficult to become lean and flexible enough to withstand a downturn economy, many people find themselves out of a job and looking for a new path in their life. This is the time that often marks the beginning of a brand new approach to business.

How can an established business take advantage of this fact? Well, the entrepreneurial spirit is born out of a desire to change the established way that something is done and forge a new path. Your employees can be encouraged to come up with new ways to work the business so that you are prepared for the changes that are coming your way.

A recession weeds out the companies that dont have the ability to change and grow. During tough economic climates, those companies that fail to see the changing market will not survive and those that use the time to innovate their businesses will emerge stronger than before.
It is an exciting time for those who recognize the potential. Take advantage of the opportunity to change and grow with the coming business environment. If you can see where the market is headed, you can make sure that your business is there waiting when things turn around.

Recessions Spark Innovation

Believe it or not, every recession develops some sort of innovation from the entrepreneurs who are struggling to keep their businesses afloat during difficult economic times. It is during these times when the ideas become more creative and allow for fundamental changes in the way that businesses operate. Your business can be on the forefront of this innovation if you recognize the opportunities that are before you.

A slowdown in your business is a perfect time for you to get together with employees and find new ways of working your business and the many processes that currently exist. Taking the time now to develop your business will reward you when the economy turns around. You will have turned your business into a lean machine that is prepared to take advantage of every opportunity that exists in the market.

Sticking to the old rules may well be the demise of your business. Companies that do not change and respond to the market are destined to fail. Making sure that your company is flexible enough to take advantage of the opportunities that will come your way will ensure that you remain in business during a time when businesses are failing all around you. Prepare your company for growth and change during this recession.

Can Your Business Grow in a Recession?

Most businesses today are worried about surviving the recession and not about ways to grow their business. However, now is actually a good time to prepare your business for massive growth and change that can come out of a recession.

During a recession, strong companies have an opportunity to become stronger as the weaker companies are weeded out. Of course, this might mean spending a little more money on advertising during the recession. Spending money on your business during a recession is not something that most people consider, but if you are creative about the way that you manage your advertising budget, it can be a perfect time to increase your business.

Many businesses find that at the end of a recession, there is an increase in market share because of the demise of the less strong businesses that didnt survive the recession.

Consider changing your approach to advertising and dont be afraid of seeking to grow your business during this tough economy. It will be the businesses that are not afraid of innovation and change that survive and grow. Make sure that your business is one of those companies and take your share of the market during this difficult economy.

Recreate and Repackage

While many business managers are fighting panic at the latest news headlines, the recession may be an opportunity for positive innovation instead of a time to contract and pull inward.

Good managers will see the current recession as an time when they can expand their business into new areas and create technologies and products that fill a void consumers may not even realize exists. Companies that are constantly recreating themselves by offering new products are the ones that survive during challenging economic times. Take, for instance, Google. This is a company that started out as a college project, which became a search engine, which became an advertising venue, which became an email client and has now expanded to offer such innovative services such as Google Earth and other applications. Google is constantly recreating itself by branching out into new areas of technology that several years ago people didnt even realize they needed.

Part of recreating is repackaging. Make your customers look at you with new eyes and you become something new and refreshing to them. You create a need that they may not have considered before. Sometimes repackaging isnt about the package, but about the perceptions that customers hold about the product or service. Offering a fresh new perspective changes views, creating the opportunity for new customers.

Its all about recreating and repackaging.

Work Smart

Working smart doesnt equate working cheap. One of the challenges of a recession can be using the dollars available to get the most creative and innovative solutions from your employees.

In a recent interview, Alex McKelvie, a professor at Syracuse Universitys Whitman School of Management suggested that small business owners face particular challenges during an economic downturn because of the need to get the most out of their employees, while at the same time spending conservatively. Given the opportunity and a receptive ear, employees can offer uniquely innovative solutions to small business owners when it comes to creating new products or solving seemingly unsolvable business problems.

One of the interesting things about the creative process is that it doesnt happen under the constraints of efficiency or being bound by a budget. Given the time to wrestle with problems, employees will find a way to solve problems that are presented to them, often in ways their manager might not have even considered. Innovation is a creative process that happens in the subconscious, when we are working on something as mundane as making the coffee or shooting baskets on the basketball court. Giving your employees chances to think creatively will result in creative solutions all around.


Thinking Creatively

One of the biggest mistakes managers can make during a recession is to become ultra conservative in how they manage and where they invest their efforts. Recessions offer opportunities for creative thinking and thinking outside the box. This is the time to try a different way of completing a task or a unique way of solving a problem. During these challenging times, survival is a necessity and the mother of invention is necessity.

Think of the newest technologies and the tech tools that are the hottest sellers. Just 10 years ago, nobody had any idea what an iPod was; yet here we are with the iPod still one of the hottest selling items Apple makes, even during a recession. Apple continues to amaze with their track record of successful, innovative tech gadgets, most of which continue to be best sellers.

Ask your product developers for new ideas about how they can approach a problem differently. What features can be added or changed to make the product more efficient or even approach it from an entirely different prospective.

Instead of looking with gloomy eyes at the current recession, innovators look at it as an opportunity for new thinking.