Innovating in a Recession? Time for Depression.

Innovating in a recession. Or a depression. It is enough to make anyone depressed, and sadly in my view, rightly so.

 

When economies hit recession, what do firms do? They cut back. They cut back on advertising, training, marketing, IT and, of course, innovation. Who cares about a brand new product line that can only get into market in two years time… when the firm’s very survival is at stake.

 

In my view innovation will be decimated. People working in innovation areas of companies will be redeployed, or let go. Innovation consulting shops will first explode in number, as recently departed corporate innovators hit the streets looking for consulting work. That will reduce fee levels, have more people competing for fewer jobs, and that will implode. The top innovation consulting firms will get hammered. Even if things are not grim to the extent of losing 50% of your revenue ,what happens in recessions is almost worse. The top 20% of a company’s revenue will vanish as other firms change their spending patterns. This amount often equates to the profit margin of the firm itself, so they slip into loss-making territory.

 

Now, all the research shows that companies who do best from a recession maintain their commitment levels to innovation. Unfortunately this describes the top 5% of companies. The other 95% of firms: they cut back.

 

My personal belief, and this is somewhat more aggressive in terms of prediction that most, is that we are looking at sustained levels of global depression. As a student of history, one can easily few the last few decades as an aberration of mankind’s existence. The world has always gone through low points, and many of these low points have been sustained over several years. Given the systematic nature of deleveraging within the current world economy (ever one real dollar supported twenty fake borrowed dollars), and the way that the world is now dramatically more interconnected than before, we are into a system wide contagion event, a potential meltdown in activity.

 

So, in this world scenario, where to the innovators?

 

Now, I would be positively delighted to be proved wrong in the next 12 – 18 months. I really, really would. The problem, as I see it, is that our world has been driven by rosy eyed predictions, and no one can face a system-wide meltdown event. It is a scenario that does not even come onto the radar. And yet, such denial of negative outcomes has hastened us to this position. Just yesterday I was reading a one-year old Wall Street Journal article on financial risk. Even the ‘gloomiest; of predictions did not come close to hitting today’s reality – in any area.

 

Therefore, I stand by my view, in spite of being an innovator and running the top company selling innovation software, Imaginatik. It will be brutal.

 

That being said, our firm is able to spin on a dime. The same toolset we have all been using for innovation can be used to support cost reductions and process improvements. And, given that the traditional way of solving these problems has been to throw people and consultants at the problem, now the budgets have gone, and the people are to follow, it provides the perfect opportunity for companies to do things differently. And in that, I sincerely hope that Imaginatik can help. We have, after all, produced $320 million in net benefits for our clients, according to published case studies, over the last 18 months just from cost reductions. And that ignores the benefits from innovation.

 

The world may prove to be a tough place, but the best innovators will simply refocus their efforts on doing what is important for the business. Innovation, after all, is the process of doing new things that deliver value (Imaginatik’s definition). Cost reduction is just another new thing we have to do.

 

For more information on Mark, please follow:

 

Blog: markturrell.wordpress.com

Twitter: http://twitter.com/mark_turrell

LinkedIn: www.linkedin.com/in/markturrell

Podcast: imaginatik.podbean.com/ 

Dopplr: http://www.dopplr.com/traveller/markturrell/public

Note: this post was inspired by a research project run by Chuck Frey at InnovationTools:

Mark, last week, I sent you a message asking you to share your thoughts on innovating in a recession. Renee Hopkins and I have received many fascinating responses – this will be an excellent report, one that I’m sure will be quite popular! I’ve decided to extend the deadline to Wednesday, Nov. 19th to give you a few more days to respond. The question, once again, is this: 

* What strategies should organizations utilize to maintain their innovation initiatives during the current global recession?

 

Best Regards,

 

Chuck Frey

Founder & Editor

InnovationTools

http://www.innovationtools.com

http://twitter.com/innovationtools

About these ads

4 Responses to “Innovating in a Recession? Time for Depression.”

  1. Mark – Well, amen. It’s either figure out a way to right the ship, or re-arrange the deck chairs. I’ll take a plan (or MANY plans) to right the ship, over just giving up any day. Absolutely agree that it’s not just about cost-cutting either. New revenue? Retaining higher levels of customers? Beefing up the capabilities of partner channels? Streamlining and measuring the effectiveness of marketing? Ah, the list goes on and on.

    Speaking of which – we should have lunch again some time soon. Interesting things afoot.

    Cheers,
    Dan

  2. Good idea, Dan – I am next in Boston the week of Dec 1st… now hang on… why aren’t you following me on Dopplr??

  3. Fascinating stuff although a little gloomy at the edges. I would recommend Amon Levav’s blog for a cure of optimism, for what it’s worth: http://visionarymarketing.com/_repository/mibdauphine/novdec2008/session-1-html/ictmarketing-one8.htm
    I don’t mean that optimists will issue better predictions mind you; merely pointing out that innovation can also be a means of finding new ways out of the crisis. There are several meanings to the word ‘innovation’
    http://visionarymarketing.wordpress.com/2006/03/

  4. I agree that innovation is the way out of a crisis. I am just being realistic on the number and proportion of companies that will a) realize this and b) be able to take action upon it.

    For example, I met the head of innovation at a company called Satyam at a conference in Stamford, CA in September. Great guy, great vision, a team of 50 people to drive innovation…

    but the company was run by a crook….
    … so what will happen to innovation at that company now.

    OK, so this is an extreme version. The problem is just facing up to the fact that even when innovation was important, with growing revenues and profits, few companies really invested in it and fewer did it properly. Why, therefore, in the midsts of a large-scale, multi-year recession, would the majority of companies start behaving BETTER than before? Not a chance. None. Sad but true (probably – this is the future we are taking about!).
    Thanks for the comment, Mark

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 2,175 other followers

%d bloggers like this: