By: Chuck Frey
A few weeks ago, I asked you to share with me your strategies for maintaining or expanding their innovation initiatives in the current global economic downturn. Here’s what you had to say.
A few weeks ago, I asked you to share with me your strategies for maintaining or expanding their innovation initiatives in the current global economic downturn. Here’s what you had to say:
Based on my experience as well as conversations with global customers and executives, here are four suggestions that CEOs could implement to drive shareholder value in a recessionary economy:
Drive the innovation agenda: CEOs must be committed to setting and driving the innovation agenda as well as monitor success on an ongoing basis, especially during a slow economy. Admittedly, innovation is still a grassroots movement. Yet, successful innovation initiatives almost always start at the top. Look at Apple’s Steve Jobs. He drives his employees to innovate, rolls up his sleeves and launches a new product every year. At companies such as Unilever, BP and Samsung, innovation initiatives start out as small projects and expand as teams begin to replicate that success across the enterprise. Rather than slashing R&D budgets in a recessionary economy, CEOs should encourage management and teams to deliver market-leading products.
Encourage new product development and enhance existing products: Given most revenue-generating products are going to become obsolete, companies need to continue investing in new product development as well as reengineer existing products for new markets. In the academic world, the saying is ‘publish or perish’. In the manufacturing world, it’s “create or perish.” Leggett & Platt, a $6 billion manufacturer, launched the first folding box spring last year. This year, they debuted the world’s smartest bed that alleviates snoring, among other features. Though not a household name, Leggett & Platt understands the need to reinvent itself and continues to take steps through their “innovation redefined” initiative to create new products that will make people sit up and take notice.
While creating new products is critical to the bottom-line, so is reengineering existing products. Connecticut-based Velcro is a leader in traditional hook-and-loop fastener technology. Rather than simply cruising, Velcro is looking for ways re-invigorate its mature product lines to address the evolving needs of its existing customer-base and the new generation.
Invest in technology to drive repeatable innovation: The process of innovation should be sustainable not accidental, especially during a recession. Though the concept of sustainable innovation is emerging, best-in-class companies are 36 percent more likely to implement a predictable, repeatable innovation process, according to a recent Aberdeen Group report. Granted, innovation is an overused word and conjures up images of people sitting in a room, brainstorming on ‘hit or miss’ ideas. But to me, innovation is about generating breakthrough ideas or concepts that result in cutting-edge products. With the right technology, many companies have made innovation a repeatable process vs. that one time ‘aha’ moment. Companies do not have to reinvent the wheel, but rather they need to successfully leverage internal and external knowledge. Nestle, Pratt & Whitney Rocketdyne, Leggett & Platt and Schneider Electric are examples of companies that have invested in technology to help sustain the innovation process.
Track return on innovation closely: In a sluggish economy, CEOs have no room for error. They are pressed for funds and resources. Therefore investments in product innovation have to yield high returns. Innovation is about turning ideas and concepts into commercial, market leading products. CEOs have to be confident that ideas for product design and product development will yield results that meet customer demand, increase revenue growth and keep costs low. This means that almost every idea or concept has to become a reality, the first time.
CEOs can successfully navigate companies through a recession by encouraging product innovation, fostering generational transition and investing in technology that will translate ideas into commercial products, consistently. The result? Increased top-line growth and market capitalization, even in a recessionary economy.
— Mark Atkins, Invention Machine
In moments of economic slow down, innovation strategies and projects precisely need to be continued, for various reasons: they may help us to find solutions to the decline in orders, they may help to reduce internal costs, the company shows that innovation is not a daily hat you put on and off but belongs to its corporative culture, and people continue being motivated. What companies should certainly do is prioritize those projects for which a higher cost-efficiency is expected.
The current economic downturn is an opportunity to trigger those projects that help to reduce costs… (A recession is an excellent) time to carry out those internal innovation projects which help them to reduce their costs, both internally and those that involve their clients. Those projects need to include cost efficiency indicators in their metrics as a clear outcome.
A different way to manage innovation projects is NOT to redistribute development costs only to one particular new product or service, but redistribute them along our business value chain. This way, we reap greater value from them faster, across the enterprise.
As an example, let us start with ourselves. In SINERIA, we have an idea generation process and we offer a bonus to the best ideas, which get a budget to carry out the projects. Currently, due to less resources and less orders, we are filtering those projects that help us to reduce internal costs and to increase the cost-effectiveness of all our projects. One of the projects we have started is to assess a BI (business intelligence) tool linked to a time sheet and expense report interface. By using this external IT tool, we are not only contributing to higher transparency in project management and reporting, but we are also assessing a new tool which we may integrate into our portfolio of IT services.
The costs of this innovation project should not only be measured against the reduction of costs in internal project management and reporting, but against the development of a new business partnership.
— Laura Buguñá, SINERIA
We are viewing the (recessionary) sentiment as a marketing opportunity and are preparing some marketing materials that will say, in essence, “If your business is being hit by the economic downturn you need to improve your market position by introducing an effective innovation initiative.” We have seen an increase in our click-through rates on (our) Google (ads), which might indicate that organizations are beginning to think in that way!
— Patrick Harper-Smith, Project-Leaders.net
Recession is a word I don’t recognize because is the consequences of unsustainable economy. I don’t see a recession, I can’t analyze macro-economic indicators that way. I see recession as a natural cycle in certain activity area.
— Ricardo Andorinho, Justland
Do you have any strategies you’d like to share here? Please do so in the comments area below this blog post.