Four Power Moves to Turn Economic Downturns into Innovation Uptrends
During an economic downturn, it’s hard to think outside the bucks – let alone the box. We often jump to cost-cutting in an effort to preserve profits and cash flow. The logic is simple: we need to stay afloat. As a result, we focus internally, at the expense of forward-looking innovation. While these moves may make sense in the short-run, a big risk nevertheless exists – that as the downturn shifts to an upturn, our myopic focus will blind us to new opportunities.
As Apple has proven to the world, a robust innovation pipeline is the key to success, regardless of the economic environment. Apple began its stunning transformation with the iPod in 2001, during the darkest days after the Internet bubble burst. And its iPad was introduced during the 2008 downturn. But of course not all of our organizations are as flush with cash as Apple, which gives the company the luxury to invest in creating the future while managing through the uncertainties of the present.
While many leaders invest in innovation when times are good, it’s valuable to learn lessons from the lean times and leverage them to help us move forward, regardless of the economic environment. Here’s how to innovate in an economic downturn, which savvy entrepreneurs and business leaders do much of the time regardless, since if they don’t, they will simply run out of money:
Continue the Lean Research
In a downturn, many companies pull back on formal market research only to go back to traditional tools like focus groups and qualitative surveys when finances pick up again. Smart companies however, respond to leaner budgets by deploying non-traditional methods that are both cheaper and tend to engage customers in creative new ways. For example, Sealed Air (makers of bubble wrap) profiles and uses their own employees for gaining quick feedback and input on early-stage ideas. McDonald’s created a global casting call that asked consumers to identify “Why I’m lovin’ it.” Companies like these keep their cost-conscious creative market juices flowing regardless of the economic climate.
Keep Prioritizing the “Wow”
Customers always have unmet needs, but in a downturn it’s essential to prioritize them so we can “wow” customers where it really matters. This remains true in an upturn, especially as we ramp up again since customers’ priorities and mindsets themselves may have fundamentally changed due to the economic circumstances. Capital One bank, for example, recently launched a new credit card called “Venture” that is quickly being recognized as the best “travel” credit card in the market – and their 100,000 point sign-up bonus that immediately translates into a $1000 credit toward any travel-related expenditures is making a big splash with credit-card weary consumers.
Go Bargain Hunting
In a downturn, good deals can be found in the form of technology licensing and acquisitions. Struggling start-ups or mature businesses with limited cash flow are often ripe for growth-focused partnerships and fire sales. Just like we need to be the first in line when Nordstrom opens the doors at its half-yearly sale if we want the best selection at the best prices, when the economy shifts to an upturn, we need to quickly scope out the best partnerships and acquisitions before others swoop in on them. Facebook’s recent acquisition of the photo-sharing service Instagram might not have been at a bargain-basement price, but it gave Facebook a blossoming new technology before its rival Google could get its own hands on it.
Stay Externally Focused
“Open Innovation” is all about tapping into resources, knowledge, and technology from outside the company. During a downturn, forward-looking companies that still want to support innovation seek outside resources – since it’s often considered too costly to conduct primary research and develop everything in-house. Kimberly-Clark launched a program called HuggiesMomInspired where the company solicits and provides financial grants to “mompreneurs” who have developed a unique product or service (including the right to partner or acquire their inventions). Keeping this type of mindset into an economic upturn ensures that we remain limber, continue to source the best external resources, and mitigate the risks of the next downturn.
While most leaders and companies would prefer to avoid downturns (unless, of course, they’re in the outplacement business!), economic lows and highs are a reality of business, and life. So rather than forget about the pain and move on, all of us have an opportunity to learn and remember personal lessons from the hard times. Scarcity and discipline force leaders and companies to do and try new things they wouldn’t have otherwise done in better economic conditions. The trick is to learn valuable lessons from this forced ingenuity, and use them to make the good times even better.
If you understand the value of learning with and from other like-minded entrepreneurs, consider attending an Innovators Alliance event. Innovators Alliance is Canada’s most valued ‘idea ecosystem’ for entrepreneurs, developed by entrepreneurs.
Join us in-person or virtually to explore a fit for you and your business. You’ll meet other business innovators, share knowledge about handling business challenges, and discuss solutions in an atmosphere of confidentiality, respect, and mutual support.
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