Business and company executives should try to take advantage of downturns to plot a route for better times
Businesses are gearing up for an anticipated economic downturn, even though no one can predict with absolute certainty when or if one will occur. It seems obvious that our nearly decade-long explosion of economic expansion is about to come to an end.
For many firms, being ready entails taking a number of predictable actions, such as reducing resources, stopping long-term innovation expenditures, and refocusing on immediate concerns. But in a difficult economic climate, innovation is needed more than ever, not less. Innovation continues to be a crucial tool for firms to achieve their long-term strategic goals in both good and poor economic times. However, when the economy falters, it is crucial that businesses approach innovation strategically and deliberately because as times get tough, the margin for mistake shrinks. Companies may accomplish more with less and keep progressing if they have a strategic innovation plan in place. Businesses that prioritize innovation during a recession will discover that a limited environment can actually encourage inventiveness, which generates strong waves of long-term growth. Consider taking the following actions to make sure that your company’s innovation booms during the next economic downturn:
- Set the agenda for innovation. The most effective innovation initiatives always begin at the top. Throughout and after a slump, CEOs must lead the innovation agenda. CEOs should encourage management and teams to give priority to market-leading goods and services in line with the business plan rather than decreasing innovation resources in a downturn.
- In an economic downturn, businesses would be wise to prioritize investments in a way that goes beyond mere profitability and focuses on their primary goals. This is known as innovating with purpose. A study by the Economist Intelligence Unit found a clear link between creativity and purpose. Sixty-three percent of executives from three international industries thought that their company was more innovative and better equipped to disrupt or respond to disruption if it had a sense of purpose and aspiration beyond its daily commercial objective.
- Pay attention to “adjacency innovation.” Business leaders must learn how to work more efficiently during a recession, which necessitates new approaches to managing innovation. Companies can think about allocating resources to an “adjacency innovation,” which might be less risky but yet produce strong returns, rather than placing large bets on a single, radical innovation. To do this, key strengths must be used to expand outside the present business into an adjacent market. Examples include introducing an existing product to a new customer group or providing a new product to an existing consumer.
- Follow your customers’ lead. Unmet consumer wants are revealed by struggling economies, thus now is a good moment to look for chances to produce new goods or services. Utilize this period to pay close attention to the market, communicate with customers, and generate ideas and solutions where the market is speaking most strongly.
- Investigate new markets. Always cast your net where the fish are when the economy is in a downturn. Take the example of Groupon, whose platform was introduced in November 2008 and which enabled businesses to contact consumers with easily accessible promos and bargains. By capitalizing on a cultural and economic flashpoint, Groupon effectively created a new category by satisfying a need of both consumers and businesses. This led to one of the largest public offerings at the time.
- Boost partnerships. The concept is that you must learn to collaborate with others and give them a stake in your success if you want to expand your firm. A more collaborative approach to innovation is required during downturns. Partnerships with government agencies, suppliers, research facilities, universities, and even customers present excellent chances to split expenses, transfer risk, and pool resources.
- Close gaps in innovation. It’s time to do a critical analysis of your innovation system’s advantages and disadvantages. Close the capability gaps right away to enable project launch with minimal resources. When the recovery occurs, this work will pay off in terms of capacity, execution quality, and time to market.
Now is the time for businesses to unleash their inventiveness as the next recession is most certainly not far off. When choices are scarce, innovation thrives. In truth, history has shown that creativity actually arises out of necessity. Businesses that want to expand over the long run must innovate during and after a slump to grow bigger. Companies that survive and thrive during economic downturns are those that embrace innovation in its truest form.