The global economy is a quagmire and we are all sinking.
Daily we hear stories about companies downsizing, dramatically cutting costs and slashing their revenue projections. Aggressive growth strategies are replaced by more defensive strategies and many promising projects are cancelled.
But what will these companies do after the reorganizations are completed and daily business is all that remains? Essentially they are holding on to a branch to avoid sinking deeper into the economic quagmire, but it won’t help them to get out. And if they don’t do something, companies will see competitors climbing out of the pits while they remain stuck.
We say the time has come to focus on innovation. By now companies should have corporate cultures that are cost-focused and stricter requirements for return on investment should be in place. Building on this fundament, innovation needs to be quick, low-cost and potential return on investment should be identified early. It is also important to remember that not all innovations will be successes. Scott D. Anthony, author of The Innovator’s Guide to Growth: Putting Disruptive Innovation to Work, reminds us that companies should also focus on decreasing the cost of failures.
Based on the above criteria, we have come up with a few simple rules to improve innovation performance - which frankly should apply regardless of economic cycles, but are particularly in the spirit of the now. We think it is just what companies need to get out of the quagmire.
1. Prioritize ideas by costs and potential return on investment. Already at an early stage ideas should be evaluated for potential. Many times, low cost ideas are just as good as high cost ones – and they entail lower risks.
2. Accept that 80% is good enough. Those last 20% can be very costly and you can achieve more and reduce risks by spreading your resources on multiple innovation initiatives.
3. Use agile development techniques. You gain flexibility to make changes along the way without having to discard or make substantial changes to detailed product specifications.
4. Test your ideas on a user group. Testing need not be expensive. Especially for qualitative feedback, a small group tends to come up with many of the same comments a larger group would do. If customers are too expensive to get hold of, use internal user tests.
5. Increase pace of decisions. This does not mean making uninformed decisions, but advocates avoiding long decision-making rounds. Cancelling flawed projects early reduces costs and allows you to focus on the best ideas (Thanks to Scott for this one).
In the eyes of Joseph Schumpeter (1883-1950), the entrepreneur spirit is that which drives progress, and the actors that drive innovation and the economy are big companies which have the resources and capital to invest in research and development. If Schumpeter was still around, he too would likely have advocated that the way out of the economic crisis is through innovation. Food for thought, big companies.
