Move with your customers. Challenging economies expose unmet customer needs, making it a good time to identify opportunities for product or service development. Use this time to listen closely to the market, co-collaborate with customers and respond with ideation and development efforts where the market is speaking most loudly.
Economic downturns can shift customer needs and buying habits, which may or may not be permanent post-economic recovery. As a result, relying on self-reported data garnered by traditional consumer research may not provide enough insight. Instead, make sure your innovation strategy includes building and testing scenarios that elicit unstated and as-yet-unrecognized customer needs in the near and long terms. Use the insights to shift investments to projects that help customers address their pain points, and position your offerings to satisfy their needs in the upturn. In short, make sure your company is a problem solver in tough times.
Explore new markets. When casting your net in down cycles, remember to fish where the fish are. Consider the case of Groupon which launched its platform in November 2008 that allowed companies to reach consumers with easily accessed promotions and deals. Successfully filling a need for both consumers and businesses, Groupon effectively created a new category by seizing on a cultural and economic flashpoint, which resulted in one of the largest public offerings at the time.
Apply process innovation to reduce costs. Don’t limit your innovation thinking to new products or business models. Recessionary cycles can also be a good time to focus innovation efforts on reducing operating costs. Process innovation can improve production or delivery methods or result in significant changes in techniques, equipment and software. Increasing service while increasing margins can help you prepare for post-recession growth.
Fail cheaply. It is a given that companies that are truly innovative will have failures. Those who don’t are simply playing it safe. So embrace failure as part of the process, just make sure you do it as cheaply as possible. During a downturn, it’s especially critical to embrace the “build it, try it and fix it” mentality.
Expand partnerships. In Asia, they use a great expression: “Before you can multiply, you must first learn to divide.” The idea is that if you want to grow your business, you must learn to partner with others and give them a vested interest in your success. Downturns demand a more collaborative approach to innovation. Partnerships with universities, innovation partners, suppliers, research labs, governments and even customers offer good opportunities to share costs, spread risk and combine resources.
Invest in technology to drive repeatable innovation. The innovation process should be sustainable, not accidental, especially during a downturn. Using the right technology, companies can ensure their innovation is a repeatable process. Aggressively scout technology and develop a broader partner and supplier network to identify and vet opportunities. Consider using short-term or ad-hoc teams to scan opportunities across your business ecosystem.
Closely track Return on Innovation. In a sluggish economy, there’s less room for error. Measuring closely the return on innovation efforts is critical to ensure any investments yield results that meet customer demand.
Address innovation gaps. Now is the time to undertake a sober assessment of the strengths and weaknesses of your innovation system. Fix the capability gaps now so you can launch projects with fewer resources. When the upturn comes, this work will also pay dividends in terms of speed to market, quality of execution and capacity.
With the next economic downturn likely around the corner, now is the time for companies to unleash their creativity. Innovation thrives in the face of limited options. In fact, history has proven that necessity truly is the mother of innovation. Businesses intent on achieving long-term growth objectives need to build it bigger by innovating in and through a downturn. Those companies that emerge from recessionary cycles stronger and ahead of their competition understand the true value of innovation. Use this time to widen the gap.