During periods of recession, the natural course of action for companies is to cut costs and focus on sweating existing performing revenue lines. During these times, Innovation efforts are seen as unnecessary expenses that can be curtailed.
Is this wrong or right?
This is one of the decisive times you know the strategic importance of innovation in the corporate strategy of the business.
There are basically two camps on this question. One camp believes that innovations are not strategic but tactical. To the followers in this camp, innovation projects should only be entertained when a company has surplus funds and should be curtailed when funds are tight. In fact, they are wasteful in recessionary times.
On the other hand, the other camp sees innovation as strategic to the growth and survival of a business. Some fanatics in this camp say in fact, companies should redouble their efforts during these times. An example is Kenneth Chenault, the CEO of American Express. He was once quoted in Fortune saying, “A difficult economic environment argues for the need to innovate more, not to pull back.”
“Innovation does not stop during slowdowns. Nor should you! Innovation attracts customers. … We are not wavering.” —Arvind Sodhani, Intel
I belong to the camp that sees innovation is central to a business’ success and it should be strategic, not tactical.
Now as to the issue of innovating during recession, I believe the following:
- Innovation must continue but companies must be thoughtful about the approach because the margin for error decreases as times get tough;
- The introduction of new products and services helps to remain competitive in recessionary times and that advantage must be sustained;
- Companies should be very ruthless at pruning innovation projects. If there are innovation projects that have been ongoing for a long time without real progress, kill them. This is not the time to be sentimental.
For me, the issue is not whether we should innovate in a recession, but how we can do it most effectively
What do you think? Which camp do you belong to?
This article first appeared on Innovation Village