As the economy continues to tumble, it is tempting to cut back on your investments in innovation. But now is the perfect time to increase your innovation efforts. Here are seven creative ways that innovation can help you recession-proof your business.
1. Make Your Products/Services More Accessible
Successful companies are now shifting their emphasis away from increased performance and sophistication to increased accessibility and affordability. This helps you tap into an under-served market. Low cost and ultra-portable netbook computers are outselling more expensive models. The Nintendo Wii has sold more boxes than PlayStation and Xbox combined. To learn more about specific innovation strategies, read our articles on The Innovation Bell Curve.
2. Use Open Innovation to Reduce R&D Costs
Sometimes it can be less expensive to have others do your innovating for you. Organizations like InnoCentive enable you to define the “value” of a new idea and then post your request to a large community of expert solvers. This moves innovation from an unpredictable cost (infrastructure, the cost of researchers, and other hidden costs) to a predictable cost (the posting fee and reward). Other Open Innovation option include asking your customers what they want. Check out MyStarbucksIdea.com. Open Innovation is a perfect way to reduce costs while growing the business. Learn about my own Open Innovation experiences…and dilemmas.
3. Use Process Innovation to Reduce Operating Costs
Innovation is not just about new products or new business models. It can also be focused on ways of reducing operating costs. Use my 7Rs of process innovation to help make your processes more efficient and more effective. I have seen companies reduce costs by 60% while improving responsiveness to customers by as much as 90%. If you can increase service while increasing margins, you are sure to recession-proof your business. Download my 7Rs worksheet and improve your processes
4. Use Innovation to Match Supply and Demand
Sometimes you only want temporary measures to help you ride out tough times. I worked at Accenture, the large international management consulting firm, for 15 years. During my time there we went through three recessions. Each time the pattern was the same: the economy tanks, customers reduce spending on consulting, Accenture lays off employees, the economy picks up, Accenture scrambles to hire talent. During the 2001 dot-com bubble burst, they used a different approach. Instead of handing out pink slips, they offered a leave of absence for a period of time. The employee on sabbatical would get 20% of their salary (plus benefits) and would be assured a job upon their return. This helped match supply with demand, while keeping morale relatively high. Sometimes a creative solution can help you smooth the ups and downs of the economy.
5. Solve Your Customers’ Pain
Although customers have reduced spending on discretionary items, they may be willing to invest in products or services that eliminate their pains. Problem solvers are always in big demand. If their pain is the need for cost containment, how can you do it for them – and take a slice of the action? In my business, I get more requests for speeches on “recession proofing” than I do for those on general innovation. What pain do you solve? Or how can you make your customer aware of a pain that they may not have noticed? Learn more about why solving a pain is more powerful…during any economic condition. You may also be interested to learn why the ATM machine was headed for failure…until it was seen as solving a specific pain.
6. Fail Cheaply
If you are truly innovative, you will fail. If you don’t fail, you are playing it safe. Therefore, if you are going to fail, FAIL CHEAPLY. And no, this is not the same as failing fast. I am not talking about speed, I am addressing the cost to implement. To fail cheaply, you must embrace the “build it, try it, fix it” mentality. Build out your idea as a small experiment. Implement it. Learn from the experience. My Innovation Personality Poker was developed using this approach. I first created a simple spreadsheet to test for personalities. Next I wrote the words across the face of an ordinary deck of cards. Then I created home-made cards printed at FedEx Kinkos on card stock. Finally, when we knew it was perfect, we invested in designers and 500 decks of casino-quality poker cards. Eventually we “perfected” the words and process and printed 40,000 decks…and the commercially published book. Learn more about the “build it, try it, fix it” approach.
7. Before You Can Multiply, You Must First Learn to Divide
While in Asia, I heard a great expression, “Before You Can Multiply, You Must First Learn to Divide.” I now find myself using this saying nearly every day. The idea is that if you want to grow your business, you must learn to partner with others – and give them a slice (and a vested interest in YOUR success). This means you take a smaller slice of a bigger pie. With the economic downturn, this philosophy is even more appropriate. People are now hungry for new money making opportunities. When you help others make money, you make money. Read more about this powerful, yet simple concept.
BONUS: Use Innovation to Improve Your Suppliers’ Business
We often underestimate the value of our various business partners, and in particular the value of our suppliers. I once worked with a potato chip manufacturer. They were dependent on the quality of the potatoes grown by small, financial unstable growers. Instead of squeezing their suppliers, they helped the suppliers grow their business. They helped the growers buy equipment and fertilizer at reduced costs by leveraging the buying power of the large chip manufacturer. They gave them business loans at reduced rates. When the market gets tight, your suppliers may struggle more than you. But if you help them be successful, you might find you are more successful.
The Bottom Line: Use Innovation to Leapfrog the Competition
While others are tightening their belts, truly successful companies use the recession as a chance to leapfrog their competition. My favorite company, Koch Industries, increases their investments during difficult times. They know that if they focus on innovation while others are cutting costs, they will quickly catapult past everyone else. They must be doing something right. They have grown seven times faster than the S&P 500 for the past 40 years. This is a company that has proven it is recession proof. Innovation is a powerful tool that can help you ride out the tough times and position you for future growth. With the recession here, you need innovation now more than ever.
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