Innovate During Uncertain Period

Now that the U.S. economy is facing a major financial challenge to keep recession at bay, small-scale businesses and enterprises must remain vigilant in recognizing flicker opportunities and obstacles for growth. In today's interconnected world, it is impractical for companies to suspend their innovation initiatives until the worst of the storm blows over. Doing so would put them at risk of falling well behind the curve when the economy recovers from the downturn. This is not the time to lay down in the couch while the business is losing precious ground to competitors who found creative ways to keep their establishments moving during the darkest days.

Stock market players and investment strategists were one in saying that the most significant impact of the Standard & Poor’s downgrading the U.S. is that it adds uncertainty to an already sluggish economy and making recovery a little bit longer than usual.

However, they offer some very powerful themes that could dampen the impact of the expected recession. While others are tightening their belts, truly successful companies use the recession as a chance to leapfrog their competition. Some of these innovative ideas are found below:

Start scenario planning now. Forecast two to three years out and evaluate the likely changes and outcomes from the recession. This will help identify new ideas and opportunities.

Redouble the focus on customer needs. Customers always have problems to solve, even in a downturn. The recession itself is eliminating some jobs customers previously needed to get done, while at the same time creating new ones. At the very least, the current economic conditions are wreaking havoc on the trade-offs people make when they consider “hiring” a product or service to get a job done, with convenience now factoring lower than cost for many customers. Invest time learning how your key customers’ priorities have changed, and quickly realign your business models to meet their needs. Rethink your business starting with the customer, and work backward from there. How can you eliminate their pain? How can you help them to contain their costs?

Strengthen the positioning of products and services using marketing innovation. Customers need the assurance that they are hiring the best possible supplier to meet their needs. Are the products and services your company is offering differentiated enough so that customers can see the advantages they offer? Make sure that the personnel handling customer service clearly understands how key customers determine value, and your products, services and marketing with that value. Focus on key customers and how their needs have evolved, but don’t neglect markets complementary to the ones your company serve. As competitors pull out, there may be new opportunities there, too.

Prune the innovation portfolio. Get rid of some of the riskier, longer-term, or overly broad programs, and redeploy the funds to support more promising initiatives with shorter time horizons. Shut down the least promising ideas now, and focus on those with the greatest potential. Many companies that claim to have no resources actually have plenty of resources, but they are tied up in the wrong activities and projects.

Look for opportunities to inexpensively test new ideas. Fail fast and cheaply. "Build, test, and learn – cheaply" is the mantra that many experts suggest that should be followed.

Embrace open-source innovation. Look for opportunities beyond your firm’s walls to continue R&D, but at a lower cost and lower risk. This can be done by sourcing R&D talent from low-cost countries such as China, Philippines, and Eastern Europe, or using services like InnoCentive that enables submission of ideas to a large community of expert problem solvers. Partnering with other firms who provide complementary products and services is another way to share costs and risks, and maintain theR&D momentum through the downturn.

Look for creative ways to extend your current products. Consider adding value-added services to products, and brainstorm ways to provide new customer experiences. Think in terms of other uses for existing products. If customers know that the products provide greater utility than those from competitors, they will be more likely to patronize the former. Also, look for incremental improvements to products that can significantly increase their value, at a minimal additional cost. Finally, take a fresh look at some of the incremental improvements or R&D projects that may have been shelved before the downturn because the timing wasn't right; some of them may do a great job of meeting customers' current needs.

Take a fresh look at the supplier relationships. Many companies habitually undervalue their suppliers. Chances are, suppliers can improve the efficiency of collaboration, logistics, and other elements of the supply chain. Strengthening these relationships may help a company recover faster when the market upturn comes. Brainstorm other potential partnerships that could increase the value of a product to key customers.

Conduct a disruptive threat assessment. There is a need to identify any emerging competitors who may see the firm's current weakness as an opportunity to advance. Remember Clayton Christensen’s advice in The Innovator’s Solution: Incumbents tend to ignore new entrants because their products and business models are too basic to be taken seriously. But many incumbents are already providing products and services that have already "overshot" the needs of their core customers, who may be looking for more basic, inexpensive options during the recession. Don't just think about innovation in terms of products, services, and business models. Why not spend some time brainstorming with a cross-functional team on how to identify and reduce areas of waste, which can uncover huge opportunities for cost savings?