Can you afford to innovate now?

During difficult economic times,  many ask, "can't innovation wait?" It seems a reasonable question - companies are facing catastrophic losses, reduction in demand for their products and services, and uncertainty in debt markets, legislation, and fuel prices.  Why engage in the risky practice of innovation - or change what you are doing - when there is so much danger, uncertainty and change in the world around you?

Isn't it better just to hold on and wait for this storm to pass?

No.

Consider the following list of companies:

General Electric

Hewlett-Packard

Jim Henson Company (the Muppets)

Hyatt Corporation

Fed Ex

Microsoft

Apple

CNN

What do they have in common?  

When they began they all challenged the accepted business model of their time.  They were all innovators. 

They also all started during recessions. 

General Electric created entire industries that didn't exist before - even though it started during the financial panic of 1873.  Hewlett-Packard started during the great depression, but created technology that helped to win wars and build entire industries.  During a recession in the late fifties, Jim Henson transformed puppetry and in the process created a massive global entertainment platform while Hyatt Hotels  began to build a global portfolio of hotels.  Microsoft and Apple were started during a time (the 1970's) when multiple recessions had convinced most experts that American business was no longer able to grow. Fortunately, those experts were wrong - in great part, thanks to the innovations of personal computers and the Internet.

How is that possible?

There are many reasons for a recession to happen, but whenever an economy is in one, the rules for success change dramatically.  Capital becomes scarce, raw materials unreliable, customers reluctant to buy.  What was easy before suddenly becomes more complicated.  Products that everyone had to have at any price before, suddenly lose their value.  But as long as there are still people living their lives, there are ways to create something they need, want and will pay for - it just might be a little different than it was before.

As an example, during the year-long recession in 2008, innovative on-line retailer Amazon had a 28% increase in net income. At the same time, retailers that did not innovate such as Circuit City are facing diminished market share, lost sales and even bankruptcy.

Companies that perceive and understand the new rules in a recession are able to innovate and thrive, while those that continue as they did before risk losing everything.  

Most people's natural inclination is to continue doing what they did before - even when it doesn't work as well as it used to.  Innovators change what they are doing, how they are doing it and even why they are doing it in order to succeed in a new environment.

Strangely then, the most dangerous strategy is to avoid innovation during a downturn.

It's times like these that the imperative for every company, every leader, every manager must be to challenge all assumptions based on a rising market.  Every process, every service, every product must be looked at from a fresh perspective - and changed to fit the new reality of a down market.

In a recession, can you afford not to innovate?