Innovation in a time of Recession

Next to my own ideas, I have also posted “innovation-in-a-recession” related questions in a number of professional forums and there are clearly multiple angles to this subject.

In general people agree that innovations can drive markets out of a recession. They require to address a consumer/ customer need in a new way or address an unmet demand, which actually can be related to the changing buying behaviour during a recession. This buying behaviour will be moving towards products required for day-to-day use, necessary replacements (e.g. in case something breaks down) or new needs because people change their routine.

In most of these cases consumers are now – more than ever – looking at the value being offered. In many cases this will relate to the costs of purchase & ownership. Therefor breakthrough innovation in terms of the cost of the products/ services should get focus, but also the way the products/services are being delivered, plays a major role. Therefor innovative business models which carry the least cost in them – e.g. via the internet - can flourish.

On the side of creating innovation there are a number of viewpoints as well. On one side budgets will be tight, but on the other side, the organisation and employees will be under pressure to come up with new ideas to help safe the business and protect their jobs. Having a strong purpose and direction as a business in these times will definately help. Maybe it is not a very nice example, but very powerful. One of the most breakthorugh innovation rich periods in the 20th century was in Germany around the 2nd world war. People were coming out of a very dark period for their country (after the first WO) and were working very hard on creating a new future. Under this pressure a lot of breakthrough technological, scientific and organisational innovation took place. Possibly in a more constructive and smaller scale this can be applied in our own environments.

With regard to organising and funding innovation within our business environments there are as well a number of viewpoints. Which innovations to focus on is a strategic question. Since this will be different per business, a general answer is difficult, but applying some common sense, we can identify a few directions. First of all the innovation should be addressing a clear consumer need, for which people are willing to spend the related costs. There should be a competitive advantage for the business compared to competition.

Another point to look at is how to bring the innovation to the consumer in a time of recession, especially when it is a real new area. Here we need to look at the value chains that are willing to support this. Some of my personal experience is that for instance traditional retail is at this moment focussing more at surviving by selling items which have already a high rotation.

Therefor if you want them to bring something new, you have to give them a good reason to list it. Therefor maybe this is also a good time to look at how to innovate the delivery model to the consumer by looking at lower cost supply chains and new sales channels (e.g. online).
In times of recession strong additional elements to look at in making choices between various options, can be in the direction on the cash flow required and pay back time of the investments. In certain cases the short term benefits are required to sustain the long term future of the business, but when there is a choice between similar options, the one that serves the long term future should be opted for. Also certain innovative areas will become more interesting because of new funding becoming available, e.g. government programs can be an influencer to change the innovative resource allocation in certain industries (just look at what is happening in the car industry).

A number of the discussions I have seen and had, addresses the point that a number of innovative areas will not be impacted that much because of the recession, simply because the need for them remains strong. For example people will continue to look after their health, do not stop caring about the environment and become more energy usage conscious (also because of
associated costs).

Since this is my first real post and I have no feeling yet if this is too long or too short, I leave it here and hope to get some feedback on the length and quality of the content – please give your feedback.