Why now is the perfect time to innovate.
When times are tough, it’s human instinct to concentrate on weathering the storm rather than innovating – but business leaders who hunker down could be making a huge mistake.
“Hunkering down is exactly the opposite of what companies should be doing during tough economic conditions,” says Vijay Govindarajan, Coxe Distinguished Professor at Dartmouth’s Tuck School of Business. “After a recession, there are new winners and new losers – the new winners are those who have invested in innovation during the recession; a downturn means assets are cheaper and talent is available at reasonable salaries.”
Separate work from Harvard Business Review suggests that in the past three recessions, businesses investing in innovation outperformed competitors by at least 10 per cent in sales and profits growth.
How, then, should a business commit to innovation in practice? “There is ‘big innovation’ such as major business model change, and ‘little innovation’, which is more focused on process and people; but either way, the best approach is often additive,” argues Faisal Hoque, an entrepreneur, bestselling author and, a contributor at the Swiss business school IMD. “Build on what you already have, leveraging new technologies and partnerships to move the organisation forward.”
As Hoque points out, innovation does not have to mean total reinvention. Rather, tools such as data analytics, cloud computing and, increasingly, generative artificial intelligence (AI), enable businesses to move iteratively. They can constantly try new approaches, measure the results, and double down on successful initiatives while dropping ideas that did not work out so well.
Some of those ideas will be customer facing, while others may be internal, with automation, for example, offering efficiency gains. But the key is to keep moving forward, argues Govindarajan. “Critically evaluate all your projects and stop the ones that have little future,” he says. “Companies have a hard time stopping things, but tough economic conditions provide the justification to shut down less promising initiatives, which releases cash flows for the next strategies.”
Freed from functional barriers, people are more engaged and empowered – and able to focus on challenges and opportunities that would otherwise have been beyond them. Connected organisations also find it easier to work with external partners, spreading risk and sharing ideas as they innovate. “Don’t be afraid to allow your employees to work differently,” adds Hoque. “If you let them, they will bring a fresh approach to your problems and opportunities.”
The bottom line is that there is every reason to be positive. C-suite leaders, after all, have been through difficult periods before – and seen the rebound. The dot.com crisis, for example, lasted 18 months but the recovery endured for seven years. That took companies through to the global financial crisis of 2008-09, which was in turn followed by nine years of growth.
Full Article @ Financial Times.