In the precarious economic climate, a global recession is an ever-present danger. However, by developing an innovation strategy that anticipates a downturn, you can help your enterprise weather the storm and even uncover lucrative ways to gain a competitive edge. Read on to discover how you can transform a recession into a rejuvenation.
Given the devastating impact of the 2007-08 financial crisis, it’s little wonder that companies worldwide are sensitive to omens of a new “great recession”. It’s estimated that a loss of more than $2 trillion in world-wide economic growth occurred between the second quarter of 2008 and the first quarter of 2009. In the U.S alone during the initial ripples of the crisis, the economy lost more than 2.5 million jobs and saw the fall of 25 federally-insured banks.
While the jury is still out on whether 2020 will be a recession year, it’s guaranteed to bring plenty of challenges for large organizations across every industry. In the interests of futureproofing your enterprise, it’s important to ensure your innovation strategy can accommodate the privations of turbulent economic times. As we saw in 2019, the business landscape is sufficiently volatile and disruptive even when the market is relatively stable. If your company’s innovation strategy isn’t propelling you forward in these conditions, it likely won’t be able to keep you afloat during an economic downturn.
But don’t panic just yet. By analyzing how you can marshal existing assets to drive creativity, engage employees, and keep innovations customer-centric, you can help your company emerge from a recession stronger than ever.
“Improvise, adapt, and overcome” is a mantra coined by the U.S Marine Corps and popularized by survivalist extraordinaire Bear Grylls. Businesses looking to discover how to beat a recession with idea management and continuous improvement would also do well to adopt it. In this article, we’ll cover five field-proven strategies your business can adopt to arm your innovation strategy for ‘recession conditions’ – empowering you to transform a catastrophe into a catalyst from growth.
1. Keep Calm with Kaizen: Making the Most of What You Have
Plato once said, “necessity is the mother of invention.” This holds particularly true when it comes to figuring out how to beat a recession with continuous improvement. You’ll need to undertake a thorough analysis of your internal processes, see where wastage can be eliminated, and creatively use essential assets to streamline your workflows.
So, what’s the most efficient way to do this? Although there are a variety of methodologies, “Kaizen” is particularly useful. This is because the process involves systematically assessing a workflow or model and then making cooperative efforts to adjust it to generate maximum productivity. The simple, scalable, and inclusive nature of “Kaizen” makes it perfect for recession conditions, as it can be actioned rapidly to great effect.
Fittingly, the Kaizen system emerged in Japan during the immediate post-war period – a time when the country was recovering from economic and infrastructural desolation. Translated as “change for the better”, Kaizen is credited as playing a significant role in Japan’s economic miracle – which saw the country rise from the ashes, reorganize its corporations, and implement American production techniques to become the word’s second largest developed economy.
The Kaizen approach is divided into five ‘S’s’:
1. Sort: Eliminate unnecessary tools or components within a workflow
2. Set in Order: See how the new ‘stripped-down’ workflow can be arranged for greater efficiency
3. Sweep: Make certain that all elements necessary to facilitate the workflow are ‘waste-free’ and primed to operate in the long term
4. Standardize: Ensure all employees are aware of the new workflow and their obligations within it
5. Sustain: Continuously review the workflow and scale as needed
This system offers an efficient, repeatable way to analyze what resources you can best leverage to drive innovation. If used strategically, it can help drastically reduce external R&D costs, as well as increase your company savings – which could make all the difference during a financial crisis. Even during stable economic times, it’s worth implementing a Kaizen system to prime your continuous improvement strategy for long-term business success.
2. Amp Up the Value: Balancing Austerity with Creativity
When most business leaders see a recession on the horizon, their knee-jerk reaction is to ‘batten down the hatches’ and brace for disaster by cutting costs and reducing expenses. While this is often necessary, it should not be the only course taken – particularly as your competitors are likely doing exactly the same thing. To gain that all-important edge, it’s advisable to survey the marketplace – through crowdsourcing projects, portfolio scouting campaigns, etc. – to see where disruptive innovation efforts could best be concentrated.
Luxury goods manufacturer Hermès serves as a great example of a company that innovated daringly during the recession – instead of cutting prices – and achieved major dividends by doing so. In 2010 – a time when many fashion companies were still reeling from the economic crisis – Hermès opened its first and only men’s store on Madison Avenue.
Though the store emphasised the fundamentals that had always been synonymous with the brand – expensive, high-quality products and apparel – it did so in a striking new way that appealed to recession demographics. Men proved willing to spend more on big-brand items that would last them a lifetime, rather than seasonal selections.
It’s important to remember that although a large-scale, daring innovation project has the potential to give your company even more disruptive clout during a recession, you also run the risk of falling further should it miss the mark. As such, you should conduct a thorough risk analysis of all new innovation projects before proceeding. This will help you keep threats to your ROI as low as possible.
3. Muster Morale: Maintaining Employee Confidence in Your Mission
Once news of a recession hits, employee job loss anxiety will inevitably follow in its wake. Even more disturbingly, employees may be made hypersensitive to signs that your company won’t survive the crisis, and thus look to leave what they perceive to be a sinking ship.
Establishing a culture that encourages innovation, and rewards intrapreneurship, is a powerful way to counteract this effect. It will let your employees know that their contributions are valued, and also show that the company is actively responding to the crisis with creative solutions – rather than simply ‘trimming the fat’ or rolling over to accept defeat.
A study undertaken by social organization ‘Engage for Success’ found that engaged and motivated employees are 59% more likely to contribute towards innovation. In addition, companies with high employee engagement rates have a 40% lower turnover rate than organizations with low engagement. It seems clear then that, over the course of a recession, companies should do all they can to boost engagement levels in order to maintain the necessary innovative output and retain core talent.
Here are a few ways you can improve employee morale and encourage greater participation in innovation during a recession:
1. Designate Innovation Ambassadors: Choose one or several senior members of staff (C-suite executives, members of the Board of Directors, etc.) to champion the innovation initiative. These ‘Innovation Ambassadors’ should lend their authority to convey to all employees how the project will help the company stay afloat. This will help reinforce that innovation is a vital activity, and not something frivolous.
2. Build the Hype: It’s important to sustain constant communication around new projects by developing ‘innovation narratives’ You could do this by creating a newsletter showcasing a ‘performer of the week’ or an outstanding story associated with a project. In addition, you could send out periodic emails updating staff on new developments, or even launch “teaser” campaigns for upcoming projects. By of new innovation projects, employees are likely to feel more positive about contributing.
3. Cultivate Collaboration: This could include enabling employees to comment on new initiatives online or allowing them to ‘upvote’ ideas they think will best benefit the company. By encouraging greater interaction, you can also help break down the departmental silos that can stifle innovation.
4. Recognize the Big Achievers: To sustain morale, it’s vital to give employees something to aim for. This could be a simple acknowledgement of their talents, or substantial real-world prizes. For example, you could highlight an individual or team that created a lucrative idea on the company newsletter, or launch competitions to uncover creative insights.
The collective intelligence of your workers is one of the most valuable assets at your disposal during an economic downturn. By combining the four approaches outlined above, you can retain the talent and expertise that could help keep your enterprise viable over the course of a recession.
4. Intensify Your Impact: Keeping Innovation Customer-Centric
When a recession hits, consumers tend to be far less willing to open their wallets. If you’re innovating to develop new products or services for a hyper-competitive marketplace, it’s vital that they perfectly align with customer needs. Although customer-centric innovation is also pivotal in economic boom times, during a recession it could spell the difference between business success or failure.
One of the most effective ways to continuously align your strategy with the requirements of your customers is to involve them directly within your innovation pipeline through an open innovation campaign. This could involve approaching your customers – via dedicated portals, surveys, competitions, and more – to crowdsource insights which can improve your offering.
In addition to opening a wellspring of growth-driving ideas, open innovation lets your customers know that you care about them – thus promoting the kind of loyalty that can be extremely useful to your company throughout this critical time.
An particularly relevant example of a company leveraging open innovation to thrive in the face of adversity is provided by Starbucks. During the 2008 financial meltdown, the coffee shop giant launched its “My Starbucks Idea” platform. This provided customers with a secure online environment in which they could post suggestions for enhancing virtually all aspects of the Starbucks experience – from new products, to store layout improvements, to charitable projects.
Matthew Guiste, Director of Global Social Media at Starbucks, discusses how the “My Starbucks Idea” program helped the company leverage open innovation to combat the effects of the 2008 financial meltdown.
The initiative generated more than 70,000 ideas in the first year alone, and over a decade later, the “My Starbucks Idea” platform continues to be used by the company to cultivate invaluable customer interactions.
5. Scout the Landscape: Pinpointing Tech and M&A Opportunities
During a recession, sustaining innovation via a repeatable, growth-generating process is more crucial than ever. To gain support for overcoming the obstacles this critical period can present , it’s important to scout out new commercial opportunities – whether they come in the form of technology, talent, IP, or start-ups as a whole. Reinforcing your innovation processes by harnessing external talent could give you that all-important competitive edge, particularly as other businesses are likely to be more insular at this time.
While a recession is underway, it’s likely that the best deals for securing new technology, startup investments, and M&A opportunities will arise. In fact, according to a study by BCG, M&As that take place during a financial downturn have a higher chance of creating value for shareholders than they do in favourable conditions – long-term returns generally exceeding 50%.
A 2019 study by BCG found that M&A deals made in weak economies tend to outperform those made in strong ones significantly.
As we have seen, adaptivity is an essential attribute your company must possess to innovate effectively during a recession. By aggressively scouting for external talent and technological capabilities, you can infuse your innovation strategy with the flexibility needed to overcome the biggest challenges the crisis can throw at you.
Survive & Flourish: How to Beat a Recession with Qmarkets’ Innovation Management Software
Now that we’ve covered why each of these strategies can help safeguard your company during a recession, the next question to ask is “how can they be leveraged?” This is where Qmarkets comes to the fore.
Qmarkets offers a comprehensive suite of collective intelligence platforms that can enable you to concentrate innovation efforts in a secure, engaging, and easily configurable environment. Although each of these platforms can serve as a powerful weapon in your recession-time arsenal, they are equally well suited to help your enterprise amplify profits in favourable economic conditions.
Gain the strategic perspective needed to promote continuous improvement, leverage Kaizen principles , and refine your workflows
Qmarkets’ M&A and tech scouting tool allows you to pinpoint lucrative opportunities, and manage the acquisition of valuable assets
It’s said that no battle plan survives first contact with the enemy. In the same way, no innovation strategy can totally accommodate the market uncertainties, fluctuations, and knock-on effects that a recession will bring about. However, by incorporating these five strategies into your contingency plans – and having an innovation management platform from which to launch them – you can embrace the unknown with confidence. Remember, the one who dares wins…
To discover how you can leverage innovation management to futureproof your enterprise, don’t hesitate to contact us today!