Tag Archives: recession

Innovating in a Downturn

Innovating in a Downturn

GUEST POST from Geoffrey A. Moore

Downturns are wake-up calls. They ask us to sharpen our focus and be more disciplined in our allocation of resources. It’s a tough-love regimen that can make our enterprises more healthy as long as we commit to the program.

There are three ways to get a return on innovation, each fit for a different purpose, as follows:

1. Differentiation

Differentiation is key for acquiring new customers. Your goal is to overcome the inertia of the status quo, and to do so, you must make an offer that is sufficiently disruptive that a prospect will come over to your side. Slightly better doesn’t cut it. You need to focus on one vector of innovation that is lights-out superior and delivers a value proposition others cannot match. Then you need to marry your offering to a customer challenge that is sufficiently urgent and important to require immediate attention, downturn or not, creating a whole product that fulfills a compelling reason to buy. That in hand, you need to rotate your marketing and sales coverage to play most of your games on this chosen turf. None of this requires heroics, but all of it goes against whatever inertial momentum inside your own enterprise remains from a decade or more of leveraging economic tailwinds.

2. Neutralization

Neutralization is key to both defending, or even expanding, your customer base when a challenger throws their hat in the ring. They are making the disruptive offer, and your goal is to get to good enough, fast enough. This allows your customer base to reject the challenger offer, good as it may be, because in the greater scheme of things, with your other value add, plus your good-enough response, it is safer and more sensible to stick with you. The key here is speed. Innovation teams want to have the best offer in the market, but there is no time for that. It is a hard ask for them to prioritize good enough, but any delay leaves your core business exposed. On the other hand, if your offer really is good enough, your account teams can pitch a consolidation offering to the customer base which can replace one or more of their current point-product vendors via a suite offering from you. Done well, you can grow share of wallet share in a downturn, which is by far the most profitable path to take.

3. Optimization

Optimization is key to maintaining viability in a downturn. Revenues are likely down, which means operating expenses must follow suit. This is particularly important in a period of rising interest rates where taking on additional debt is truly dangerous. Done well, optimization not only saves money and frees up resources to invest in differentiation or neutralization, but it also improves the customer experience by streamlining the processes that underpin the core of your business. The key is to combine the value disciplines of operational excellence and customer intimacy, focusing them on the processes that are unnecessarily slow, complex, or onerous. Again, the challenge is to overcome the lulling force of inertia. Change is never welcome, as there is a J-curve in every learning curve, and in a downturn, people are fearful of losing any ground even temporarily.

One Final Point

These three paths of innovation do not blend. Combining any two will dilute the impact of both. This leads to waste at a time when return on investment is crucial. You can run the playbooks in parallel, but you must not let them merge.

That’s what I think. What do you think?

Image Credit: Unsplash

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Keep Your Innovation Nerve

Keep Your Innovation NerveIt is much easier to lose your nerve than it is to regain it, so better not to lose it in the first place. I have lost my nerve before and made decisions I regretted for a long time after they were made. Acting out of fear leads to poor decision making and a lack of leverage that, in turn, leads to unfavorable outcomes. That is why you must maintain your nerve and focus on the actions you need to take to create positive change, rather than allowing yourself to be overtaken by fear. Fear is one of those emotions that grows to fill the space.

When this downturn began, I had a client that wanted to extend our contract at half the previous rate in order to cut costs. Without any other projects in hand it would have been very easy to take their offer and hope that something better would come along. It’s much harder to walk away from guaranteed income and focus on winning new clients during the biggest downturn in a generation, but I did. The outcome?

Not losing my nerve, refusing this offer, and fully dedicating myself to revitalizing my business led to:

  1. Signing my first two clients outside the United States
  2. Signing a top literary agent to represent my book project and John Wiley & Sons to publish it (the five-star Stoking Your Innovation Bonfire)
  3. Building upon my book Stoking Your Innovation Bonfire by creating the Nine Innovation Roles Diagnostic Tool to help companies improve their innovation team success
  4. Becoming a popular innovation keynote speaker and thought leader
  5. My personal innovation blog expanding to become the leading innovation blog on the web – Blogging Innovation – with more than 15 contributing authors and upwards of 200,000 monthly page views
  6. Blogging Innovation becoming the foundation for Innovation Excellence, the world’s most popular innovation web site – a Top 1% site that now regularly generates 800,000+ monthly page views (before it was sold in early 2020)
  7. Launching a new business focused on helping b2b companies increase their inbound sales leads and revenue through execution of customer journey research and creation of an effective b2b pull marketing strategy that includes the use of my proprietary single content input, multiple content output methodology

So before you lose your nerve and start asking yourself all those questions about what could go wrong, focus instead on asking yourself about the actions you could take now to make sure that things go right.

Are you going to be nervous in the downturn, or nervy? If you act fearful, your clients will be afraid to do business with you, but if you’re confident that you will do great things, then your clients will want to do great things with you.

Build a Common Language of Innovation

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Innovating Through Downturns

Innovating Through DownturnsWhile most individuals and organizations natural reaction to an economic downturn is fear and retrenchment, they also present a time of great opportunity.

Where would Microsoft be if they hadn’t continued investing through the downturn of the early 90’s?

  • Microsoft may never have finished the hugely successful Windows 95.

Where would Apple be if they hadn’t continued investing through the technology crash of 2001-2003?

  • Apple may never have fully realized the promise of the iPod and subsequent iPhone.

  • The unemployment rate increases (more available workers)
  • Interest rates drop (lower cost of capital)
  • People become fearful of losing their jobs making it easier to recruit from companies reducing or eliminating their innovation investments (increased labor mobility)
  • People are more open to moving if a spouse’s job is eliminated or at risk (increased labor mobility)
  • When a recession arrives, it is easier to acquire tax breaks or other incentives for expansion, new sites, etc. (lower investment costs)

So, if companies have positive cash flows or significant amounts of cash on their balance sheet, or promising ideas to invest in, then there is no better time to invest. Companies with the courage and financial capability to invest in innovation through a downturn, absolutely should.

In addition to all of the other benefits, there is no better opportunity to achieve competitive separation through continued investment in innovation.

It does, however, take a strong CEO and steady board to have the courage and conviction to make such an investment. Innovation is not a perfect science and requires a tolerance for failure and a long-term commitment.

In today’s short-term Wall Street quarterly profit-driven corporate reality, investors’ short-term outlook may be the biggest impediment of all. But, smart organizations will find strategic solutions to overcome this impediment.

Organizations should take the following strategic actions to maintain or expand their innovation initiatives, despite the current global economic downturn:

  1. Secure the leadership flexibility capable of continuing to invest in innovation despite financial pressures
  2. Identify resources that you would like to have had access to during good times, that you might now have access to such as:
    • Labor in scarce specialties
    • Affordable capital
    • Scarce real estate

  3. Increase competitive monitoring to identify opportunities that may be created in areas where the competition reduces previous innovation investment
  4. Increase customer research to identify opportunities to refine your ability to deliver products and services that deliver increased customer value, ideally at lower cost
  5. Improve your innovation processes to improve your ability to innovate more quickly and effectively than your competition
  6. Improve your organizational agility to increase its flexibility to adapt to changes in market conditions caused by the downturn and to shift resources efficiently and with increased speed

Organizations that take these necessary strategic actions, will come out the other side stronger than the competition, stronger than ever before, and create opportunities to preserve or attain market leadership.

Happy innovating!

Build a Common Language of Innovation

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