There is now a bounty on the head of the next person who uses the phrase, “in these turbulent economic times.” The news is awash in stress–inducing stories of the state of the world economy, and job losses. Whether or not it’s true for you in your work or life, almost everybody is hunkering down and reducing spending. Many are also not innovating. Which is exactly the wrong thing to do, AND the wrong way to look at it.
Innovation opportunities exist in both top line growth (new products, services, and revenue sources) as well as bottom line improvement (cost reduction, productivity enhancement, doing things better/faster/cheaper). “Ok, smart guy” you say, “prove it!”
Innovation causes growth
The fire of research burns in our bellies (along with too many jalapeno peppers), and it warms us to some important truths. Our friends at McKinsey have found that during the last major recession (2000 – 2001), 40% of the leading US industrial companies toppled from the top quartile in their sectors, and a third of leading US banks met the same fate. We’ll ignore cheap shots at banks for now and note that you can reasonably draw two conclusions from this data:
- Omigosh, batten down the hatches, protect the ship and ride out the storm! Or
- Yowza! What an opportunity to gain ground on the competition!
One of these answers is more likely to help you grow and succeed. Take a guess which one – but only after you hear the second piece of McKinsey data: during the same period, 15% of companies that had not been industry leaders prior to the last recession vaulted into those positions during it.
This additional piece of data shows that the first strategy is dangerous (even though your gator brain tells you it’s trying to keep you safe), and the second strategy is right–on if you have an interest in growing your organization’s impact and/or market share. And as the header quote from A.G. Lafley indicates, the companies that aim to stay in a leadership position are doing just that.
Even the automobile industry?
If you’ve read a paper in the last few months, you realize that in the US and internationally, automobile sales are in the tank. Yet somehow in 2009, with the US market down 39.4%, Hyundai (yes, Hyundai) has almost doubled their market share from 2.4% to 4.1%. This after their sales dropped almost 50% in December. (Source: Autoweek Magazine, 3/23/09) What? How’d they do that?
Well, the new Hyundai Assurance program, launched Jan. 2, 2009, got buyers’ attention. Here’s how it works: buy a new Hyundai, and if you lose your job, the automaker will make the payments for you for a while, and then buy back your car (before you sign, read the fine print, and know that your mileage may vary). Pretty innovative, not terribly expensive in the long term, it gets people into a brand that is still re–building its reputation with a compelling story…and it’s creating very noteworthy results.
But we have no resources!
Yes, times are tough, capital is harder to come by, and people are going into “savings” mode. But that doesn’t mean you can’t innovate. In fact, one immediate innovation opportunity is to help figure out ways to do (Danger: overused cliché coming) more with less. Our clients routinely report that they exceed their cost reduction targets when they use the Creative Process (aka Creative Problem Solving process) to find those reductions by implementing the resulting innovations. They find savings in purchasing, the supply chain, spend avoidance, productivity enhancements and reduction in development cycles to name a few.
How do they do that? By moving thoughtfully through the steps of the Creative (CPS) Process: Identify a goal, gather data, clarify the problem, generate ideas, strengthen solutions, and then create a plan for action. All while looking for new ways of doing things that no one has tried before. Sounds easy, no? Well, with practice (of course), it is! And companies like Clorox, Mazda, Texaco, TRW, Kraft, Johnson & Johnson and many, many more have proven it to themselves (and their shareholders).
One client (who asks to remain anonymous) decided to put the approach to the test with the intention of trying to find out how to speed up the development pipeline of their agricultural–based product. The right question can help you bridge the downturn profitably. A cross–functional group of scientists worked for two days at an offsite retreat using the Creative Process on this challenge. The result? According to official company documents, they shaved a full year from the development pipeline so they could get their new products to market – and reduce their investment costs and book profit that much faster. In their words, “this will significantly increase the efficiency of the development process and resource use.”
Wait, faster new products with fewer resources?
Yep, it’s possible, and we’ve seen it happen with many other clients as well. So don’t make the false choice between “innovation” or “cost improvement.” The really smart companies attack both. At the same time, and double their impact. As Obi–Wan Kenobi said in Star Wars, “Trust the Force, Luke.” Okay, your name isn’t Luke (is it?) and we’re not talking about the force. But we’re asking you to trust that the process works for creating newness and improving what already exists.
Yeah, yeah, we walk the talk
We’ve had to trust the process as well. For a few months, business cooled for us while people were trying to figure out what was happening with the economy. What we’ve noticed is that for us, when the economy is good, business is good and when the economy is bad, business is good because people REALLY need our help, but when business is uncertain, no one calls. So during that time, we had two choices:
- Slash costs and wait for the phones to start ringing again (and thank you, they have!) or
- Take the opportunity to innovate like crazy.
Guess which we did? One client, who had their travel budgets slashed, asked us if we had any online training courses to avoid having people fly to get together for training. We didn’t. But it spurred us into action and we do now! (see it here) Yes, it required hard work of many people and investment, but since we’re not rolling in cash, it forced us to find an experienced partner who could help us efficiently build a very solid offering that fits our research and philosophy.
And it was the opportunity to move the business forward that we needed. What’s interesting to us is that we’ve wanted to create a program like this for years, but didn’t think we had the resources to create it to the level we wanted if (and this is key) we tried to do it ourselves. The key to unlocking the door was asking the question, “how might we create this program with limited resources?” Without that question we wouldn’t have found our partner.
The IBM CEO study of 2006 notes that the biggest obstacle to innovation is “limited funding for investment.” We would argue that it’s the limitations which create the opportunities for new ways of thinking, rather than just opening up a sink–hole for cash with unlimited funding.
Give us a Tweet!
We also took the opportunity to look at how to reinforce training after the programs end, and we’ve got some really exciting things in the pipeline. And we took the opportunity to begin the uphill battle of learning about social networking (Follow us on Twitter: @tamethegator, and look for us on Facebook. Okay, enough shameless self–promotion.
The point: yes, we turn to the creative process to pull us through the tough times. We wouldn’t ask you to do it if we didn’t completely believe in it from our own business results.
So what can you do?
In these turbulent economic times it’s important to correctly frame your challenges:
Manage your thinking – you can look at this recession as the worst thing in the world that will ruin your business and career. Better though is to look at this as an opportunity to leap–frog the competition. The only difference is the attitude you choose, which requires you to pay attention to what you’re thinking about.
Look for opportunities – your competitors and consumers are doing different things now. If your competitors are holding back on marketing, new launches, or investments…that spells opportunity. And if your consumers are asking for something different or changing their behaviors, that means there’s a need to be filled. What can you do to fill it?
Clarify the problem – don’t take the problem at face value. If management is saying, “reduce costs,” don’t automatically think, “how might we reduce head count” or, “how to stop spending.” Instead look for opportunities to redefine the problem that will grow the business like, “how might we shorten our product development time,” or, “how might we improve efficiency,” or “in what ways might we get the entire organization to help reduce costs,” or “how might we expand our product line.”
Pay attention to the climate – the research on climate for innovation is clear: when layoffs are happening, the climate is terrible. After the reductions are done, things eventually pick up. As James Kirkpatrick noted in a recent AMA webinar, ”Innovation and creativity comes from a foundation of security.”So pay attention to what you can do to reduce the stress and fear that people have during layoffs, and to help move the organization forward while things return to the “new” normal. Kirkpatrick also noted that, “Fostering innovation and creativity counters recession–era tendencies towards fearfulness and withdrawal.” What can you do to counter those tendencies?
During recessions, depressions and major organizational downturns, there are abundant opportunities for growth and money to be made if you can prevent people from hiding inside the box while they wait for the “all clear” signal. Your choice is how you’ll respond to the challenge. We say now is the time to seize the initiative and innovate like crazy to both reduce the bottom line, and increase the top line. It’s not a choice between newness and savings, but rather how to put them together to achieve exponential benefits.