Feeling gloomy about innovating in the current climate?

It wouldn’t be surprising. Many managers are short on time due to headcount controls or in the aftermath of redundancies. Some have had their innovation budgets slashed in the belief that the current portfolio has to remain the main priority.

It’s easy to think that innovation and recessions don’t mix... but think again, could recession be an innovation oppportunity?

Recession is a Change Of Context

In a general climate of ‘belt tightening’, your colleagues may be questioning how many customers will be open to considering new products or new services from your company. However what is a recession?

It’s a change in the CONTEXT of people’s lives.

A new context is emerging where unemployment is rising, the cost of living is rising in the UK and Europe and public spending is being cut to address government deficits. For those in work there is increased insecurity around their jobs, less confidence to commit to major purchases and we are also hearing that in future we will have to take financial responsibility for more of the things that were once provided by the state.

However, grim this may sound, viewed objectively, this is just a change in CONTEXT and a change in CONTEXT is a great starting point for innovation.

If you understand your customers and their needs and you understand the current context or how it has recently changed, then you have two of the bits of information that are vital as starting points for innovation. You have in effect an insight – a customer need in a particular context.

A quick example of insight:

Customer need : people need to drink coffee.

Context: The context changes and people become more aware of and less willing to turn a blind eye to the poor living and working conditions of farmers in Africa.

The innovation opportunity that arises  in the coffee market is to develop ‘ Fairtrade’ coffee products.

In non-recession times the starting point for innovation is frequently product innovation, service innovation or process innovation. However in a recession if you try to ‘add value’ through offering extra features and benefits – will your customers have the money or be willing to pay extra for them?

Likewise, if you try and develop ‘value’ propositions to response to the tough financial times your customers are experiencing, very soon you may discover that removing features presents new challenges. How can you get the product to perform adequately? Will it cannibalise your current range and perhaps destroy value?

In a recession finding your starting point remains the same – you need to understand your customers’ needs in the current context. But then instead of simply looking to innovate in your product or service or process, you may be better off looking more broadly across the value chain to innovate.

Innovating in areas other than products and services can deliver enormous benefits, and may even have a greater chance of being game changing.

So where else can you look to innovate apart from the product or service?

A quick look across the value chain provides the following topics – apart from operations. We’ve assumed that you’ve already worked at optimising costs in your current operations.

Purchasing

You're probably on top of purchasing and getting the best possible deal on raw materials, but how often do consider what new technologies/materials have been developed recently which might be cheaper and which might even perform better as well?

Warehousing and distribution

Can you innovate in a way that will incentivise your agents or distributors to sell more? Can you innovate to improve your products' impact on shelf or how people recommend your service? Are there any brand new distribution channels you could target?

Sales and Marketing

How could you innovate in credit terms? Or financing? How could you innovate beyond your firm’s boundaries? What could you build in partnership with other firms? What competences does you firm have that could be used in another context?

Customer Relations

What other problems are your customers telling you about? Could you solve more of your customers’ problems?

Innovation In Tough Times

There is much anecdotal evidences of great innovation being born in tough economic times.

In the first article below Cameron Mackintosh, the highly successful British impresario indicates how gloomy economic times do not have to cramp anybody’s creative style.

The second article captures the frustration of young people who have been hit by the double whammy of the introduction of student tuition fees and high graduate unemployment. No longer able to afford expensive nightclub charges for entrance and drinks, they are now making their own ‘free’ entertainment.

What are your customers doing in response to tough economic times? Is there any way you could be innovating around your offer to help them?

Cameron Mackintosh says "cuts needn’t be bad for creativity".

Return of Underground Rave Culture.

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