On December 1, 2008, the National Bureau of Economic Research announced that the United States had officially entered a recession beginning in December 2007. A variety of factors have contributed to this situation, including rising unemployment, a general downturn in economic growth, the subprime mortgage crisis and the precarious state of major financial institutions. During recessionary times in the past, companies have made mistakes in dealing with a slowing economy.
Unless you want to compete solely on price, the ability to innovate is one of the competitive advantages that can differentiate your company in a downturn. Innovation drives growth, performance, and market valuation. Here are five innovation killers that you need to avoid if you want to come out of this recession even stronger.
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Not retaining top talent. Typically, these are very bright individuals, who are highly compensated and whose reduction can lead to quick cost cutting. These are also the individuals that can best provide you the insight, knowledge and innovation to successfully navigate these challenging times. Top talent is not a luxury item.
Not focusing attention on current customers. Current customers are the life blood of any organization. During tough economic times companies often take their current customers for granted. It is much easier and extremely important to maintain the relationship with current clients than it is to gain new customers. By embracing the relationship with your current customers, you can work with them to find ways that you can innovative your products and services. They are in a position to offer key outside experience that can benefit both companies. This will also foster a stronger relationship while demonstrating your willingness to work with them to weather these current conditions.
Not cultivating strategic relationships. Many companies become so focused internally on the situation directly in front of them that they fail to realize that these strategic relationships can actually be part of the solution. Reach out to your vendor partners, innovate together and collaboratively work to deliver solutions for today’s rapidly changing marketplace. They are in the same situation that you are. They are also trying to do more with less, have fewer internal resources and are looking for ways to strategically innovate.
Stopping development of new products. This can have negative implications not only during the recessionary period but also limit the organization’s ability to seize opportunities when the market turns. It is critical to deliver a dynamic and well differentiated value proposition that protects and grows revenue in a difficult market. One way that companies can do this is through new product innovation that specifically adds value while addressing the changing needs of the marketplace.
Focusing solely on cost cutting instead of optimization. When companies face tough economic times they fall into the trap of focusing so heavily on cost cutting that they often cut areas that could actually help them deal with the current economic climate. As mentioned earlier, the firing of top talent, cutting customer initiatives, ignoring strategic relationships and stopping new product development are just a few.
But it goes much deeper than the above mentioned areas. The cost cutting permeates into the mindset of the entire organization. Executives and employees are rewarded for squeezing costs at every step. Employees are evaluated on cutting and sustaining the status quo instead of innovating and growing the business. This leads to fewer and fewer innovative ideas, growth strategies and the type of creative thinking that will help differentiate the company. The organization stops taking the necessary risks and avoids investing time and energy into innovation, which is exactly what helped the company get to where there it is today.
Recessions challenge us all, but they also present opportunities. Opportunity to capture market share, gain a competitive advantage, and increase revenue through new customer acquisition and retention.
