Innovation - The Key To Survival
Thursday, February 5th, 2009
Joseph Blank
Principal, Value Staging LLC
So many companies are struggling for survival. Entire industries are suffering. Quick fixes abound. What is the solution when consumer confidence is low, credit markets are tight, revenue is down and investments are losing money?
Trying to fix an entire economy with so many forces at work and thousands of critical success factors to consider is nothing short of daunting. A few things are certain; there is no quick fix, there will be mistakes along the way, groups of people will suffer, some companies won’t survive.
When a company plans for disasters, it is called a business continuity plan. When a company is faced with an unplanned disaster, it is called triage.
When companies in trouble look to prioritize to determine who or what gets cut, what is that process? What are the criteria? Perhaps the discussions look something like:
- We need to reduce operating expenses by 35% across the board
- This division currently operates with 200 people, we need to get that down to 150
- All future expenditures over $5,000 must be approved by the CEO
- Reduce overall production by 25%
- Suspend these specific projects
- Cut these pending programs
- Allocate available funds to these specific areas
There may or may not be a significant amount of analysis and due diligence involved in these decisions, but the end results will most likely have a negative impact on customers and employees.
Take this scenario and apply it to an entire economy. The ripple effect is enormous. Suppliers and customers, producers and consumers, support infrastructure and the non-related businesses that rely on the peripheral opportunities are all suffering at once.
If we look at some of the major causes of the great depression, they include:
- The stock market crash
- Bank failures and lack of credit availability
- A sharp decrease in purchasing across the board
- A breakdown in international trade
While the specific conditions that led to the Great Depression are much different than what we face today, these major causes are with us now.
So how do we not only survive, but take advantage of conditions and grow using Innovation?
If the stock market is a reflection of how the equity market views the future value of an industry and the publicly traded companies within it, then companies need to come up with ways to boost confidence in their future value.
If credit markets have tightened, creditors will be very diligent regarding to whom and for what credit is extended. If the purpose of a loan is to help a company “stay afloat” for a few more months, that is likely a bad choice.
However, if the purpose is to grow revenue and profitability by opening up new markets or taking advantage of a unique opportunity that has been overlooked, these are probably good reasons to extend financing.
While triage dictates that some emergency actions are taken, simultaneous to “stopping the bleeding” is a requirement to significantly improve the long term health and viability of the patient.
This is a very different, but just as important, type of discussion. This conversation looks at:
- What core competencies and skills do we possess?
- What new ideas and opportunities can we generate to leverage these competencies and skills beyond what we have done in the past?
- What specific resources are required to develop and execute these new opportunities?
If this dialogue takes place post triage, the company may find that many of the skills, ideas and resources required to take advantage of these possibilities are now gone!
Harsh conditions don’t have to stifle creativity. In fact, creativity and innovative thinking are more important when threats to survival are looming.
Stated in a recent Industry Week Article entitled: “New Economic Thinking Required: Successful Companies Will be Proactive
- “For starters, a CEO’s pet project should be placed on the back burner so that company resources can be relegated to those initiatives that positively affect the bottom line the fastest. . “
- “Secondly. . .During a period of downsizing, leadership needs to be more visible as well as effectively communicate what changes are taking place and why. This will cut down on rumor and speculation. . .”
- “Thirdly, the negative impact of the downturn on the top line can be reduced by changing geographic coverage, streamlining supply chains, altering product designs, modifying pricing and introducing new services. Successful leaders and companies adapt to current economic conditions.”
- “Finally, the downturn offers organizations a chance to implement changes that can improve long term profitability. Pushing ahead with a range of productivity improvements should be front and center, including internal Lean and Six Sigma programs. Many times, the positive effects of these internal programs alone are often short-lived high performance workforce improvements and a more flexible process.
In order to effectively make sustainable change, companies should seek out an operating consulting firm to maximize the results from an internal initiative, as well as ensure that these initiatives enjoy long term sustainability. The long term benefits drastically outweigh the costs.”
A proactive approach towards creative thinking and proper planning can help assure survival in this very serious economic downturn. In the words of Albert Einstein, “Imagination is more important than knowledge. For while knowledge defines all we currently know and understand, imagination points to all we might yet discover and create.”