Innovation in times of crisis

Government and enterprise leadership tend to act the same way when facing a crisis: they cut what is seen as non-essential to the execution of their primary objectives. Basically, everything that seems not necessary for survival (in the short term) is cut. Items like culture (with some exceptions like Churchill in the UK during WWII), fixed capital investments or innovation tend to be abandoned or to put in hibernation.

Even though cutting such items helps balance short term P&L, it will certainly compromise future growth potential or, in some cases, long term survival. Many times that is not taken into account by leaders for several reasons:

    • It is difficult and unpopular to explain to people why there is a need to keep (or even reinforce) investment in something that only brings benefits in the long term, and, as Keynes once said, “in the long run we are all dead.”
    • Government and enterprise leaders know they will not be there in the long run, making it difficult to compromise their present position and popularity for some sacrifices that will only benefit their successors.
    • People tend to prefer a smaller benefit now over a much bigger one in the future (time value of money and/or other benefits).
    • We all know that innovation and R&D are essential for differentiating, improving efficiency, increasing growth, and thriving in the market. All reports point out that countries and enterprises that invest in innovation and R&D get better performance and higher growth potential in the long run.

We at Exago, as well as many other innovation management providers, faced in the last few years many prospects hesitating to dive into an innovation program. The reasons for this were mainly the following:

        • “There is a huge economic crisis and we can’t invest in non-core activities.”
        • “We only invest in projects that bring measurable ROI in the short term.”
        • “It is not the right timing because we already have too many corporative programs going on and can’t start another one.”
        • “It is not the time because the company is facing structural changes and we can’t distract people from their objectives.”

These real examples show how companies still look at innovation. They’re really saying, “Innovation is nice to have but now is not the time for it because we have “serious” things to take care of now.”

Our point of view is the following: As long as innovation is seen as a non-core activity it will never be the right time regardless of the economic situation.

Curiously, the most successful clients working with Exago did it during crisis times. They did not concern themselves with short term ROI (even though it came at a very high rate as a consequence of the process used) but with creating, nurturing and implementing an innovation and participation culture.

Innovation by itself does not ensure an organization will thrive but lack of innovation will certainly condemn an organization to a slow demise. Furthermore, it is in times of economic difficulty that more value can be extracted from innovation due to diminished investment and the commoditization of products and services when demand falls and margins are lower.

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