Is innovation still relevant?

04 Jan 2009|Darrel Rhea

Given the unprecedented changes in the economy, is innovation still relevant in this environment? Fundamentally, innovation is about finding new and better ways to attract and delight customers. It’s about being more effective and more competitive in producing value. In an economic contraction such as we are experiencing, the environment is clearly even more competitive: businesses are chasing fewer and fewer dollars. So innovation is even MORE important in a recession. It is survival of the fittest.

In an expanding economy, growth masks a multitude of sins. You can be mediocre and still depend on size and inertia. But evolution doesn’t happen in a linear way. It putters along until there is a crisis event, …then bam, you get a big shift. The dinosaurs become extinct. That’s what we are seeing in the auto industry. Those big dinosaurs are being pushed over the edge by the financial crisis.

So the answer is yes, innovation is very relevant in this environment — even urgent now. But how are businesses reacting to the economic conditions? …

The vast majority of companies are looking like deer caught in the headlights. They are doing a full stop. No one wants to look like they didn’t take action when they could have, so even healthy companies are stopping a lot of important programs. There is a lot of fear now, and a lot of that is probably warranted, but I am seeing more inaction than action. And that’s a leadership issue.

How should business leaders be reacting?

While leaders clearly need to protect their organizations by becoming lean and efficient, they also need to be in action to become more competitive by being even more relevant to customers. Of course they can’t do every innovation initiative they want to, but they need to prioritize and pick just one or two actions that could really make a difference in the experience of customers and differentiate from competition.

Innovation shouldn’t stop, it just needs to get as focused on efficiency as the rest of the business needs to be. The big question they need to keep asking themselves is “How do I both survive and also assure that I am positioning the company to win when we emerge from the recession.”

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