Fishing in a storm

January 12, 2009 — 29 Comments

There is an Eskimo proverb that says the storm is the time to fish. We are in the middle of a pretty big storm at the moment and organizations are asking questions about how committed they should be to innovation. I am moderating a session at Davos on this topic and would love any thoughts you might have about ways to think about innovating in a disruptive economy. What is the justification for innovating now? How is it different from innovating in good times? What are the challenges that may prevent even the most optimistic of leaders from investing when belt tightening is the order of the day?

There has been plenty of conversation, some of it here, about the importance of sticking with innovation but I am hoping to get beyond the homilies and abstract perspectives to the real issues and tactics that leaders should consider. What are the best examples we have of successful innovation in difficult times?

Tim Brown

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29 responses to Fishing in a storm

  1. I’m biased and I just want to say that out of the gate. I work with a nonprofit that tries hard to encourage innovation (NetSquared).

    In good times, I think innovation is often about how to use our excess resources — excess petroleum, excess time, excess corn, excess cash. And it leads to some interesting and some troubling results. I’m not sure, during bad times, that the ratio of interesting to troubling changes, but I do think that the constraints and urgency of disruptive times produce innovations of a different quality. I wish I had an example to make my point but all of my examples are literary (sonnets and villanelles — full of their constraints — make some of the most beautiful poetry).

    I do think — and htis is where my bias will start showing — that during these disruptive tiems we have to think not just of a different quality of innovation but of a different process for innovation.

    Innovation can’t be owned — by some company or research insititution — behind a firewall of secrecy. That doesn’t work anyway but it’s a riduclous conceit — that people in a certain category will come up w/ the best ideas. They may come up w/ many of them but that is probably because of training and time and access to resources. What happens if we give more people training and tiem and access to resources?

    What happens if we bread down the steps to innovation and make them available to a wider group of people? And what happens if we do that in a way that both allows people to weigh in on the problems considered most important and the solutions for which they have the most enthusiasm?

    I think that, combined with the skills that are assembled in more traditional labs, you’ll get a new way of looking at issues that need solutions and a new way to think about innovation. A way that is local and is about enthusiasm and responds to the constraints.

    That is, I think, the thing that leaders really need to figure out: how to make innovation a part of the culture and not a secret.

  2. For a good example of aggressive innovation in (and in spite of) a down economy, I think the bicycle industry could offer some great lessons, particularly as it relates to urban transport and environmental sustainability. Somewhere I read: “never waste a good crisis”, written on the premise that in tough times, people are more willing to consider change.

    In the face of these particular times, the bike industry has shifted (in several cases, shifted substantially) towards promoting cycling as a transportation alternative, rather than purely as recreation. Cities are responding with public works projects that improve bike lanes and bike pathways to make it safer to ride. The result has been a wider range of bikes to suit a new suite of riding experiences that are exclusively centered around city living and city lifestyles. In some cases, these new categories of bikes and their related product innovations (better fenders, racks, accessories, lights, and even fashion sense) will help bike companies – manufacturers and retailers both – get through a time where conspicuous enthusiast-based consumption has declined, or disappeared.

    These changes in how and why people ride came directly from the increased expense and stigma of driving: the bike industry in many ways has cleverly wrapped these customer frustrations in new products and services that are making lemonade from the economic lemons that we’re currently being served.

  3. Just like manufacturing has embraced the concept of continuous improvement, business needs to embrace continuous innovation and leaders of course do this. Having said that, fear can be a motivator and the following excerpt from the December 08 McKinsey article “Leading Through Uncertainty” makes the case that given the range of possible outcomes, many business models could “break.” :

    (Begin quote) In particular, organizations must think expansively about the possibilities. Even in more normal times, the range of outcomes most companies consider is too narrow. The assumptions used for budgeting and business planning are often modest variations on baseline projections whose major assumptions often are not presented explicitly. Many such budgets and plans are soon overtaken by events. In good times, that matters little because companies continually adapt to the environment, and budgets usually build in conservative assumptions so managers can beat their numbers. But these are not normal times: the range of potential outcomes—the uncertainty surrounding the global credit crisis and the global recession—is so large that many companies may not survive. (End quote)

  4. I think for some companies innovation will be the only choice. Good times offer a chance to be successful with little or no real innovation, as the recession continues this will become more and more difficult.

  5. Innovation is more important now, since
    1. Consumerism has shrunk more than in the past few decades. Changes in entire value chain- from manufacturing/ biz development (services) to pricing are necessary. Companies can differentiate themselves only with the help of innovation
    2. Challenges across geographies with asian nations rising would require a company to differentiate from low cost services and products using innovation and making an emotion connection with the consumer. Eg : iPhone with the right pricing can beat cheaper cost phones.
    3. Innovation is a long-term investment and hence not all companies will make the cut. Companies which don’t innovate will have to differentiate on price, it is not a great strategy because given a price war, all consumers in this economy want the lowest price

    How different from innovating in good times?
    1. Cost of innovation is different, and not all companies can develop a good innovation curve with a low price barrier
    2. Talent – Not the supply, demand is low, since the price an organization has to pay is high
    3. Customer – customer’s needs are very different ; Lower price, high amount of substitutable products/services

    What are the challenges that prevent innovation?
    1. Lack of Capital – credit crunch and economic woes
    2. Companies feel that their past brands could sell better products than their competition and thus slack on innovation
    3. Companies are in a race to survive and might be de-prioritize innovation as most of them might associate it with cost.

  6. Innovation is only one part of the design process. Innovation is redefinition of the problems we face more than anything else. It is the beginning of the overall plan and although a plan rarely is carried out as intended the planning is essential.

    We are in a situation where an enormous quantity of resources are going to be released into the economy. We have to take the time to find the problems, follow our knowledge, feel the trends, fit the courses, function the skills, form the tools, forum the qualities and foot the quantities. Or as John Boyd put it, Observe, Orient, Decide and Act. If we don’t, all those resources will go into bank accounts without any tangible benefits for the country.

  7. in the last german recession – roughly between 2001 and 2004 – bmw embraced the change by reviewing structures and processes to rebuild the organization towards a much more product-driven and design-driven one.
    consequently bmw radically reevaluated the importance of classical advertising which then let to the – somewhat ambitious and somewhat unfortunate – split with long-time partner ‘jung von matt’ as lead agency in 2006.

    still. tough times are good times for getting back to basics. and what else should that be than products and processes? – design and customer orientation – together with environmental issues – are the hallmarks of corporate strategy in the 21st century. they all demand a farewell to the linear management concepts we have become accustomed to. integrating environmental issues – just as integrating the customer – reflect and demand a more cyclical and holistic concept of management as it is present in the day to day practice of most organizations.
    so let design and innovation disappear from the budgets – let it disappear from the strategy papers – and let it become an integral part of operative excellence as natural and as unspectacular as accounting is today.
    a long howl – sure… – so what better time would be than today?

  8. In a situation like today’s, one thing to consider is that there will inevitably be situations where the marginal cost of research and innovation will go down significantly. Specifically, situations where resources once employed towards incremental research or design work (such as the next release of a proven software, as an example) are now unable to find paid work and hence are free/forced to work on higher risk initiatives.
    So, I belive that today, rather than last year, someone else is likely working on riskier and potentially more disruptive innovations in your business. If you are managing a large company, the question i believe you are faced with is wether to try to match/recreate internally an environment with similar risk profile, or to focus on developing the capability to harness innovative ideas from the external world.

  9. In adverse economic times, R&D is often the first thing to go, but on the contrary, smart businesses need to be innovating on the downswing, so that they are prepared with the “next big thing” when the market turns up again. It puts you ahead of the curve. I think we sometimes need to move to the “off beat”, to help us “see” the right “beat”.

    You need to keep the ball rolling so that the innovation momentum is retained. There’s a lot of inertia inherent in some businesses, so if allowed to slow down or stop, it’s difficult to get re-started.

  10. Any investment in innovation has to be justified in terms of an internal rate of return or cost/benefit, measured or imagined. So in theory, investing in innovation ought not depend on whether business prospects are good (cash reserves don’t justify wasteful spending, after all) or whether there’s a storm (good investment in innovation should be financed by borrowing even if cash resources are low). Yet, it does.

    Perhaps the money illusion or wealth effect operates on a corporate scale (the chances that I make a “soft” purchase rise in proportion to my pocket’s being full with cash). Add to this mix the other important resource—time—and the same fallacy is retold thus: good times are busy (no time, lots of cash), bad times mean free time but no money.

    Tactics:
    Innovations that target cutting costs, can be most persuasive at this time, even though, as pointed out, such innovation is always relevant. Particularly those that also
    -avoid waste (material, energy, manpower)
    -promote simplicity (an improve the product/service)

    Cost cutting innovations have the advantage that their value is easier to measure, which appeals to quant-heads. In cost benefit calculations of interventions that build value or “stuff”, the benefits are usually diffilcult to convert into money without methods that are innovations in themselves, and are frequently fanciful, or until much later: you could wind up dividing, say, $, by happiness. Cost cutting innoavation is an easier sell.

  11. We need to think of these times as an opportunity to Regroup, Rethink and Redesign community, services, products, etc. We should look at innovation as a key ingredient in the way we redesign products and services to be more efficient, more environmentally friendly, more user centric, more community oriented. Innovation has an incredibly important role to play in ensuring that products and services are better suited to times shaped by scarcity (whether scarcity of credit, natural resources, food and shelter, etc.). Indeed I would argue that it is an essential element to moving beyond short-term band aid mentality approaches that typify public and private sector responses in hard times.

  12. Innovation is a pretty big, vague word. And big, for a lot of folks, implies expensive and/or high-risk. In an economy that’s sputtering like over-cooked oatmeal, high-risk, high-reward doesn’t seem to be all that attractive– even for optimistic leaders.

    To get more concrete, what if we got past the word “innovation” for a minute– or at least broke it down into bite-size morsels? To borrow a line from the movie “What About Bob?” what if we showed companies how to take “baby steps” toward innovation? So, rather than “we need to be innovative” or “now is the time to innovate” (statements with which I agree), what if we helped the risk-averse focus on one or two or three things about their product/process/service?

    I guess that’s still “homilies and abstract perspectives” though. Ok, so, now something real– one tool I’ve found extremely useful is Blue Ocean Strategy’s “Buyer Utility Map” which helps (forces?) you to “look at the issue from the right perspective” (check out slide 20 here: http://is.gd/fQ8W).

    Good luck moderating the session! Sounds fun.

  13. Thanks for being so welcoming! I am a late-in-life high school teacher.I teach Early Childhood Education to high school teachers in a mountain vacation resort town. In other words, my students come from families who generally work in the service industry; they often aspire to be the first in the family with a high school education. The more affluent come to town to ski, hike, and bike, and to be waited on by the locals. I changed the name of the course to Foundations of Education in order to broaden my ability to bring messages to my students about their futures…about the possibilities the future holds, whether they become educators in the traditional sense, or spend time with me learning about their own potential and how they can best share that with the world. I spend a lot of time teaching them how to think out of the box. Eventually, they go into our on-site preschool and work with 3-6 year-olds. (I’m finally getting to my point!) Thus, I was drawn TedTalks and the discussion of the importance of play (it’s what I teach). I never thought to bring the connection of all sorts of play to innovation in industry. I am going to incorporate the TedTalks into my curriculum. We’ll watch it next Monday…and simply play…for the rest of the semester. Thank you for making a connection for me that my kids will be able to see, feel, and love….

  14. Hi Tim,
    Always a pleasure to see a new post on your blog.
    the following are my answers to your question.

    1. Innovate now cause economy is down, resources are available cheaper.

    1. In good times innovation will be a quick fix solution, it has to be cost effective. In bad times as resources are cheaper we can take innovation projects which were not cost effective during the good times. i.e. collect more information,invest more time in the projects.

    1.Optimistic leaders wont take projects cause their structure of understanding the external environment has changed.Historically more ventures are launched when economy is on a up move, CEOs wait for better times.Unless some CEO has preserved resources to take advantage of this opportunity, CEOs would not want to innovate, they would rather by a rival(proven success) which are strategically concentric with their own companies.
    This is a time when leaders should go to the BOP (bottom of the pyramid) work with the potential customers and come up with solution to product innovation. This is the time to innovate business model and strategy for BOP.
    http://en.wikipedia.org/wiki/Bottom_of_the_Pyramid

    A good example of innovation during a company’s bad time is Apples iMac G3.

  15. During tough economic times it is all but impossible for most companies, as evidenced by this mornings news about Google, to maintain highly innovative and scattered activities. The “big bang” mentality usually means big bucks. I see my clients and my colleagues clients more and more learning to focus their innovative engeries into small scale and existing process innovation.

    My wife, long time executive in hospital administration (cardiac), has always focused (challenged) her managers and best perfomers on the 360 degrees of working. What can we do to make the patient’s stay better. Focus the human energy and innate need to do things better on a tangible target.

    Most important is two aspects of management, and more critical now as people become focused on their own job security, is to empower people to innovate and reward people for their efforts.

    Bill Evans

  16. Hello Tim…

    I’d like to tell you a story… but first, do you know what are the similarities in the lives of Mahatma Gandhi, Martin Luther King, and Nelson Mandela? All of them spent a lot of time in jail, and they found it to be productive time for thinking and writing.

    Ibn Al-Haitham is no different. Abū Alī al-Ḥasan ibn ibn al-Haytham (also known as Alhazen) is considered the first “scientist”, pioneer of the scientific method and father of the optics. He was the head of a project to regulate the flow of the Nile in Egypt. Once he decided it was impossible, he escaped severe punishment from the Fatimid caliph in Cairo by pretending to be mad. So instead of the death sentence, he was kept under house arrest until Hakim’s death in 1021.

    He spent his time experimenting with light and physics, and made the discovery of light traveling in a straight line (instead of light beaming out of eyes as it was known) by making holes in the prison’s wall and seeing how buildings outside were depicted upside down on the other wall. During this time in prison, he wrote his influential Book of Optics and scores of other important treatises on physics, medicine, science and mathematics problems (among which he explored the squaring of the circle). He wrote more than 200 works on all these topics and in particular published a seven-volume treaties on optics which had a great celebrity and influenced western thought, notably that of Roger Bacon and Kepler. In fact, Part V of Roger Bacon’s “Opus Majus” is practically an annotation to Ibn al Haitham’s Optics.

    Ibn al-Haitham gave the first clear description and correct analysis of the camera obscura (he also illustrated… making him an early design thinker :)). The word camera comes from the Arabic (Qamara), which means dark or private room. His time in prison got him to think of new theories, and discover the sciences of optics (6 centuries before Isaac Newton’s studies).. (http://en.wikipedia.org/wiki/Ibn_al-Haytham)

    In comparison of our “prison” time, it might just be our opportunity to explore new systems and ways of doing.
    Not a story directly related to your question, but you are a creative connector.

    cheers!
    Randah

  17. hi tim,

    i think the tough economic condition we are experiencing today gives the corporations a platform to unlearn what they have done till now… in other words its a time to get the bad blood out start thinking afresh. Although innovation should not be limited just to products or services. Innovation should happen in all the fronts from work culture to people management. there is nuthin wrong in trying out new things because we have nothing to loose.

  18. Very interesting comments…I wonder what inspires someone who is imprisoned…to be ultimately creative…when others are desparately depressed amidst freedom? I wonder… because, as a high school teacher, I am always wondering how to inspire and draw out creativity, and often wind up looking to “entertain”…at least I am now left with hope that, well, perhaps creativity happens in its own time…

  19. The importance to innovate in contracting economies seems to be on the readiness for the future. Being prepaire to be the beneficiary of returned or expanding economies. Innovation is where the preparation is started. Contracting economies can be used to companies’ advantage by concentrating on quality innovations (looked at by trimming the fat or adding more resources).

    A brief look at some US history:

    Dupont in 1930 with there focus on R&D for Neoprene, also Freon

    Polaroid startup gained it’s research at Harvard

    Hewlett-Packard startup in mid-late 1930′s

  20. Hello Tim,

    I believe the best way to think about successful innovation is to equate it to Darwin’s theory of natural selection.
    “Darwin captured the only way that apparent design can arise without a designer: relentless selection on random variation.” -Helena Cronin, Darwinian philosopher, London School of Economics.

    However, innovation in business is not random variation, it is the biological equivalent of the cross insemination and mutation of ideas, (mostly) informed and strategically developed. While the market can shift and still select relentlessly, there is a lower degree of failure (we’d like to hope).

    There was an article some time back that highlighted Sharper Image’s failure, claiming that innovation is not the answer. This struck me for a moment, yet after entering the store’s going out of business sale a few days later, I realized there was something vital the author failed to notice. Sharper Image’s products were innovative for innovation’s sake. In other words, they offered superfluous items for an extravagant era, unfortunately that era had passed. The economy shifted and they were selected out of the business gene pool because they were not nimble enough to evolve.

    On the other hand, in a recent study by the Kauffman Foundation, they found that companies formed during a recession (excluding the Great Depression and World War II) were actually slightly more likely to go public than those formed during non-recessionary times. During a recession people can more accurately gauge what traits have worked in the past, which have failed, and where the necessities will be.

    What traits or business models will emerge from this upheaval? I could name a few. However, it seems clear that it is up to innovation to determine the final outcome and eventual turnaround of the economy. Furthermore, it is the innovation during rocky times that yields the most rewards. Both Microsoft and Southwest Airlines were started in a recession and they both disrupted their industries by offering industry innovations.

  21. corporate innovation used to be “be different or die”

    i think we just need new ethics…. nothing more nothing less…. but do not use these ethics as a marketing tool. enough of all this corporate/business jargon, models, methods and tricks. be honest for who you are and what you offer. know thyself, your personal and corporate one.

    “be honest or die”

  22. oh! and something else, maybe it is about time to go back to a scale closer to human being.

  23. Is it entirely unrealistic to argue that innovative and sustainable “belt tightening” (instead of simply firing every second employee) could be a valuable example for the general advantage and the constructive effect of innovation?

  24. In my opinion, crises are catapults for innovation. My company is also dealing with this dire global situation and a lot of “belt tightening” is going on. However, I must say that belt tightening causes innovation: how can we do what we do better, more efficiently, cheaper and with fewer employees? Innovation results from the need to improve something in some way – i.e. going from candles/oil lamps to lightbulbs. In the corporate world, it’s the same: how do we meet consumers needs in a unique way that is better than the competition, and still make money? Good times, in my opinion, oftentimes cause people to get lazy and comfortable. In troubled times, people must innovate to survive. Of course, the limitation in times of difficulty is resources that one can dedicate to innovation. My answer to that is: leaders must balance the short-term with the long-term. Crises too shall pass. However, leaders must make sure that their companies do not pass away but stay relevant for the long-term.

  25. Now is not only the time to innovate… it’s the time to create leaders.

    To say things like… “you are responsible”

    People didn’t do extraordinary things during times of war. They were ordinary people who did what they needed to do.

    They did this because someone said to them, “I need you.” “you have a responsibility”, “everyone’s doing it” and “we believe in you; we have no choice”.

    We need to take away the “extraordinary” nature of innovating and of leading, and make it the norm…

    To remove tonnes of positive media and status based attention for what (what we must tell ourselves and prove with our own actions) people should be doing anyway.

    And we must offer support for it… and enable the rewards that only a community can give.

    “You’re right, it’s not fair. you won’t get much credit or fame for it… but you’ll get it done and see the results. Only you can see what you need to do.… everyone’s doing it… let’s go have fun”

    I’m the most serious about the fun part.

  26. Crisis – especially significant ones – are the best opportunity for change. Humans are creatures of habit- comfortably following patterns and systems we are acquainted with.

    But a big crisis is forcing people to get out of their comfort zone (After all- its not that comfortable anymore) and look for a more comfortable place… i.e. different solutions we are not used to… products who are new but deliver more value… and if you can innovate by creating those places, a crisis is your best friend.

  27. “Opportunity is missed by most people because it is dressed in overalls and looks like work.” – Thomas Edison

    The greatest opportunities often come out of the deepest downturns. Some things have to die or cease for others to have room to flourish and grow. So much of the current “correction” is long, long overdue. While it’s a scary time, it’s also full of nervous energy for what’s next.

    I can’t wait for what’s next. It’s going to be great.

  28. “Innovation: What’s in that little, trendy, sexy word ?” is the latest feature article on the “ideas” page and was written by Ms. Mariana Ferrari, CEO of Procesoi. Mariana investigates and speculates on the human factors contributing to innovation. Mariana has considerable experience in international marketing and advertising and she includes in the article data gained from a major study of the factors of the innovation capacity of firms in Spain.

    Please go to the “ideas” page: http://www.techmankanata.com/ideas.htm

    Bill
    Spokane, Washington, USA

  29. Big innovation that changes the game is important. But tiny innovation by many people can also transform the organization to respond to crisis. Sree mentions continuous improvement methods, which are not confined to manufacturing.

    First opening the mind to the true depth of continuous improvement, kaizen, lean, or even six sigma, begins to unleash its power. Then teaching all organization members — workers, managers, community group members — how to design work to make problems visible, swarm to solve problems in the moment, and break down silos, and make leaders into teachers, begins a revolution in the capabilities of the organization to meet its mission more effectively.

    For one view of this philosophy, I recommend reading “Chasing the Rabbit” by Steven Spear. For another, I studied DTE Energy’s thinking and action revolution for more than a year and wrote an in-depth article about it in a professional journal. Contact me at karen.m.wilhelm[at]gmail.com if you would like more information about DTE.

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