Special Report: Innovate in a Recession

Change Your Mind-Set

The economy tanks. You have two options: hole up in a bunker and hope it ends before you run out of tinned peas, or innovate and emerge stronger than when the economy took the hit. "During a recession, people tend to say, 'Let's stop everything and save money until it's over,'" says Bernard Meyerson, vice president and CTO of IBM's systems and technology group. "Well, you're not going to save your way to greatness." But you can innovate your way there. So stop moping and heed our experts' advice. Here are three steps that'll help you focus on innovation rather than recession woes.

1. Take a Reality Check
   "Love the lows," the experts proclaim. "Relish the recessions." Given the national mood, even Curb Your Enthusiasm's Larry David comes across as more sensitive. In fact, before you relish anything, "make sure your core business is strong," says Susan Schuman, CEO of innovation and leadership firm SYPartners. "Protect your core, because only then will you have the capacity to innovate."
2. Don't Go It Alone
   There's the romantic notion of innovation: lone genius, devising the idea of the century--from a tool shed. Then there's reality. "Innovation is actually much more complex," says Edward Bevan, vice president of innovation and market insight at IBM. "Increasingly, it's the integration of technology, business models and pro-cesses--all wrapped together. It's very difficult for any one entity to do that alone."
   
   Bevan ought to know. He oversaw IBM's 2008 "Innovation Jam," an online gathering of thinkers who generated far-ranging ideas from which IBM will extract solutions that all participants can use. Few entrepreneurs could erect an IBM-size jam, but the guiding principle applies: "We believe that if we pool our wisdom, we'll end up with better results," Bevan says.
   
   If IBM, with its vast internal resources, thinks it's important to reach beyond its borders to fill gaps, it stands to reason that entrepreneurs should, too. Gather diverse thinkers around a table to create a "public commons of ideas," says Bevan.
   
   Meanwhile, Web 2.0 teems with tools for tapping the wisdom of crowds. Such as:
   • Collaborative brainstorming, mind-mapping: brainreactions.net, mindmeister.com, bubbl.us, mindjet.com, shareyourbrain.com
   • Emergent trends in business, culture: trendwatching.com, iconoculture.com, psfk.com, springwise.com
3. Play To Your Strengths
   "A recession is an especially good time for entrepreneurs to build loyal followers," says Thomas Koulopoulos, founder of strategic business consulting firm Delphi Group and author of The Innovation Zone: How Companies Re-Innovate for Amazing Success. Big companies, often good at community building, will be distracted during a downturn. "But when the economy recovers, everyone will go after that audience--and if you already own it, that gives you tremendous leverage."
   
   Robert Wolfe, 38, founder of Madison Heights, Michigan-based outdoor equipment and apparel retailer Moosejaw Mountaineering, agrees. He built a loyal community around his brand by squeezing every pixel of opportunity out of Web 2.0. His innovative marketing, known as "Moosejaw Madness," spans text campaigns, a blog and "Daily Remark" on moosejaw.com, among other initiatives.
   
   In the 2000s, many larger retailers responded to the dotcom implosion by discounting extensively. Instead of battening down the hatches, Wolfe ratcheted up the madness. "For our survival, innovation was imperative," he says of his close to $40 million company. "We made sure our customers knew we were still at it and as crazy as ever. And I think it's going to work out the same way this time around."
   
   In this economy, Wolfe won't pursue everything on his innovation to-do list."But we think we're good at Moosejaw Madness," he says. "I'd say that if you're good at three things on your list, don't skimp on those three. Innovate around whatever you're best at."

5 Steps to Innovation

1. Apply Rigor
   According to management consulting firm McKinsey & Co., 36 percent of top managers say they govern innovation in an ad hoc manner. "We often think that if we throw people in a room and ask them to brainstorm, they'll innovate," says Thomas Koulopoulos, founder of strategic business consulting firm Delphi Group. Yes, they'll generate ideas, but ideas don't have legs by which to leap off the white board. To be more hit than miss, establish a companywide process to brainstorm, test and implement ideas. Sound daunting? Get training at dicor.org, ideachampions.com, innovationmasterclass.com and strategyninstitute.com.
2. Go Where Consumers Go
   When one of SYPartners' clients, a bank, sought to reach the Hispanic market, the innovation and leadership firm sent executives to a Hispanic neighborhood with undocumented workers. Observing challenges these workers faced in dealing with banks, the execs saw unmet needs they couldn't have spotted from the corner office.
3. Learn From Other Industries
   When the executives realized the extent to which the Hispanic market was community-driven, SYPartners had them look not at another bank, but at community trailblazer eBay. In other words, if you want your clothing company to cultivate superior service, have tea at the Ritz. If you want to attract top talent, see how Procter & Gamble does it.
4. Test Your Idea
   Take experts' counsel: Long before you fall in love with your idea, show it to consumers to see if they will, too. Cash-strapped markets don't suffer bad ideas gladly. That makes a period of decline--with its intense selection pressures--a great time to test ideas. Says Susan Schuman, CEO of SYPartners, "The good ideas rise to the top, and the bad ones go away quickly."
   
   Here are some places to test your ideas:
   • Kancept.com: Post your concept and ask, "Would you buy this?"
   • Emachineshop.com: Design and order a 3-D prototype.
5. Get A Leading Edge
   According to Boston Consulting Group, leaders who successfully cultivate innovation have the ability to change, tolerate ambiguity, assess and be comfortable with risk, balance passion and objectivity, and command respect. If you don't fit that description, appoint someone who does.