With a looming economic downturn, businesses have to ensure the fitness of their innovation engine.
Rising energy prices, high inflation, ongoing supply chain challenges: Even though some European economies reported better third quarter results than originally expected, the signs of a looming recession are still there. In this environment, many business leaders are unsure how to prepare their organizations for a potential downturn, and how to handle innovation initiatives in this context. To achieve more clarity for your own organization, you can employ our Innovation Readiness Check, that we will present in our free digital event Success Through Digitized Strategy: Innovation Management on November 30.
Historically, especially smaller and middle-sized companies seem to favor cost-cutting over innovation during times of recession, like a study by Northwestern Kellogg described. At first glance, the instinct to focus on day-to-day business to stay afloat during a period of economic downturn may seem understandable even today. However, neglecting innovation might be the wrong recipe against crisis situations, especially when it comes to ensuring sustainable success after the crisis, like the comparison of "fit" versus "fragile" enterprises by Gartner, Inc. showed.
Successful companies make use of the current pre-crisis situation to prepare their innovation engine for the hard times to come. This is something that we observed and accompanied in many projects in the past few years, with different companies of all sizes and business sectors. From these projects, we deducted an Innovation Readiness Check, which helps organizations to evaluate the fitness of their innovation engine.
The check entails a range of questions, regarding the strategical alignment of the company, organizational structure and aspects like communication, responsibilities and available tools. A key question, for example, is the fit of innovation strategy and corporate strategy: In successful companies, both strategies are closely aligned. This means that the respective companies deduct all innovation-relevant aspects of their corporate strategy step-by-step and embed them into their innovation strategy.
These elements also determine the layout of every single aspect of the innovation engine, which brings us to another important question: Are your innovation structure and processes efficient and effective enough to cope with upcoming recession? Successful companies have clear and transparent structures and processes in place. Hence, they avoid unproductive discussions and decisions that lead to innovation results that do not support corporate strategy.
Another sometimes overlooked aspect of fitness against recession is the choice of the right collaboration partners and the question whether they create enough value. Collaborating with partners along the innovation process can speed up innovation, save money and lower risks. However, smart partners have clear expectations of a partnership that need to be managed. Depending on the company’s strategic direction on innovation, the set-up of a successful collaboration approach requires to act on legal, cultural and procedural issues in a proper way.
In addressing all these and more questions, organizations can ensure their robustness to still be able to innovate while being challenged with a potential economic downturn. With open communication and transparent processes, teams and leaders can rely on the organization’s full expertise and available data to choose the right innovation initiatives. In addition to the development of new opportunities, this also reduces the risk of wasteful spending in times when cuts into profits weigh even heavier than during more prosperous phases.
If you want to ensure your company’s fitness against recession and learn how to apply the Innovation Readiness Check to your business, then please join our event Success Through Digitized Strategy: Innovation Management. Get in touch with leading experts in the field of corporate strategy and innovation research, and learn how a digitized approach to innovation can help to transform creative ideas into initiatives that create sustainable value and ensure long-term success.
