As my regular readers know, after the recession started, I tried my best to convince anyone who would listen not to be a dumb company until I was blue in the face. As I predicted, I wasn’t very successful (as I lost track of the number of companies who put new solution acquisition on indefinite hold and of the number of smaller solution providers that put new development on indefinite hold), but I was still glad to see this recent article in Industry Week on “how leading companies will thrive after the recession” which said that some companies will emerge in a downturn in a better position than their competitors and start to outperform them because they have a commitment to innovation and a drive to become immersed in emerging growth markets.
The truth is that without investments in innovation and new markets, growth will stall even as the economy rebounds. I understand that less business means less revenue which means less money in the corporate coffers, but this doesn’t mean you cut the innovation budget. If money is really tight, you reduce the innovation budget in line with other budget reductions, but you don’t cut it. You cut the non-essentials like the box at the ballpark, the Nascar sponsorship, the deadweight middle management, and — even though you’ll despise me for saying this — your bonus. I strongly believe that management should not get big bonuses during times of poor performance. (However, congruently, I also strongly believe that management should be entitled to big bonuses during times of record growth because I believe management bonuses should be based on the overall corporate performance they drive.)
The simple truth of the matter is that innovation must be a priority, no matter the economic outlook because the right innovation will drive growth even in a down market. The article gives two examples of companies, namely Snap-on Tools and Makita, whose sales are increasing because their products match what consumers want. If you can find a way to give consumers want they want with higher quality and lower cost, they will switch to you, even if your product is considered a luxury. Although they are more thrifty, consumers will still treat themselves in down markets — just not as often.