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During challenging economic times, the prevailing course of action is often to put the brakes on major decisions, hunker down, and wait out the storm - cutting costs along the way to staunch the bleeding. While this response may seem natural, in many cases, it's the worst thing that executives can do. In fact, now is the ideal time to focus your efforts and resources on innovation. Here's why.
First of all, any kind of downturn creates new needs and opportunities because it causes customer preferences to change. We saw it during the global financial crisis in 2008, and we saw it during the Great Depression. Uncertainty creates opportunity. Companies that invest in uncertain times can gain a significant competitive advantage over those that don't. By believing that the economic outlook will improve and taking the necessary steps to bolster your business now, you will be well positioned when economic conditions improve.
Remember, innovation is the best path to growth. If a company wants to grow, there are only three ways. First, buy other companies, which is extremely difficult in an economic downturn. Second, squeeze more out of your existing products, which is also challenging. Third, through new products, services, business models, and ways to reach customers. In the end, innovation is the major driver of organic and sustainable growth.
Chances are many of your competitors will slow down during a downturn, making it easier for your company to seize a greater proportion of market share. At the same time, customers delay their purchases and slow their spending. So when the economy rebounds, you will enjoy a distinct advantage if the products, services, and processes are in place to satisfy the pent-up demand.
So make uncertainty your ally. However, as executives, we don't like uncertainty. In fact, we do everything we can to drive it out. However, uncertain times often serve as the catalyst for innovative ideas. From risk management and effective implementation to high-quality managers and best practices, companies need an arsenal of resources to innovate during uncertain times.
Innovation means two things - novelty and value. Businesses can design new products and services, expand into new channels or markets, or develop different manufacturing or marketing processes. With any innovation, particularly in a downturn, companies must address four risks:
- Technical risk: Will it-the product or service-work?
- Production risk: How can we scale it up at low cost and high quality?
- Customer uncertainty: Will it meet a need?
- Market uncertainty: Does the commercial opportunity justify the resource investment?
It can be hard, if not impossible, to develop these best practices from scratch within your own organisation. Specialised executive education programmes, like those offered by Harvard Business School, can accelerate innovation capabilities in a company. To help leaders improve organisational performance amid India's challenging economic times, Harvard Business School (HBS) provides best practices, strategies, and frameworks for improving productivity, reducing time to market, increasing operational efficiencies, and innovating for growth. At the same time, at HBS, we also help executives take the necessary steps to reposition their organisations for the economy's eventual uptick.
Invest in people
No matter what's happening in the economy, you will need high-quality managers. To have high-quality people, you must invest in them. Indian companies that want to accelerate and improve the quality of their leaders should seek outside professional training and education. Now is a good time to make that kind of investment because the opportunity costs are lower. When business is booming, it is hard to pull people off the front lines to develop them - making the opportunity costs much higher. While it might seem contrarian, the best time to invest in your people is during a downturn. By investing in your most talented executives today, you enable them to develop their innate leadership skills and gain the innovative strategies necessary to lead your company through challenging economic times and beyond.
Keep the focus on execution. When it comes to innovation, it is important to balance strategy with implementation. In fact, we have a saying: "A strategy is only as good as its execution." After working with a number of prominent Indian companies, I have found that the challenges are universal. The primary question is "How do we innovate effectively?"
Innovation doesn't happen on its own. You can't just go into a company and tell everyone to be more innovative and hope for the best. To create real change, you must clearly communicate your innovation agenda, set goals, and measure progress.
Finally, be sure to capitalise on training programmes and resources that can help you, and your organisation, innovate more effectively. Our renowned case studies - taught throughout the world - provide real solutions that can be easily translated to address your own business (and innovation) challenges. Every member of the HBS faculty, myself included, is committed to exposing executives to multiple perspectives and new ways of thinking about business leadership. The result is executives who are well equipped to manage, lead, and yes, innovate, even in uncertain times.
Stefan Thomke
William Barclay Harding Professor of Business Administration, Harvard Business School & faculty chair of HBS Executive Education, India
