Solution To Tough Times: Innovation
Innovation can be a Plan B for companies that are concerned about securing or stopping the dilution of their revenues and earnings by market forces. The movement to new products and services can take hold relatively quickly and profitably--even in a recession. But it must first begin with integrating the innovation process into companies' most basic operating levels.
In these times, innovation can be the spark for reassessing, reinventing and revitalizing existing resources in the emerging digital interactive marketplace. It could prove to be a saving grace. A well-executed good idea can be the ultimate counter to grave concerns about tight liquidity and credit, stagnating global market growth and weakening earnings.
Consumers and companies have demonstrated a willingness to respond to and invest in new digital products and services that are cost-effective, convenient and immediately valuable--even in tough times. But we have seen of late how innovative new entrants can be brutally trounced by incumbent competitors or dismissed by fickle consumers. Having the appropriate people, concept and execution are often more important than the initial funding. While there are no guarantees, the risk-taking involved in thoughtful internal innovation pales in comparison to the risk of doing nothing in this savage economy.
Even some of the more formidable players are being tested. RIMM's challenge to Apple's iPhone, the Google rival search engine Cuil and MySpace Music's counter to Apple's iTunes are some of the newer ventures. After all, a mere decade ago, Google and Apple were the struggling new boys on the block.
Innovation works on a number of important levels. It is focused on creation and upside as markets shift into digital high gear. It is all about momentum and independence, which flies below the radar. It is not directly subject to the ebb and flow of the stock market or quarterly performance. Innovation is its own ship. It is a good idea with a future. And it can generate a healthy risk-reward within months of a launch. Apple's iPod, iTunes and iPhone immediately resonated with consumers because they were functional, relevant value-added good ideas.
The most critical ingredient of assuming an innovation defense in these turbulent times is giving the right people the necessary resources, financial and marketing support. What used to be called R&D is no longer a voluntary risk; it's an imperative.
Venture capitalists get it. They are expected to invest more than $9 billion in the third quarter--mostly in communications, Internet, software and information, electronics, medical devices and semiconductors, biotechnology and the environment. More than half of the funds went to markets outside Silicon Valley and New England, according to a recent PricewaterhouseCoopers Money Tree survey. The more than $21 billion already invested by venture capitalists is 50% higher than the 1998 record of $14 billion. One reason could be that venture capitalists believe the U.S. can innovate its way out of the current financial malaise.
The latter is no small matter, considering that Democrats and Republicans have been squarely at odds over whether the American taxpayers or private investors and business should bail out the financial markets. JP Morgan Chase's overnight assumption of liabilities and assets of Washington Mutual, the biggest-ever savings-and-loan failure in history, is noteworthy. There are troublesome signs that grassroots credit is drying up, but there are also encouraging signs that private equity and well-funded public companies are coming to the rescue in ways that can generate profits long-term and eventually provide return on investment in revived IPO markets.
The digital infrastructure needed to support innovation is already in place and continuously developing. For instance, the Skunkworks concept of providing autonomy and non-bureaucratic support to an elite group of specialists within an organization was initiated at Lockheed Martin decades ago, and is a huge source of enterprise and new revenues at companies including IBM, Ericsson, Motorola, Best Buy and Cisco Systems. These days, the enterprising use of internal social networking can empower an ingenious workforce and unlock innovation.
For instance, earmarking groups to devise ways to connect local television station and newspaper resources with GPS functions in mobile phones and stand-alone location devices would surely yield ways to generate new revenue streams, as well as save existing local media from obscurity. It would be equally smart for media conglomerates to internally mandate innovation-driven groups to capitalize on "friend-finder" mobile interactive technology and social networks and to monetize their content.
Forget using labels such as "trial" or "experiment," which will keep good ideas from being adopted. Instead, integrate innovation-focused groups throughout an organization so that good ideas spread like wildfire. Maybe then, companies can begin to measure themselves along some new metrics, like measurable productivity, launched ventures and new revenue streams. They can be the tangible rainbow over a troubled landscape.