When a recession descends — or even when there are signs that one might be on the way — large organizations tend to diminish their ability to be ambidextrous. They begin overweighting their operational skills and actions, while allowing their innovation skills to slide, out of fear. The term “tighten up” is an example of one that leaders often start using. Many organizations lose their focus on the long-term.
Budgets get cut. The focus turns to Horizon One innovation efforts, which have six-to-18 month timeframes, mostly attending to incremental adjustments of existing products to increase gross margins. Another common response is to reduce skill-building related to innovation, insights, and design thinking.
The culture shifts from big ideas to small changes in product and experience. The innovation emphasis can become more about operational efficiencies in production and supply chain.
What can be done to prepare or be proactive in advance of a recession?
1. Foresights. In the early stages of a recession, it is smart to begin a long-term foresights process that identifies the potential opportunities that could emerge once the recession is over. The average recession over the past 150 years has lasted 22 months — only slightly longer than the typical new product development or go-to-market time frame. So a foresights process that identifies scenarios, changes in customer behaviors, and ramifications will enable organizations to be more prepared once the recession is over. Build a three-to-five year roadmap that recognizes the impending recession, likely scenarios, and actions you recommend.
2. Platforms. Get ahead of the innovation strategies that will more likely lead to growth in the downturn. Be clear about your innovation platforms, and update them with impending turbulence in mind. Clarify the innovation strategy — the base from which you will conduct experiments, derive insights, and collaboratively evolve ideas over the time period of the recession. Ensure that work is going to be meaningful, albeit naturally ambiguous, at the moment.
3. Insights. With clear platforms in place, invest and bank insights early, ahead of the recession. Devote time to anticipate the big new questions. Get prepared to “think your way out” of the challenges, and surprises that may come your way.
4. Framework and Talent. Devote some time to understanding how broad organizational talent may change in a recession, and how that impacts the manner in which you collaborate with business units and functions. In recessions, corporate reorgs can result in change within business units that affect how they can pursue innovation and new development. Those shifts may provide opportunities for innovation and venture teams to pick up the slack.
Make sure you have the right talent on your team to navigate turbulence. Ensure that you have operational talent on your innovation team, including people who have hard or technical skills in the science of what you are evolving for the marketplace. Being seen as a group that is purely visionary and focused on idea generation can make your group vulnerable to cuts. Keep a strong bench that can deliver on shorter timeframe innovation, with others in your group having eyes on that three-plus year strategic outlook.
Thinking through these issues in advance can help you transcend a recession, and emerge much stronger.
Michael Perman is the CEO and Founder of C’est What?, author of the book Craving the Future, and a former innovation and marketing leader at Gap Inc. and Levi Strauss & Co.