With $25.6 trillion of value destroyed across global financial markets since its peak in October 2007 and unemployment across Europe alone now escalating to 9.4%, the global recession continues to take its toll. Many organisations are immersed in a simple struggle for survival. But basic economics suggests that the much-talked about ?green shoots? will come. And when they do, the thrivers will be those who have successfully exploited ideas that bring positive benefits to their business. In other words, they?ll be the innovators.
History has shown that recessions can provide good opportunities for businesses to build the foundations for future market leadership. The US semiconductor industry collapsed during the downturn of the early 1970s because the then dominant US industry stopped investing, while the Japanese continued to pour money into innovation. When the upturn came, the US industry was still in hibernation and the Japanese were poised for world leadership. The result was that the US semiconductor industry became virtually extinct.
But, can organisations realistically combine the meeting of performance targets today with developing the products or services their customers will want to buy tomorrow? How can companies harness desperate times to think about problems in different ways and open their minds to options they would not previously have considered?
Innovation has undergone a dramatic makeover in the past decade. While in the past innovation was led by secretive R&D departments, today we live in a truly global village where the proliferation of communications technology has meant that people can interact meaningfully anytime and from anywhere. We have almost instantaneous access to global market developments. Organisations that are prepared to exploit this changing market environment for greater commercial benefit will emerge victorious. There are three ways in which this can be done.
First, organisations must combine the most valuable skills and insights from a wide range of external partners, not just from their own people working in isolation. Boeing?s approach to the 787 was a fine example of collaborative innovation. This immense project included over 50 partners from over 130 locations working together for more than four years. From the start, the aim was to leverage the most advanced and specialised capabilities from this network. For example, composite materials were being used for the first time for large sections of the airplane. Smaller, more focused firms had developed expertise here that was unique. Rather than replicate this expertise, Boeing blended it with specialised skills from other partners who had developed complementary technologies to create the optimal approach to its design. So, Boeing gained tremendous value by getting individual suppliers concentrated on perfecting their part of the value chain.
Second, leverage the wealth of talent and ideas that reside within your own organisation. Finally, organisations must actively listen to the market and constantly scan what?s going on in the global economy. One of the deadliest dangers in a recession is that businesses become so concentrated on their own survival that they miss out on changes that will drive the future direction of their industry. Organisations need to recognise that most of the pressing challenges we face today, such as revitalising global financial services and slowing climate change, cannot be solved by one company, country or NGO?all require collaborative innovations.
For example, the death throes of the car industry in the US are partly caused by the absolute focus of the industry on pensions and pay and conditions, while holding the fixed view that the world of the gas-guzzler will go on forever. If the industry had been more attuned to public discord prompted by global energy shortages and more willing to collaborate in the design of innovative solutions to reduce their product?s energy consumption, they would not have been opposed by the tremendously powerful special interest groups which have now paralysed the industry. Collaborating with these groups would have brought fresh perspectives?and helped them to be better prepared for the wideranging changes facing their industry.
Of course, innovation cannot be approached without sound judgement. It is pretty clear, for example, that the seeds of the current recession were sown in financial innovation that for the most part was unregulated because it was poorly understood. It?s interesting, with the benefit of hindsight, to see that regulation and governance significantly lagged innovation in financial products and left regulators unable to fulfil their true role of protecting society. Regulators have to find a way to be on the beat of innovation without becoming a drag on it. This is a very serious challenge. But rather than analysing what should have been done, the industry?s stakeholders now need to collaborate to build the future framework of the industry?one that will not constrain the market while at the same time ensuring society?s wider interests.
The organisations that will thrive out of this recession will be those that look beyond their traditional way of working to take advantage of the skills, resources and insights that the wider marketplace has to offer. And in their wake they will leave the competition?which in many instances may well have been consigned to the scrapyards of history.
The writer is global innovation director, Logica