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Innovation Blog

Innovating During/After a Recession: A Three-Pronged Plan

By Shlomo Maital

Global managers need to come to terms with the fact that the ‘recovery’ will be weak, perhaps indistinguishable from recession.    Whether GDP in the US and EU grows at 1% or 1.5% is immaterial.  It still means that for many businesses sales will remain flat – unless the ‘three-pronged plan’ proposed by Dartmouth’s Tuck Business School Professor Vijay Govindarajan is implemented (or at least, a version of it.)[1]

First Govindarajan recommends setting up a Dedicated Team, dedicated solely to the goal of strategizing the post-recession period.  Let the team come up with an innovation, and then implement it as they would conduct a scientific experiment. Why? Because until you get that innovation out into the hands of users, you will lack vital information.

Second, he recommends three steps:

Formalize the experiment.   List hypotheses.  Define how you will test them.  For instance:  In a post-recession period, price sensitivity remains high.  Hypothesis: “We will test a very low-end product with low price, and check very carefully whether demand is price sensitive, so that volume increases more than price falls, to compensate for the lower prices. Our hypothesis is that it will.”

Break down the hypothesis. Simplify!  Identify the most crucial hypothesis, or hypotheses, and focus on them.  Is it price? Is it some new feature that is being added?

Seek the truth. Jim Collins calls this “face the brutal facts”.  Innovators who invest the company’s hard-earned cash have a vested interest in putting a rosy glow on test data.  Make sure the company has a pervasive culture of ‘telling the truth’.   Companies that delude themselves will pay heavily. Remember, if you launch full-scale a bad product, not only will the product fail, but you have lost valuable time that could have been invested in launching a successful product.

Govindarajan again stresses the obvious point that innovation is more about implementation than inspiration.  While readers may be utterly tired of hearing this again and again, it is so important that it is worth repeating, in his words:

“There is too much emphasis on ideas and not nearly enough on execution. As a result, most corporations have more ideas than they can possibly move forward. Too many promising ideas on paper never become anything more than … promising ideas on paper.”

Screen your ideas, pick one or two, set up a team, give it some money – and execute.   Make sure you take seriously a scenario in which there is weak economic growth for several years to come.

[1] Bloomberg Business Week,   “How to innovate after a recession”, Viewpoint September 7, 2010


Blog entries written by Prof. Shlomo Maital

Shlomo Maital
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