Improvisations

Two news items that capture some of the spirit of the times:

• In a New York Times column, Thomas Friedman raises the question of whether this downturn may signal the end of an era of unsustainable growth.  Asks Friedman: “What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall….”
•  On a more mundane note, Google applies “crowdsourcing” to the question of spending less – with a new web site, Tip Jar. Tip Jar uses a Google tool called Moderator to allow visitors to submit and vote on money-saving lifestyle tips. Google announced Tip Jar’s launch earlier this month — and so far the Tip Jar site contains more than 3,000 tips.

For more on sustainability  and what it means for businesses, explore the Sustainability area of our site.

For more on collective intelligence techniques such as crowdsourcing, see “Decisions 2.0: The Power of Collective Intelligence,” in the Winter 2009 issue of MIT Sloan Management Review.

Need to cut costs?  Scott D. Anthony, president of the innovation consulting firm Innosight, advises instead thinking in terms of “re-featuring” your offerings. In a brief excerpt from his forthcoming book The Silver Lining: An Innovation Playbook for Uncertain Times, Anthony recommends figuring out what jobs customers are trying to get done when they purchase your products or services — and what objectives are important to them. That, in turn, will help you figure out which features are important to a given set of customers — and which are areas where you can trim costs.

For more on the concept of thinking in terms of the jobs customers are trying to get done, see “Finding the Right Job For Your Product” – an article by Anthony, Clayton Christensen, Gerald Berstell and Denise Nitterhouse, in the Spring 2007 issue of MIT Sloan Management Review.

“If history is any guide, we can expect some significant industry shapers to emerge from the current crisis,” observes Bhaskar Chakravorti in a new interview about how companies can find opportunity in the economic downturn. Chakravorti, a senior lecturer at Harvard Business School, offers some helpful ideas about how to prosper in a recession. His suggestions include:

• Think in terms of “substitution effects.” In a downturn, consumers may substitute more car repairs for a new car — and thus business may be good for mechanics. Also in demand, according to Chakravorti: ”affordable luxuries” and products that provide good value for their price.
• One problem: ”Capital is in short supply,” Chakravorti says. However, if entrepreneurs can overcome that, there are opportunities.  ”Technologies and materials left unused due to the collapse of one industry can be creatively re-directed toward others than can take advantage of the low input costs,” he observes.
• “Think business model,” advises Chakavorti. With businesses cost-cutting, there may be opportunities for entrepreneurs to develop innovative business models, he notes.

You can read the interview at Harvard Business School Working Knowledge.

 It’s not uncommon to hear experts suggest that recessions are good for innovation — in part because hard times encourage new thinking. John Chambers, Cisco’s chair and CEO, goes even further. Earlier this month, in a Wall Street Journal column, he described  the current economic situation as “the biggest opportunity of our lifetime.” (Wall Street Journal subscription required to access full article.)

Why?  Not surprisingly, Chambers found the idea of a U.S. government stimulus package that includes spending targeted for broadband infrastructure promising. But more generally, Chambers thinks the economic crisis could accelerate the trend away from traditional top-down management and toward collaborative innovation, enabled by technology.  Wrote Chambers:

“We now have the opportunity to re-invent the way we manage companies and get work done…To be successful in a 24/7 global world, managers must give up on the idea that all decision-making must run through them and must discard the silo approach to developing and executing on strategy.”

Last week, I blogged about a Knowledge@Wharton article containing advice about innovating in difficult times. This week, a visitor to our site added her own insights on that topic: Laura Weiss, an innovation consultant, pointed out her own recent San Francisco Chronicle column on innovating during a downturn. Commented Weiss: “I advocate the following:
   

• Get focused, fast
• Leverage what you already know
• Maintain a steady pace
• Be compassionate with yourself.”

Two of the points in Weiss’s column strike me as particularly interesting. First, in order to innovate efficiently in lean economic times, she recommends undertaking small experiments that help you learn quickly and maintain momentum. And she also suggests looking internally:

When it comes to innovation, there is a tendency to believe that insights and know-how are the domains of outside experts. Take the time now to improve internal networks for communicating your ideas in order to more effectively mine in-house knowledge across as much of your organization as possible. You may know more than you think, which will help you get focused on what’s missing and eliminate the cost of reinventing the wheel.

A good point, indeed. What else should innovators keep in mind so that they and their new ideas can survive in — and hopefully thrive in — difficult economic periods like these?

It can be a formidable challenge to make sure your innovation projects continue to prosper at a time when many company budgets are shrinking. A recent article from Knowledge@Wharton summarizes recommendations from a panel of experts who spoke at Wharton – on the topic of how to sustain technology innovation, specifically, during tough times. Some of the panelists’ recommendations:

• Align projects with the larger organization’s aims.
• Hone your people skills. People “need to like your idea, but they also need to like you,” observed panelist Eric F. Bernstein.
• Show how your innovation will save money.
• Have an advocate for your project at as high a level in the organization as possible.

The Knowledge@Wharton article also quoted Wharton marketing professor George S. Day , who noted that some leading companies continue to invest in innovation even during difficult economic periods. Day has written in MIT Sloan Management Review on topics such as being a vigilant leader and aligning an organization with the market.

We blogged earlier this month about some companies trying creative responses to the recession, including reducing employees’ hours rather than laying staff off. The New York Times this week reported that there’s a trend: An increasing numbers of organizations are seeking to cut labor costs but avert or limit layoffs – so they are trying measures such as reducing workweeks, offering or requiring unpaid time off, or eliminating bonuses. According to The New York Times,  

Companies seem particularly determined to find alternatives to layoffs in this recession, said Jennifer Chatman, a professor at the Haas School of Business at the University of California, Berkeley. “Organizations are trying to cut costs in the name of avoiding layoffs,” she said. “It’s not just that organizations are saying ‘we’re cutting costs,’ they’re saying: ‘we’re doing this to keep from losing people.’ ”

Also this week, Caterpillar Inc. announced that it will it will cut compensation for executives and managers (but particularly executive compensation, which the company may cut by up to 50% for 2009) and offer a voluntary buyout option to U.S. employees.

Clayton Christensen  is an expert on disruptive innovation, a professor at Harvard Business School — and, apparently, an optimist.  In the new edition of Business Insight, our collaboration with The Wall Street Journal,  Christensen explains why economic downturns are good times to innovate. Christensen points out that most innnovations need adjustment before they’re successful. And, in good economic times, would-be innovators can waste a lot of resources before they make the adjustments to their strategy that are needed to succeed in the marketplace, Christensen argues. Not so in tougher economic times.  As Christensen put it:

In an environment where you’ve got to push innovations out the door fast and keep the cost of innovation low, the probability that you’ll be successful is actually much higher.

Today’s Wall Street Journal features an article that highlights a subtle but interesting difference in management style between Toyota Motor Corp. and Detroit’s Big Three. Toyota in the U.S. currently finds itself with excess capacity for models such as pickup trucks. Rather than paying its workers but not requiring them to show up when they are not needed on the factory floor — as the big U.S.-based auto companies often do — Toyota is, yes, paying those workers not needed on the production line – but is using the down time to send them to classes to improve their productivity and quality skills and generate new ideas for improving production.  For example, during this down time, one assembly worker has developed a Teflon ring that may help avoid damage to vehicles’ paint that can occur during one phase of production. 

The article brings to mind an essay by MIT Sloan School professor Thomas Kochan in the Summer 2006 issue of MIT Sloan Management Review. Kochan argued that U.S. companies face a choice.   One option is what he called “taking the managerial high road” and investing in becoming a “knowledge-based, high-trust organization — which requires training and empowering employees and harnessing their full motivation and talents to generate innovative solutions that drive productivity and service quality.” The alternative? Focusing on controlling labor costs.  Kochan cited Toyota as an example of a company that has competed successfully by taking a cooperative approach to working with its U.S. workforce.