Recessions Call for More Creativity, Not Less
Conventional wisdom holds that boom times call for new ideas, and recessions call for execution. That “wisdom” is wrong. In fact, even more creativity is needed when times get rough. Why?
First, sales are tougher to come by. Your sales force needs to be more compelling and your products more alluring than ever before. So, the front of the house needs to step up its thinking, or bear the brunt of lower volumes and prices.
Second, the back of the house needs more creative belt tightening than the usual “let’s cut travel budgets, impose a hiring freeze, and lay off the bottom 10 percent” approach. Your competitors are going to take those same actions, and there is an iron-clad rule in economics -- in a highly competitive market, any savings that are common to most suppliers get passed along to the consumer. Thus, although you may have to take obvious actions too, the only gains you get to keep will be those from ideas your competitors don’t think of.
Third, recessions are the best time to step up your competitiveness. Studies have shown that companies have twice the opportunity to change their relative position in an industry during a recession compared to growth times.
So, if creativity is at a premium, how do you jump start it during a period where most managers just want to put their heads down and “get through this”?
First, start the process now. Today, recession is a threat, not yet a reality. If you wait until you see actual volume declines in your sales reports, the recession will have already begun, and you will be under enormous pressure to act immediately. No one thinks as clearly when he is already in crisis. So start now, while you have time to look beyond the obvious.
Second, involve your team -- but do so effectively. We all know that unstructured brainstorming sessions usually don’t produce very good ideas, or much commitment to action. You can change this. In the December 2007 Harvard Business Review, an article entitled “Breakthrough Thinking from Inside the Box,” laid out a series of changes that can double the effectiveness of such sessions.
Third, use a question-based approach to focus the search for powerful ideas. The same HBR article showed how narrowly focused questions lead to more breakthroughs than broad ones. For example, instead of asking “How do we save costs in this department?”, you can ask “How much does it cost us to handle a perfectly standard item versus ones that require specialized handling? What does that imply about our efficiency and our pricing policies?” Or, “What activities seem to give us the most trouble and frustration, and what would have to change for us to be able to simply eliminate them?” And so on.
Most companies who gain ground during recessions keep it later, and most who lose ground do not regain it later. More creativity, not less, can determine which category you fall into.
Go to the Complete Downturn Survival Guide
Kevin P. Coyne is Senior Teaching Professor at the Goizueta Business School of Emory University and a former senior partner at McKinsey & Company. Shawn T. Coyne has 25 years of line management and consulting experience at Procter & Gamble, McKinsey & Company, and other leading firms. They are co-founders of The Coyne Partnership, an executive counseling firm.
First, sales are tougher to come by. Your sales force needs to be more compelling and your products more alluring than ever before. So, the front of the house needs to step up its thinking, or bear the brunt of lower volumes and prices.
Third, recessions are the best time to step up your competitiveness. Studies have shown that companies have twice the opportunity to change their relative position in an industry during a recession compared to growth times.
So, if creativity is at a premium, how do you jump start it during a period where most managers just want to put their heads down and “get through this”?
First, start the process now. Today, recession is a threat, not yet a reality. If you wait until you see actual volume declines in your sales reports, the recession will have already begun, and you will be under enormous pressure to act immediately. No one thinks as clearly when he is already in crisis. So start now, while you have time to look beyond the obvious.
Second, involve your team -- but do so effectively. We all know that unstructured brainstorming sessions usually don’t produce very good ideas, or much commitment to action. You can change this. In the December 2007 Harvard Business Review, an article entitled “Breakthrough Thinking from Inside the Box,” laid out a series of changes that can double the effectiveness of such sessions.
Third, use a question-based approach to focus the search for powerful ideas. The same HBR article showed how narrowly focused questions lead to more breakthroughs than broad ones. For example, instead of asking “How do we save costs in this department?”, you can ask “How much does it cost us to handle a perfectly standard item versus ones that require specialized handling? What does that imply about our efficiency and our pricing policies?” Or, “What activities seem to give us the most trouble and frustration, and what would have to change for us to be able to simply eliminate them?” And so on.
Most companies who gain ground during recessions keep it later, and most who lose ground do not regain it later. More creativity, not less, can determine which category you fall into.
Go to the Complete Downturn Survival Guide
Kevin P. Coyne is Senior Teaching Professor at the Goizueta Business School of Emory University and a former senior partner at McKinsey & Company. Shawn T. Coyne has 25 years of line management and consulting experience at Procter & Gamble, McKinsey & Company, and other leading firms. They are co-founders of The Coyne Partnership, an executive counseling firm.
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Recessions Call for More Creativity, Not Less
Alright I give up. Here we the price shooting up the roof and someone comes to give a piece of the brain on how to look cheerful. It is just like the farmer who has lost the farm. I tell him, “You know, the land only weeps when dug, the stone only screams when cut, the diamonds sheds tears when parted with the soil and when the branch is cut, both the tree and the branch felt the agony.”
This is not a school for the cry-babies nor is it the seeking sympathy. The reality is losing the value of money, once you had this, now you have the same amount but buys little, is not a laughter matter. I do not need someone to tell me , have patience.
Firozali A Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa
- Posted by Firozali A Mulla MBA PhD
February 9, 2008 6:22 AM
There is very little reserached on recessions. Most new material in the business and academic fields focus on "positive" strategies such corec capabilities, core business spin offs, mental frames, upsizing, unstoppable ideas, etc. Older materials focused on "planning" or using instruments or methods like "porter five forces" or strategic groups to name a few. None attack the issue of recessions or downturns.
Thus, there is little other than acnedotal tales without much ability to generalize. The studies so far from consulting companies such as McKinsey, or Mercer or similar exploit their own databases and conclude on actions that tend to contradict from one study to another. One for example argues that geographic expansion is a good move while the next study suggest to focus on non-price-sensitive segments building from the base.
Thus far no academic work has followed this track of how to fend off most effectively recessions, maybe because no one will have enough data or recessions to create a career out of it (will never get tenure).
Is this a field of strategy that will be built on try something and "create" new ideas and see if they work? then tell us about it. We need some systematic work on this issue.
- Posted by jesus ponce de leon
February 9, 2008 10:26 AM
Your comments clearly point out how much pain is required by the leadership in many firms to focus on management's long term role for shareholders. It also implies that firm's have to choose between innovation and execution, instead of balancing them throughout the cycles. I often use the phrase ICE as the key focus for strategic orientation and reinvestment. It stands for Innovation, Communication, Execution, but instead of viewing it as a barbell that requires choice along a straight line , think of it as a triangle with communication as the base.
This approach requires management teams to work on balancing the concepts over time and as needed; being proactive instead of reactive.
- Posted by Ward Hill
February 9, 2008 1:25 PM
leadership intelligence has a value to help define the ability to manipulate the structor modification's required beyond education, experience, & knowledge. Creativity & Innovation can evolve.
Interested in knowing the value of your corporate leadership intelligence? Wait until a ressive issue strikes and you will find out.
Mitt figured this out after hundreds of millions and California.
I do not think many people understand the application of intelligence in a diverse economy as it is related to platforms in the United States. If you use socialism as your platform for creativity & innovation then independance could be lost & assumilation into intrapment could be your demise.
Intelligence requires information input & confidentuality to be put to effective use. Security upgrades and ammendments to corporate advisory committes will need to be structored before proceeding.
James Lewis
Bozeman, Montana
- Posted by James Lewis
February 9, 2008 9:07 PM
True, Recession calls for innovation and creativity, but the ideas and thinking has to cascade down from the top in the form of proper planning during the being of the goal setting period. The Business Contionuity Plan and Disaster Recovery Plans should address the type and nature of recessions also, which in most organisations does not give impetus to forecasting ideas and are missing. Creativity does not happen in a jiffy, it depands on attitude and right environment and empowerment in the organisations. Hence creativity and innovative thoughts and actions should be nurtured right from day one.
- Posted by H.S.Shama Sundar
February 10, 2008 9:28 AM
In order to accept the premise that “recessions require more creativity”, one would have to accept the corollary, “non-recessionary periods require less creativity.” Additionally, the conclusion cannot be applied globally. That is, we cannot say “recessions require more creativity from ALL companies.” Some companies have invested considerably in developing creative/innovative capabilities in non-recessionary periods. Therefore, while the article makes good points, the conclusion is simply not supported.
A conclusion that could be supported would be, “Recessions require more creativity of some management teams.” Not everyone needs to be concerned about being more creative, but those that should be concerned are unaware that this applies to them, and worse, their organization’s capability for doing this work is not where it needs to be.
Clearly, recessions mark an inflection in the external environment. Assumptions, upon which previous corporate strategy was based, have changed. Therefore, all management teams need to re-evaluate corporate strategy in this new light.
More importantly, recessions expose weaknesses in top-line and bottom-line growth strategies. When the bottom-line is growing, management teams--their plans and execution--tend to not be scrutinized. The human nature tendency that management teams always try to fight off is that success often leads to arrogance. Some do not fully succeed. Unfortunately, no one—and no management team—is ever aware that their success has led to arrogance.
When recessions are looming, boards/owners ask tough questions, and evaluate the soundness of growth plans. Any hint of arrogance quickly turns to introspective analysis around, "how will we win in the future? And, "what are the few things that we ought to do very well, right now, to drive growth?"
In a recession, those management teams, who have been resting on their past success, have the difficult challenges of:
(a) Doing new and different things, and not just the things that they have done in the past. Coming to this conclusion is difficult because it requires management teams to recognize their past success was not 100% tied to internal execution, and that some % of success was attributed to positive external factors; and
(b) Developing their organizational capability for doing these new things.
- Posted by Dan Sougstad
February 10, 2008 1:22 PM
As I would see it, Creativity and Innovation is a never ending process. It is just that applications will differ during recession times.
It makes perfect sense to be ready NOW - before the actual recession arrives. Contingencies and action items must be identified during this 'peace time' before the actual war or before the storm really hits you.
Some such action items that I can think of are -
- Identify the kind of talent and skills that you would need, to really push for during the recession time and for time after good times return. Normally, either talent will be laid off or generally will be dis satisfied with current mode of working during the recession period. Such talent can be tapped and retained during recession period
- If reduction in sales or other activities is a given, it makes better sense to retain better market segment and / or customers during this period. Identification of these corners is a peace time activity that can be done now. When the going gets tough, such tough actions can get going.
- Generating and maintaining focus during any operation is a necessity for all times. Even more so during recession. Focus will also help employees to understand and contribute in a more meaningful manner.
- What is given above is just a preparatory set of tasks. Actual work is in terms of identification of actual areas to select and particular action items to take up. Some actions there will be in terms of -
:- adoption of better technology or other infrastructure / assets to acquire.
:- selection / adoption of better methods / best practices
:- Running pilot programs for improving operations and implementation of any process changes.
:-Training or capability building of team
Opportunity is really in terms of trying new things. Knowing about a recession, a lower profitability or performance level is possibly an acceptable outcome. In that sense, risk absorbing psyche is easier for shareholders and other 'external' members. It is up to the leadership to pick up the gauntlet and make most of it.
- Posted by Shashank Tilak
February 11, 2008 12:20 AM
Dear Sirs,
Recessions happen in every economy periodically driven by trade cycle. But certain times it happen so fast that nothing can be done to arrest or reverse.It is the socio-economic policies adapted by the governments and the delibirate view the political parties in power have, really accelerate the recession process, because of bad financial planning and control of the situations. Ofcourse more creative and effective thinking has to go into every work-module to try and evolve strategies which help the companies to withstand the fall. There is not much of scientific formula to go about. It is pure contingency or crisis management which calls for high degree of competence of the subject for the people who are handling. It is not the question of Boss giving direction and Subordinates obeying them and executing, it can happen the other way round also. In a situation where recession has already cropped in every suggestion both from within and outside the organisation has to respected. This period gives scope to imrpove inter-personal and also intra-personal relations to develop the 'oneness'in the organization and to think in varied directions. Instead of getting panicky, organizations should covert this into an Oppurtunity.
Rammohan Potturi,
Hyderabad,
INDIA.
rammohanpotturi@rediffmail.com
- Posted by Rammohan Potturi
February 12, 2008 12:20 PM
Creativity and innovation. Some of the readers have made the point that this is not new and that all epochs (good and bad ones)or business stages require them equally. The most recent recessions lasted about 8 months and two 16 months.
74-75 16 months
80 6 mos
82 16 mos
90 8 mos
01 8 mos
How much can a business realign their creativity and innovation in 8 months? What specifically will they have to do differently from their previous creativity-innovation? The problem with these type of vague recommendations is that they sound the same for every business cycle or business stage.
Researching these recessions shows that creativity-innovation aside the survivors and best navigators through these recessionary cycles had in common:
1. they had access to lines of credit and cash as they entered the recessions,
2. they were champions in productivity measures leading their industries or sectors, before,during and after the recessions,
3. they had in place strong monitoring cash management systems,
4. they had low cost structures that allowed them to fend off long periods of price competition during these recessions,
There are very few (anecdotal) cases where companies "created-innovated" products and services during the recessions, however, when looked in the context of what competitors were doing in their respective industry, the innovations were not "breakthorughs" nor "radical" nor "disruptive". They were simple modifications of existing models (or business models if you want to use one of the field cachy names).
Who can tell us what exactly are these "new creative-innovative" ideas during recessions and how exactly they differ from all the ones already discussed in textbooks, business trade books and strategy recipes?
- Posted by jesus ponce de leon
February 12, 2008 8:00 PM
In a way recession is good for IT companies to move to product based business. Any enterprise level product companies would easily take 9 months minimum to have one version. In fact, IT service companies could use their bench strength to consolidate and build products for multiple markets.
This would also help design the right kind of business process for the underlying industries - be it small or big companies , to be in next 3 to 5 years. This would herald new thinking and innovations, and business strategy that would transform to improved efficiency levels
- Posted by Gokul Seshan
March 9, 2008 4:59 AM