Don't kill the goose before it lays the golden egg

A new report warns against cutting down on innovation investment in a bid to trim your cost base...

Last Updated: 31 Aug 2010

You won’t find many CEO who dispute the importance of innovation. Even in the current slowdown, many business leaders insist that the last thing they’re going to do is cut down on R&D. The problem is: this is easy to say, but harder to do in practice. When times are tough for your business, the obvious response is to go back to basics – to focus on getting the money through the door and avoiding risky moves that don’t have a definite pay-back. Managers are reluctant to spend money unnecessarily– and this is bound to discourage innovation, however much you continue to proclaim its importance.

According to consultancy Arthur D Little, abandoning innovation efforts in a downturn is a big no-no. ‘Recession fears have been the death knell of many potentially brilliant R&D projects,’ says director Rick Eagar. But if a company wants to come out smiling, it can’t afford to slow down – in fact ADL cites the examples of Google, Amazon and Research in Motion, all of whom have enjoyed big success by actually boosting R&D when times were tough.

The key, apparently, is not to kill innovation – but to look at ways to get more value from it more quickly. ADL talks about creating an ‘innovation culture’ within your company to make sure people aren’t deterred from innovation efforts, which largely boils down to the ‘unwritten rules’ – the behaviours that really dictate how your people go about their jobs. If you can work out what these are, you can then work out how innovation fits into them – for example, if your staff are motivated by the idea of working collaboratively, you need to make sure your R&D programme reflects that.

The report also suggests two other good arguments for keeping it all going. First, it’s actually cheaper to do when times are tough – a slowdown means your development teams have fewer demands on their time, so the opportunity cost of them working on a project is less. And second, external partners might be more open to working together, rather than assuming they can go it alone – and two heads may be better than one.

So make sure you’re practising what you preach when it comes to innovation – or by the time you’ve realised your mistake, it might be too late to do anything about it...

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