1.3.1 The importance of innovating in crisis

During the time of recession it has a greater significance to create something new and collect new information appropriately, rather than just to manage and keep the existing level of the present situation. The current rules in an existing market are already well-known for the main actors of that market. Thus:

When the circumstances are changing, we will gain significant advantage over our competitors if we are the ones recreating the rules of the market by exploiting the upcoming new opportunities

As a consequence, instead of accommodating to the existing situation, we need to develop skills like creativity, motivation, social interaction and the capability to discover. By now, successful organisational learning means to gain knowledge in changing the “game” ourselves1.
Does it worth it to use a provident strategy in significantly insecure situations? Those companies that are subject to great environmental uncertainty become more open to changes. These changes are realised successfully if the management of the enterprise is flexible enough to re-evaluate the resources2 and develop them in order to create something new3. Obviously, in a turbulently changing environment, this requires greater investment of energy4. On the other hand, if the pace of the market slows down, some of the resources of the company become disengaged. Those enterprises can be successful at the time of the crises that are willing to take this investment not only adjusting to the economic changes but to proactively outpace them.5

Why is innovation still important? Innovation creates advantages that could be easily exploited during the time of a recession as a resource for survival. During the economic crises customer needs and expectations are changing rapidly, there are quickly changing competitors while there is a slowly changing technology and external regulatory environment. The pace of the global and dynamic market slows down at the time of recession6.
This all together brings greater opportunities for innovation than the regular circumstances. Thus, the crises can enhance innovation. What is more, as you could see in chapter 1.1.2, innovation can lower the costs of production, build new markets and increase competitiveness. In addition, innovation can also enhance profitability or stopping the drop in profit. It helps generating employment or keeping it on a constant level while increase market share and growth. This is why innovation is important for the way out of the crisis.


Figure 1: Benefits from innovation

Please stop and think: Can you recall the benefits of innovation from Chapter 1.1.2? Can you recognise the changes in your own market? Can you realise what are the changing needs and expectations of your customers? Which ones can you exploit by innovating? Which benefits would be your target?

 


1 J. Bergstrom: Thoughts on creating a learning organization
2 For more details see Chapter 2.2 SWOT analysis of this Innovation Guide
3 Newman, K. L. (2000) Organizational transformation during institutional upheaval.
4 Zahra( 2009) : Developing the selection and valuation capabilities through learning
5 Volberda, Henk W. (1996), "Toward the Flexible Form: How to Remain Vital in Hypercompetitive Environments
6 Roubini-10 Risks to Global Growth. Forbes