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Ross Prof: Save Your Company Through Innovation Spending
Posted in:
- Career
- Group Dynamics
- Managment
- Risk Management
- Strategy
- innovation
In a recent interview with Ross School of Business professor Jeff DeGraff posted on the University of Michigan's web site, DeGraff urges companies to consider downtimes the best for pursuing innovation, even if that means spending more money than on the surface seems wise during a recession.
He shares three key reasons why this is the case:
- Investing in innovation when costs are low will pay off in the future: "At some point, U.S.-based firms are going to come out of the recession. And there will be a shakeout of those who have invested in the last development cycle and those who have cut back," says DeGraff.
- Innovating can save companies in trouble: "When the risk of innovating and the reward of innovating are reversed, as in a recession, people are more likely to take on increased risk to get the multiplier of a breakthrough," says DeGraff. He mentions Apple as a company that came back from near bankruptcy thanks to its great innovations.
- Innovating can connect companies with new allies: "Capital is scarce and a firm no longer has the wherewithal to do all the investment or own all the intellectual property, so it connects with suppliers, maybe even competitors or maybe even joins an organization whose job it is to connect the dots," DeGraff explains.
DeGraff is aware that many companies in the current economy face cash-flow problems and may not be able to secure loans, which makes finding the money to innovate more difficult. He says this is why it's so important to take this opportunity to build those relationships that will allow for innovation. He also advises companies that there will always be a "failure cycle" when innovating, and that they should not try to avoid it, but rather, speed it up:
You don't spend a lot of money on the first version. The first version is going to need a lot of work. So you experiment in succession with versions 1A, 1B, 1C, etc., until you have some real data on the technology, competency and market, and can begin to shape and integrate the product, service or solution into an initial offering.
Image courtesy of Flickr user Alain Wibert, CC 2.0
posted by Stacy Blackman
October 30, 2009 @ 6:00 am
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