Special Report: Innovate In a Recession

If the downturn is hurting your entrepreneurial spirit, we have good news for you: Recessions are historically ripe with opportunity for innovation. Don't believe us? Read on.
Magazine Contributor
8 min read

This story appears in the February 2009 issue of Entrepreneur. Subscribe »

Change Your Mind-Set
The economy tanks. You have two options: hole up in a bunker and hope it ends before you run out of tinned peas, or innovate and emerge stronger than when the economy took the hit. "During a recession, people tend to say, 'Let's stop everything and save money until it's over,'" says Bernard Meyerson, vice president and CTO of IBM's systems and technology group. "Well, you're not going to save your way to greatness." But you can innovate your way there. So stop moping and heed our experts' advice. Here are three steps that'll help you focus on innovation rather than recession woes.

  1. Take a Reality Check
    "Love the lows," the experts proclaim. "Relish the recessions." Given the national mood, even Curb Your Enthusiasm's Larry David comes across as more sensitive. In fact, before you relish anything, "make sure your core business is strong," says Susan Schuman, CEO of innovation and leadership firm SYPartners. "Protect your core, because only then will you have the capacity to innovate."
  2. Don't Go It Alone
    There's the romantic notion of innovation: lone genius, devising the idea of the century--from a tool shed. Then there's reality. "Innovation is actually much more complex," says Edward Bevan, vice president of innovation and market insight at IBM. "Increasingly, it's the integration of technology, business models and pro-cesses--all wrapped together. It's very difficult for any one entity to do that alone."

    Bevan ought to know. He oversaw IBM's 2008 "Innovation Jam," an online gathering of thinkers who generated far-ranging ideas from which IBM will extract solutions that all participants can use. Few entrepreneurs could erect an IBM-size jam, but the guiding principle applies: "We believe that if we pool our wisdom, we'll end up with better results," Bevan says.

    If IBM, with its vast internal resources, thinks it's important to reach beyond its borders to fill gaps, it stands to reason that entrepreneurs should, too. Gather diverse thinkers around a table to create a "public commons of ideas," says Bevan.

    Meanwhile, Web 2.0 teems with tools for tapping the wisdom of crowds. Such as:
    . Collaborative brainstorming, mind-mapping: brainreactions.net, mindmeister.com, bubbl.us, mindjet.com, shareyourbrain.com
    . Emergent trends in business, culture: trendwatching.com, iconoculture.com, psfk.com, springwise.com
  3. Play To Your Strengths
    "A recession is an especially good time for entrepreneurs to build loyal followers," says Thomas Koulopoulos, founder of strategic business consulting firm Delphi Group and author of The Innovation Zone: How Companies Re-Innovate for Amazing Success. Big companies, often good at community building, will be distracted during a downturn. "But when the economy recovers, everyone will go after that audience--and if you already own it, that gives you tremendous leverage."

    Robert Wolfe, 38, founder of Madison Heights, Michigan-based outdoor equipment and apparel retailer Moosejaw Mountaineering, agrees. He built a loyal community around his brand by squeezing every pixel of opportunity out of Web 2.0. His innovative marketing, known as "Moosejaw Madness," spans text campaigns, a blog and "Daily Remark" on moosejaw.com, among other initiatives.


    of executives say innovation is a top priority.

    (Source: Forrester Research)

    In the 2000s, many larger retailers responded to the dotcom implosion by discounting extensively. Instead of battening down the hatches, Wolfe ratcheted up the madness. "For our survival, innovation was imperative," he says of his close to $40 million company. "We made sure our customers knew we were still at it and as crazy as ever. And I think it's going to work out the same way this time around."

    In this economy, Wolfe won't pursue everything on his innovation to-do list."But we think we're good at Moosejaw Madness," he says. "I'd say that if you're good at three things on your list, don't skimp on those three. Innovate around whatever you're best at."

5 Steps to Innovation

  1. Apply Rigor
    According to management consulting firm McKinsey & Co., 36 percent of top managers say they govern innovation in an ad hoc manner. "We often think that if we throw people in a room and ask them to brainstorm, they'll innovate," says Thomas Koulopoulos, founder of strategic business consulting firm Delphi Group. Yes, they'll generate ideas, but ideas don't have legs by which to leap off the white board. To be more hit than miss, establish a companywide process to brainstorm, test and implement ideas. Sound daunting? Get training at dicor.org, ideachampions.com, innovationmasterclass.com and strategyninstitute.com.
  2. Go Where Consumers Go
    When one of SYPartners' clients, a bank, sought to reach the Hispanic market, the innovation and leadership firm sent executives to a Hispanic neighborhood with undocumented workers. Observing challenges these workers faced in dealing with banks, the execs saw unmet needs they couldn't have spotted from the corner office.
  3. Learn From Other Industries
    When the executives realized the extent to which the Hispanic market was community-driven, SYPartners had them look not at another bank, but at community trailblazer eBay. In other words, if you want your clothing company to cultivate superior service, have tea at the Ritz. If you want to attract top talent, see how Procter & Gamble does it.
  4. Test Your Idea
    Take experts' counsel: Long before you fall in love with your idea, show it to consumers to see if they will, too. Cash-strapped markets don't suffer bad ideas gladly. That makes a period of decline--with its intense selection pressures--a great time to test ideas. Says Susan Schuman, CEO of SYPartners, "The good ideas rise to the top, and the bad ones go away quickly."

    Here are some places to test your ideas:
    . Kancept.com: Post your concept and ask, "Would you buy this?"
    . Emachineshop.com: Design and order a 3-D prototype.
  5. Get A Leading Edge
    According to Boston Consulting Group, leaders who successfully cultivate innovation have the ability to change, tolerate ambiguity, assess and be comfortable with risk, balance passion and objectivity, and command respect. If you don't fit that description, appoint someone who does.

Diagnosis: Ultimateitus
Definition: Compulsion to continue working on an innovation even though it's done
Symptom: Diminishing returns
Treatment: Put consumers' needs above yours, and remember that love does not a revenue stream make.

Where to Get Inspired
By James Park


  • Edward Lowe Foundation: The Edward Lowe Foundation helps second-stage companies grow to the next level with retreats and roundtable sessions, and also provides articles and briefs on myriad business topics.
  • SBA online courses: These free online courses produced by the SBA will help you stay informed and competitive. The courses range from the SBA's Guaranty Programs to business plans and marketing.
  • SCORE Small Business Success Podcasts Series: SCORE's free podcasts are an excellent place to start. Many deal specifically with the economy, such as Planning in an Economic Downturn.
  • U.S. Patent and Trademark Office: Register for a patent or trademark, and find out how you can protect what's yours.


  • 1,000 Dollars and an Idea: Entrepreneur to Billionaire, by Sam Wyly ($24.95, Newmarket): Wyly started his first business with just $1,000 and went on to become a millionaire before the age of 30. Published in 2008, the autobiography follows Wyly's inspirational entrepreneurial journey from IBM employee to founder of Green Mountain Energy, offering insights on the lessons he's learned along the way.
  • The Back of the Napkin: Solving Problems and Selling Ideas with Pictures, by Dan Roam ($24.95, Portfolio Hardcover): Roam's book promotes visual thinking as a way to clearly communicate and map out your ideas. Use this strategy to turn your next brainstorming session into a breakthrough.
  • Reality Check: The Irreverent Guide to Outsmarting, Outmanaging and Outmarketing Your Competition, by Guy Kawasaki ($29.95, Portfolio Hardcover): Entrepreneur's "Wise Guy" columnist ("Top 9 lies of venture capitalists," page 36) writes about everything from business plans and pitching to schmoozing and innovating in his newest book.
  • The Tipping Point: How Little Things Can Make a Big Difference, by Malcolm Gladwell ($14.99, Back Bay Books): This bestseller discusses how ideas and messages can become viral and why small changes can have big effects.
  • The Toilet Paper Entrepreneur, by Mike Michalowicz ($24.95, Obsidian Launch LLC): This book's no-nonsense, enthusiastic approach may be what you need to get yourself out of the recession funk. Michalowicz shows you why starting a business isn't about needing money, a business degree or the conventional resources.


Shop.org Strategy & Innovation Forum
February 2-4
Gaylord Palms Resort & Convention Center, Orlando, Florida
This event will focus on how retailers can not only survive the recession, but also thrive in it. Learn why you should invest in innovation, embrace social media and deal with changing customer behaviors.

San Francisco International Gift Fair
February 7-10
Moscone Center, San Francisco
If you're looking for product ideas, come check out what's new and what buyers will be looking for. This event showcases everything from crafts to food to imported goods.

10th Annual Sales & Marketing, 2009: A Frost & Sullivan MindXchange
February 8-11
Disney's Grand Californian Hotel and Spa, Anaheim, California
This event focuses on sales and marketing, which are especially critical in this volatile economy. Brainstorm and network with industry leaders and attend up to 16 interactive sessions.

Entrepreneur.Com Resources

  • "2009 trends to watch": Our annual hot trends research helps you stay ahead of the game. Find out which markets and industries are set to grow this year.
  • Business Idea Center: Want to see what businesses are out there but don't know where to start? Make this your first stop. Browse by industry, interest or profession, or search by keyword.
  • "Great Minds in Business": This series on historic innovators and businesses will show you what you can achieve in the future by drawing inspiration from the past.
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