Looking back at 2008 from the comfort of my armchair, it has been an exciting yet troubling time. Legends like Lehmann Brothers have simply disappeared, an early victim of the recesion. The whole US automobile industry went cap in hand, twice, to the US Government, as its defunct business model collapsed. Even the supposedly decoupled BRIC countries have seen growth fall to single digits, as they were hit by huge falls in demand. What's in store for us in 2009?

Sadly, I do not know the answer to that question. It will emerge out of the myriad of interactions of all the players in the complex adaptive system that is the globalised market. We will have to wait and see.

That doesn't mean that we need to go into 2009 on a wing and a prayer! There are valid lessons that we can learn from recent recessions, even from the great depression of the 30s. One of the lessons is the importance of innovation in preparing for the growth that always follows a recession. As a recent article in the McKinsey Quarterly on Innovation Lessons from the 1930s suggests, companies with great ideas and sufficient money should invest in them during the recession to drive growth afterwards. Companies like DuPont, Hewlett Packard and Google all took advantage of great ideas during previous recessions to emerge stronger out of them.

The biggest challenge in innovation is finding great ideas worth investing in. History shows us that 80% of innovations fail in the market. They are not the ones to be investing precious resources in, in good times or bad. The basic problem with the 80% who fail is that they didn't meet any unmet customers needs. This is really a failure in the innovation process rather than in the innovations themselves. They were domed to failure. As I suggested in a recent blog post on Why You Need to Get Really Close to Your Customers in a Recession, the key to successful innovation is really understanding your customers needs; at the jobs they are trying to do and outcomes they are lookoing to achieve level. The blog post was about service innovation, but the principle applies just as much to product and experience innovation. Even to business model innovation.

As we enter the heart of the recession in 2009, companies will be forced to make some very difficult decisions. Many of them will not survive. This is Schumpeterian creative destruction at work. But the ones who survive, in particular, the ones who thrive after the recession is over, will be those who understood their customers needs best, who innovated around their unmet needs and who invested in these winning innovations during these most difficult of times.

Are you ready to be the new Google? You know what you have to do.

Post a comment or email me at graham(dot)hill(at)web(dot)de to get the conversation going.

Graham Hill
Customer-driven Innovator
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Further Reading:

McKinsey Quarterly, Innovation Lessons from the 1930s

Graham Hill, Why You Need to Get Really Close to Your Customers in a Recession

Ulwick & Bettencourt, Giving Customers a Fair Hearing

Johnson, Christensen & Kagermann, Reinventing Your Business Model

Iyer & Davenport, Reverse Engineering Google's Innovation Machine