Now is the time to plant the seeds for business growth. Our tendency in the current economy is to delay investments, stop initiatives, just wait-‘n-see. But the cost of catching up can exceed the cost of innovating now. Investing in innovation today can bring forth a harvest of new customers, new processes and new capabilities later.

Consider some examples from the Great Depression. Tom Nicholas in the McKinsey Quarterly describes how patent applications during the early 1930s declined significantly. Many companies that chose to bench their innovation efforts didn’t make it to the other side. Yet plenty of companies who invested in innovation not only survived, they thrived.

Take RCA. While its stock price was tanking, the company increased its innovation efforts and shifted from radio to the burgeoning television industry. The company returned to profitability by 1934 and dominated the market soon after.

DuPont saw its prices and sales take an alarming plunge – and yet the company increased its R&D spending to develop its new material “Neoprene.” DuPont took advantage of the pool of unemployed engineers and scientists and the low cost of raw materials. Neoprene became a tremendous success – by 1939 every automobile and airplane manufactured in the United States used Neoprene components.

Entrepreneurial start-ups of the period also invested in innovation. In the mid 1930s, engineers Bill Hewlett and Dave Packard self-funded a business in a rented garage. By 1939 the Hewlett Packard Company had created its first product – a sound test device sold to Disney Studios (another Depression era innovator).

My own profession, industrial design, traces its emergence to the Great Depression. Close-fisted consumers were not in the mood to buy, so smart manufacturers hired design consultants to make products better looking and easier to use. Companies saw sales tick up with the new, innovative designs.

Fast forward to 2008, and a comparably lowbrow innovation, Snuggie™, that silly looking blanket/housecoat peddled on TV and friended on Facebook. While the economic bad news poured in, Snuggie sold four million units at $10 each ($20 per pair) – $40 million dollars worth! Snuggie connected with consumers in new ways and succeeded while the economy plunged.

For companies with ideas and cash, an economic downturn can actually become an innovation advantage. Here’s why. Competitors are retreating, leaving gaps to be filled with innovative thinking, while underperforming companies go away altogether. Capital is released from dying sectors. Once the toxic securities of today are cleared out, lending will flow to the innovators of tomorrow. Material costs are down. More skilled workers are available, often at a lower cost. And more consultants are available when full-time hiring might be frozen.

Even cash-strapped companies can use innovation to build their business today. Consider these opportunities:

Tailored Product Innovations. Consumers will be more particular about the products they purchase, paying only for features that provide real value. This presents an opportunity to study users and learn about their needs.

Innovative Touch Points. Social networks and digital media provide a vast, new environment for connecting with consumers and creating “multi-logues” about a brand, product or service.

New Alliances. Expanding networks to share ideas and develop partnerships can create the connections that spawn innovation. Procter & Gamble CEO A.G. Lafley wrote in a recent shareholder letter that P&G relies on outside consultants and partners “to turbo charge P&G’s internal innovative capability.” More than half of all P&G’s innovation includes an external partner, he said.

Innovative Business Processes. GM prospered during the Great Depression in part because of Alfred Sloan’s legendary innovations in organizational management and workforce motivation.

A bad economy produces winners and losers, just like a good economy. Investment in innovation can be the difference. So run past the competition while everyone else is running for cover.


A version of this column originally appeared in the Charlotte Business Journal on March 6, 2009.

Monty Montague is a Principal at BOLT. He directs teams of designers, researchers and engineers in Product Innovation programs and has worked with companies ranging from GE Lighting and Ingersoll-Rand to Herman Miller and Coca Cola. Monty holds over 25 patents for product innovations and his work has been recognized with Gold IDEA Awards for design excellence, the iF award for international design innovation and the IDSA Catalyst Award for market success. Monty's writings have appeared in Innovation Magazine, Design Management Journal, and the Product Development & Management Journal. Click here to email Monty.

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