No doubt about it, a global economic downturn is upon us. Recession is a word we hear daily on the news, as we see reports of further job cuts and well-established and renowned businesses calling in the administrators.

As the recession bites, uncertainty about the future and concern about where the money is going to come from to pay the bills, means that cash flow comes under pressure, as each company in a supply chain hangs onto its cash, delaying payments until the last possible moment.
 
In such circumstances, there is a natural tendency to batten down the hatches and curtail spending on all but the bare minimum necessary to keep the business functioning: cutting back on everything. Some companies do it with a scalpel, others with a machete, and still others with a chainsaw. Anything that doesn’t produce revenue (or enough revenue) is fair game for being downsized or eliminated.
 
Every industry has its concerns, and IS wont come out unscathed either, however we have something on our side – innovation. Many may think that a recession could lead to the death of innovation as any activities that cant be seen to deliver an immediate return on investment are likely to have budgets hacked back. However, it’s quite the opposite, as people have to really stretch their resources in order to make the most of what they have, and find new and more effective means of driving the business forward. This makes a good breeding ground for innovation.

“The dictionary defines ‘innovation’ as ‘something new or different’ and ‘the introduction of new things and methods’,” explains Matt Hague, product director at Microlise. “On this basis, there is a very strong argument for innovation in a recession as there really is no better time to seek better, faster, leaner ways of doing business!”

“As the saying goes – necessity is the mother of invention,” continues David Pratt, co-founder and coo of ThinkGrid, “and in addition to that, invention (or innovation in this case), is a necessity. Never is this truer than during a time of economic uncertainty. History has shown how innovators can truly make a difference by being forced to resolve the really big problems that face individuals, organisations and societies. 

“As the Profit Impact of Market Strategy showed us earlier this year, over a 30 year study of 1000 British businesses it was found that companies were spending more on innovation during economic downturns. Those who invested saw a return on capital spent rise of 23.8 per cent, compared to only 0.6 per cent for those who cut their spending.”

When times are good it’s just too easy for a company to keep doing what it’s doing. If decent profits are being made, where’s the incentive to innovate? It’s only when the cold wind of recession begins to bite that companies are driven to optimise efficiency right across the business so as to ensure survival, let alone continuing profitability.
 
This survival instinct can provide the virtual ‘adrenaline rush’ that a moribund, complacent or even comparatively efficient business needs to seek out ways to further improve its service and get the very best out of its assets. 

“Frequently, technology and its innovative application are the keys to such improvements,” says Hague. “The company that responds positively, quickly and decisively to a downturn in economic fortunes is most likely the company that will emerge from the recession stronger and best placed to take advantage of the eventual upturn in the economy.”

Saving every penny possible may sound like the best thing to do when recession hits town, however that’s just not the case. Companies, and more specifically IS and IT departments, can find many ways to lower costs - giving the organisation a decent level of financial security - without affecting innovation.

“Tightening the purse strings means reviewing priorities and keeping the innovation programs that are either inexpensive or define the company. Consider product innovators like GE and Apple – a new product drought would mean substantial hits to their income and profitability. Or traditional process innovators like FedEx – for them, improvements in their IT departments let them pull ahead of their competitors. Once they stopped investing in innovative approaches to their customers’ problems, their growth stopped as well,” says Tahar Bouhads, ceo of research and consulting firm Common Sense Advisory.

“Define ‘innovation’ as improving products and processes. Focus on new products evolved from current offerings that will be more efficient, better priced, and less costly to produce. If ‘innovation’ is part of your company’s mantra, you’ll have to make a bet on which products will win. You’ll have to kill off some of your favourite ideas, or at least park them until times are better. And don’t forget that how well you service your customers could mean that you actually grow business while your competitors are shrinking,” he adds.

Pratt follows on by offering his point of view on fairing the economic storm.

“Look at spend across the entire IT infrastructure and identify areas where costs can be more effectively managed. This does not necessarily have to mean cutting costs but moving them to better suit the needs of the business and free-up budget that can be invested in innovation,” he says.

The key issue is to spend wisely and direct your attention towards those innovative technologies that are going to deliver measurable returns to your business not only in the short term, but in the medium and longer term too.
 
“The first priority is to review your product and services strategy in light of the changing economic environment and realistically re-evaluate which activities should be maintained, perhaps increased, deferred or ceased. You do have to cut your cloth accordingly,” explains Hague.

“However, in doing this evaluation, this is not just about re-assessing what the market opportunity, in terms of size and value, might be in the short, medium and long-term, but also about how you can do the same work for less. This might include outsourcing less-key development work, partnering and looking to suppliers to reduce their costs. It is generally an imperative, never more so than during times of recession, to look at re-usability when innovating – do not reinvent the wheel and do not develop something for a specific customer which cannot be re-used.
 
“Certainly in a recession where every penny counts, apply the same levels of governance to innovation projects as you would to day to day operations,” he continues. “There is often a risk that concurrent innovation projects fall into the background compared to day to day business - every penny should be accounted for and adherence to schedule and specification scrutinised.”

Although times may seem tough, IS managers need to look upon this recession as an opportunity. A chance to shine in the midst of adversity, to show colleagues and bosses your leadership and decision making skills and to help innovation create new technologies and ideas to move industry forward as financial times improve.

“(It is an) opportunity to provide leadership to the business in making intelligent cost cutting decisions, and in making innovative use of technology to both do this and position for the future,” says John Thorp, chair of the VAL IT development team for Information Systems Audio and Control Association (ISACA) and ceo of Thorp Network.

Gus Desbarats, chairman of design company TheAlloy highlights just one of the many ways you can take advantage of the opportunities tough times such as this offers.

“Move from being known as a ‘tech buyer’ to being seen as a ‘process innovator’,” he explains. “Get more involved in the detail of the firms operations. Focus on explaining and getting companies closer to achieving the theoretical optimum benefits of the tools they have.

“The recession is an opportunity for innovation but also a challenge for the IT industry to learn how to get far, far, better at anticipating user, buyer behaviour in far deeper detail than it is used to. Those who get this will be winners, those who don't will suffer.

“The recession is also an opportunity for low budget process improvement to create to better exploit the potential of previous innovation investments.
“This can look like a bit of an innovation paradox: on the one had there is a need to get much better at adapting technology to fit it better to human needs the humans are customers, on the other hand there is also a need to evolve business processes (run by people) to better exploit technology potentials. This may look like a contradiction, but actually it isn't. You can train and motivate employees to adapt, (especially in tough times) but external customers make their own rules (tough ones in tough times).”

Times like this really demonstrate the strategic value of IS and IT to businesses, and your departments are currently in a really strong position to raise your profile across your organisation by delivering the changes needed.

Remember now is the time to innovate. Your sector is not impervious to the problems the recession brings with it, but it can actually have a huge role in helping your company survive. Innovation is the company’s lifeline to the future, helping it to find ways to save money now, but also helping it position itself well for the future.