The current economy poses a challenge for just about every type of business in every type of industry. But what good entrepreneur doesn't relish a challenge? According to Thomas Koulopoulos -- president and co-founder of Delphi Group, a business and IT advisory service, and author of The Innovation Zone -- today's tumultuous business landscape is perfect for innovative and ingenious entrepreneurs. "Innovation is the only way we can get out of this mess and create a new era of prosperity," Koulopoulos says. "Some of the greatest innovations have come out of times of economic crisis." With that in mind, Inc.com's Alexandra Johnson spoke with entrepreneurs from some of the most progressive small businesses in the nation, to seek their advice on staying innovative now.
Why should companies focus on innovation, and not just survival, during a recession?
Colin Angle, co-founder, CEO, and chairman of iRobot, a Bedford, Massachusetts-based company that designs and builds robots: If your company's bread and butter is the invention and creation of new products, you don't really get to have time off for a recession. Innovation is the lifeblood for companies like iRobot, and it's what we are and what we do.
Paul Berger, vice president and technical director of Sugar Land, Texas-based Oil Chem Technologies, which specializes in surfactants and processes for chemical enhanced oil recovery: We've learned our lesson from the past. We had quite a bit of luck in the late '90s with some good projects, and then things went to sleep for a while. Being small, our company was able to overcome those obstacles -- we used all the down time we had to develop new products and processes that we wouldn't have had so much time to concentrate on in better economic times. So when things came back, we were prepared, and we've had a great growth spurt in the last three years because of that.
Jeff Probst, CEO of Blue Sun Biodiesel, an agriculture-energy company and marketer of renewable fuel products in Golden, Colorado: I think if you continue to focus on the customer, you'll be better positioned to maintain innovation in good or bad times. Those who maintain it in bad times can be better prepared when the economic situation turns around.
Dwayne Spradlin, president and CEO of InnoCentive, an online brainstorming community based in Waltham, Massachusetts: When companies disinvest in the very things that keep them competitive, they lose the ability to maintain market share. And when they cease to invest in the future, and the economy rebounds during good times, they don't deliver the results that are expected by shareholders and the markets. So it seems like "the obvious thing to do" to disinvest in something like innovation or marketing and other things that at times feel nonessential during a downturn, but it's exactly the wrong thing to do for a company that's taking a long view and wants to maintain and gain market share.
So how specifically do companies stay innovative and forward-thinking during tough times?
Angle: The company's culture and approach to innovation really determine whether a company can be sustainably innovative or not. We take ideas from all over the business. We have periods of the year where we give the engineers more freedom to pursue ideas that they may be bouncing around in their heads but may not be part of their regular development and engineering jobs. And during challenging economic times, other companies are more willing and open to partnering deals than they would be during stronger economic times, which can create new opportunity and makes downturns on the economy actually a richer environment for multi-company cooperation and innovation.
Berger: A recession gives us a little time to do things we had put on the backburner because of the pressures of everyday business. There's always a light at the end of the tunnel. Gradually, we'll get back to our regular economy. But in the meantime, we'll be developing some things that will be very useful. And because we're involved in some of these research projects, we'll get peripheral ideas that may even help us to diversify a little and get involved in areas that are not affected by the economy right now.
Probst: Keeping the doors open is critical in tough times, but the way to do that is to maintain close contact with your customers and your sales channels to get fresh ideas. It allows you to open up new areas of opportunity, despite everyone suffering the same kind of economic downturn.
Spradlin: You really need to do three things. Ask yourself, what projects are in the pipeline today? Which are truly going to deliver results with a high probability of success now and in the future? And then you need to reprioritize your financial commitments to ensure that necessary programs are funded.
Do you see innovation as a way for smaller companies to compete with larger ones?
Angle: Absolutely. If you think about a large company, they tend to do a very, very good job of the here and now, which is driving their revenue today. And they often do a fairly good job of putting R&D dollars against technologies that could benefit their business in three or four years. It's this middle horizon, this 18- to 36-month period, where larger companies tend to have a lot of problems when it comes to developing new products. It's the smaller companies -- the venture-capital backed companies -- that can take new innovations into the mainstream.
Berger: We've been pretty good at staying lean and mean so that we don't really suffer any cutbacks unless things really get drastic. We have much less overhead, and everybody knows the business. In a small company, everyone can do everybody's job -- whereas in a bigger company, you have all these different departments that have been structured and built up, and those are where companies start cutting people. So there's sometimes an advantage to being small and focused.
Probst: It's the only way. I think speed, flexibility, and agility are critical in any industry when you're a smaller company playing against entrenched, larger companies. And it's critical for any market in the economy.
Spradlin: It absolutely is. If I'm a midsize company, in this economy, I know I need to innovate because I can't afford not to. But I can get access to some of the same resources around the world that those large organizations -- my competitors -- have. And I can do it without the large overhead fixed-cost that those larger companies maintain.
Do you think it's more difficult to be innovative as the company grows?
Angle: As companies grow, it's not obvious how to shepherd products through the second phase of existence. There are companies who do it well, but many more who do it poorly. That's why it's difficult to sustainably launch organically grown innovative products.
Berger: From my experience, it does. I [used to work] for a larger company, but it was smaller companies working within the framework of a larger company. Each one had its specialty, so they operated very well. But once that layer of middle management was removed, and upper management ran the company, it became such that they didn't understand the business, and it was harder to be innovative.
Probst: I hope not. I think that's the lifeblood in today's world, with competition coming from all over, with new technology, with new players in international markets. Because of that, I think it's always a demand on your business and on your strategy to maintain that performance or strategy toward innovative new products and services for your markets.
Spradlin: I think that companies need to innovate the way they innovate. Organizations large and small that prosper in this century will be the organizations that really know how to not only tap the inside talent and focus on the innovation programs that matter, but that also understand how to reach their customers, their partners, and innovators all over the world. Companies that get this right will have better cost economics, faster time to market, and a more disciplined innovation system to insure that they'll be able to deliver. Then, in the next downturn, you've actually got a more flexible infrastructure relative to today.
If you could give a single message, what would you say is your best advice for small companies on staying innovative now?
Angle: I think the best advice I have is to give yourself enough runway to fail and to survive in the end. IRobot got where it got certainly not through any exercise resembling inspired efficiency. I think we had about 18 different failed business models before we landed on ones that started working for us. But we were very fiscally responsible and things were going well. We raised money. We were always innovative, and always had a strong mission statement, which guided what we were trying to do, so we didn't ever sit around wondering what to do next. No one packed up their bags when things went the wrong way. We're all still having and we're all still excited in the mission.
Berger: Try to maintain the staff you have, and try to do some things you'd planned on doing that you didn't have time to do before.
Probst: Stay closely in touch with the marketplace itself, your customers, and your sales channel. I think communication and listening to the market and customers is a great way to better position yourself in the marketplace, so that when the economy turns around you're a much more competitive player in the market. Stay close to your customer.
Spradlin: I think companies that want to stay innovative right now need to focus on the innovation programs that are truly strategic to their organization, and they need to think differently about how they do innovation. They need to look at the opportunity to make the entire world their R&D lab, master those capabilities, bring that in-house, and continue to innovate even in tough times.