Recent recessions in 2001 and 2008 can give us valuable insight into what we should do to optimize the results from innovation spending in a recession. There is a pattern to what successful firms have done in past recessions and it is as follows:

  • Successful firms maintained profits or limited losses by reducing expenses in areas that brought operational efficiency.
  • They kept innovation spending constant as a percent of revenue.
  • Firms that exited these recessions as winners explored lower risk opportunities in adjacent markets or through incremental innovation instead of dramatic technological change.
  • They collaborated with customers, suppliers, and smaller firms to reduce risk and uncertainty.

From an operational perspective, firms need to focus their attention on opportunities with less uncertain market potential and a high net promoter score. In these markets they need to drive product differentiation and improve unit economics.

For a full white paper on Innovation Spending in a Recession click here.