Why recession is the innovation acid test

Necessity breeds the saying goes, so too for innovation in organizations looking to find new survival skills. Video conferencing reduces travel costs, the Web enables decentralization of resource, opportunities to collaborate blossom. It is through tough economic times, argued by McKinsey’s August publication of “Using technology to turbocharge innovation in a downturn.”

Recession has historically given way to an increase in technological advances for multiple reasons. One being that during economic downswings only major innovations become successful, the kind capable of shifting the paradigm of existing business models and establishing new growth areas to excel into the economic upswing.

Over a dinner last week I was talking with friends about how so many organizations make the mistake during a downswing to go into crisis management unaware that market positioning is underfoot. McKinsey researchers found that nearly 40 percent of leading US industrial companies tumbled from the top quartile of their sectors during the 2000-01 recession, as did a third of leading US banks.

The report states there are two areas of innovation currently taking place. First is the “Internet of People”, in short people are integrating with each other, the market, and workplace. The second is the “Internet of Things” in which micro devices on wireless networks become more interactive and intelligent capable of transforming business models.

The coming paradigm shift here is that the new logic of paying for value will determine the success of your business model.