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Jobs Are Weak, Recession May Loom--Do Not Cut Spending On Innovation!

Posted by: Bruce Nussbaum on September 7, 2007

If you haven’t look at the stock market today, it’s sinking, thanks to a very weak jobs report that implies that the risk for recession is up considerably. I know from long experience that the knee-jerk reaction of 90% of top managers in the US in the weeks ahead, as they prepare their budgets for 08, will be to cut “excess” and “extraneous” expenses. And I know from past experience that investments in innovation and new products will tend to be cut. The rationale is always the same—we have to meet our numbers no matter what or Wall Street will kill us.

Well, don’t run scared of Wall Street and don’t cut investments in innovation. Wall Street will kill corporations who don’t have new products and services that generate revenue and profits anyway. If not this quarter, then next. It’s a losing game to play.

Cutting R&D and innovation spending now, as the economy weakens, opens competitive opportunities to those companies that take them. This is the time to boost, not cut, investments in innovation.

Reader Comments

alan posner

September 10, 2007 9:28 PM

I had been in the in vitro diagnostic business, R&D, for a long time and I have observed the same thinking. When cash flow is tight or budgets must be cut - R&D is the first target - why? because we are not a profit center.

Well. the company I worked for, which at the time was the largest in the business - is gone. Lack of new products. Shocking, if you stop investing in R&D - you have assured that you will fall behind your competitors.

But upper management always got their bonuses because they hit their number (savings) - until there was nothing left to save.

Will they ever learn ?

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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