3.84% Signals Recession--This Will Be A Testing Time For CEOs And Innovation.

Posted by: Bruce Nussbaum on November 26, 2007

The interest rate on the 10-year Treasury bond dropped to 3.84% on Monday, below that of the 2-year bond and you don’t have to be a financial whiz kid to understand that in the past this often signalled a recession ahead. The Federal Reserve is again pumping extra money into the financial system.
The big test for senior managers (of big corporations and small design consultancies) over the next year or so is whether they proceed with their plans for innovation and change or fall back on cost-cutting and efficiency drives to keep profits up.

Already you see CEOs killing plans to transform their business cultures as the marketplace slows down. They are falling back on tried-and-true mechanisms for survival. And for some companies, Six Sigma may be the salvation in tough times. But for many other corporations, a slow-down in growth may be the golden opportunity to transform the way they work and how they develop products and services.

My advice to CEOs contemplating cutbacks to their innovation efforts—don’t do it. Seize the moment to create competitive advantage for the future now.

Reader Comments

Todd W.

November 26, 2007 11:03 PM

Interesting to look back on the last implosion and see what Apple was doing. Oh, yeah - as the recession was really picking up steam, Apple was introducing the iTunes (Jan 2001) and the original iPod (Oct 2001).

And layoffs? Nope.

From SF GATE:
Apple has maintained its workforce at about 11,000 throughout the year. In a meeting with analysts last week, Chief Executive Officer Steve Jobs said: "Almost every single competitor has been doing massive layoffs and retrenching and restructuring, but we're doing quite the opposite. We're not laying off boatloads of people. We're taking those talented people and saying that if we're going to get out of this, we're going to get out of it by innovating our way out of it."

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/26/BU118967.DTL

Christa

November 27, 2007 1:36 PM

Hi Bruce,
Thank you so much for this concise and strong support of innovation. I work in the innovation department of a large corporation and it's true times are tough, though improving. That improvement is coming from innovation and design and we need to keep forging ahead in that direction. I really appreciate your counsel and have forwarded your post to my boss to give us both some encouragment to keep pushing forward.

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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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