Innovation, Recession-Style

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2. The Innovation "Systematizers" Companies that have already placed their bets on innovation can double down, creating multiyear growth gaps over their competitors. For example, Procter & Gamble (PG), Johnson & Johnson (JNJ), General Electric, Cisco (CSCO), and IBM (IBM) have all made public commitments to growth through innovation. And all treat innovation like any other operating process, setting targets, measuring performance, allocating resources, and actively managing portfolios.

While these companies— particularly GE—have been affected by the recent turmoil, focusing on innovation as a process allows them to go beyond the creation of one-off successes to churn out wave after wave of blockbuster growth businesses.

The systematizers should look closely at their portfolios and ask questions such as: Do we have enough projects that, if half or more of the projects fail, we could still hit our revenue and profit targets? Which of the ideas should we accelerate? Decelerate? Shut down? Do the projects in our portfolio have meaningfully different strategic intents (e.g., feature- or function-based vs. packaging- and promotion-based)?

3. The Streamliners. The final class of potential beneficiaries includes companies that can use current conditions to accelerate efforts to truly change at the pace of the market without losing control. One area to accelerate: dispassionately discontinuing business activities that have passed their expiration date.

While we certainly advocate pruning the corporate portfolio before being forced to, we acknowledge that an economic downturn can be an excellent catalyst to shed businesses, product lines, brands, and projects that were nearing their expiration date anyway.

Companies need to be sure that they don't accidentally jettison businesses with untapped or hidden potential. They should carefully consider whether a business unit or brand has headroom for future expansion or whether it has an asset that can be extended into new markets.

The fundamentals of creating compelling growth businesses haven't changed: a problem that haven't been adequately solved, a solution the customer considers better than current alternatives, and an attractive, sustainable economic model and expansion plan. Yes, things are going to get tougher, and the bar for success is going to get higher. But there remain ample opportunities to be seized by those who don't freeze.

Scott D. Anthony is the president of innovation consultancy Innosight and the author of The Silver Lining: An Innovation Playbook for Uncertain Times (Harvard Business Press, 2009). David S. Duncan is a partner at Innosight. Richard N. Foster is a senior faculty fellow at Yale School of Management, a board member at Innosight, and the author of Creative Destruction and The Attacker's Advantage.