Make hay while the sun of recession shines.(comment)

When recession has caused an all-round despondency, it was heartening to hear plenary speakers at the opening session of the recent SPIE Advanced Lithography conference touting the current downturn as a time for new design innovations for new markets.

What are the implications of a recession on design innovation? There seem to be two views. One view is best said in the words of American Express CEO Ken Chenault, quoted in Fortune, "A difficult economic environment argues for the need to innovate more, not to pull back." The other is well expressed by Advertising Age in a recent editorial, which argued that innovation wasn't truly a strategy--it was a tactic that was somewhat frivolous in good times and downright wasteful in bad ones.

THE SILVER LINING

I for one would agree with Chenault. In the recent book The Silver Lining, the writer Scott Anthony points out that the darkening economic climate is good for innovation. When companies have deep pockets, they invariably put a lot of money even into bad ideas. But when resources are very scarce, bad ideas are unable to linger for long. Decision to kill bad ideas are taken early in the design phase, in contrast to prosperous times when companies can afford pursuing a bad idea even when repeated design failures or problems show inherent weaknesses in the idea.

Anthony looked back to three downturns in the U.S. and identified 44 companies that had less than $1 billion in revenue at the start of the downturn, but grew phenomenally during downturn at a CAGR far more than during normal times. Among such companies are Intel and Southwest in 1979, Best Buy and Charles Schwab in 1989, Amazon and Research in Motion in 2000. Each of these companies grew almost 30 percent per year during the downturns of 1980-82, 1991, and 2001 respectively. Anthony identifies some companies that have a turnover of about $1 billion today and are making excellent use of the recession to grow through innovations. Among these are VistaPrint, an online marketing services company; iRobot, a home robot ...