Prioritizing innovation: Now’s the time

In nearly all of my recent conversations with business leaders, the topic of our economy inevitably comes up. People are feeling cautious in the face of uncertainty but remain optimistic. When I look at our economic situation today, I think of canoes and swift currents. When these sturdy boats travel the fast-moving waters they rarely emerge from them in the same way they went in.

This analogy helps describe the situation facing businesses today. For every industry that will be disrupted in an economic cycle, there will be organizations that grow and thrive. The question for business leaders is how to ensure that not only do their boats emerge, but also that they come out ahead bridging or extending the gap to their competition.

After the 2008 financial crisis, Deloitte polled 200 Chairs and CEOs of top global companies about what helped their organization during the downturn. The top two factors that led to better performance were preparedness for a range of scenarios, and fresh external perspectives that helped them act faster and in different ways than they might have otherwise. This tells us that organizations should be developing a dynamic plan for the future and a mindset of preparedness rather than prediction.

One investment that must continue to be core to every business plan is a strong commitment to innovation. Research shows that investing in innovation helps companies thrive during periods of economic uncertainty. A study published earlier this year found that sustained investment in R&D was instrumental to helping firms navigate the 2008 financial crisis. And Deloitte’s own examination of winners of our Best Managed program has found that the most successful private Canadian companies are those that implement an intentional approach to innovation.

A deliberate approach to innovation brings improved and more resilient products, people and processes that help a business outcompete the rest for the longer haul. This competitive edge becomes more important in an industry under economic pressure.

Unfortunately, Canada lags behind its peers on investment in innovation. Gross expenditure on R&D (both public and private) has declined since 2007, and is almost 50% below the OECD average. Our own research found that less than half of surveyed businesses continually invest in developing innovative solutions. Even fewer, only 19%, have processes in place to actually test and scale innovations. This is bad for business and is making Canada less competitive - all business leaders must act.

Innovation doesn’t need to be radical—not every improvement is going to transform an industry. To the contrary, sometimes innovation that’s ahead of the market by an inch―not a mile― executed precisely can be even more impactful on your people, your clients and your bottom-line sooner. The important thing is to invest in finding those ideas that will give your company an edge.

There will always be ups and downs in the business cycle. It’s normal. They present challenges, but also opportunities; in every industry that shrinks, there will be organizations that find ways to grow. According to the Harvard Business Review, a full 14% of public companies managed to actually accelerate their growth and profitability in 2008.

Every business in Canada should view the current uncertainty as an opportunity and a call to action for their business and the economy. By remaining prepared and by investing in innovation, every business has an opportunity to emerge from the turbulent waters in better shape.

Listen to my conversation with our Chief Economist, Craig Alexander and Executive Advisor, Pierre Pettigrew about what’s going on in the economy and how companies can stay ahead. Deloitte’s podcast, Disrupting the bear, can be found on iTunes and Spotify.