Innovation during a recession…
Business Week recently featured an article on innovation and how companies which do innovate do well, especially in recessionary conditions. The article focuses on 4 companies: Best Buy, P&G, Apple and Starbucks. It notes that the first three have all used different techniques to innovate and modify their business practices. Best Buy has started to focus on providing customer service to its clients, and is doing so by increasing its staff. Adding people during a recession may not seem like a standard business practice, but it is a sign that the company isn’t focused on the short-term conditions, but it is innovating for the long-term. The article also looks at how Apple’s innovative products have been able to stimulate consumer spending in poor market conditions, as well as how P&G is changing its business operations to cope with rising energy costs. The author then contrasts this to Starbucks, who is closing stores to cope with its lack in profits. He also claims that by closing these stores and keeping its breakfast sandwiches, it is not being innovative.
I can only agree with some of the arguments proposed in this write up. I agree with the argument made for Best Buy in that by pursuing an innovative strategy such as increasing its labor force, it could be securing its long term future. The argument made for P&G is much less convincing. The author simply states that P&G has tried to change the fact that it uses 30,000 trucks and 145 manufacturing plants to cope with the rising energy costs. This is not particularly innovative, as every company I know is trying to scale back operations which consume a lot of fuel. So how is P&G any different? I also find the example of Starbucks as not being an appropriate example of a company with bad innovation. It isn’t cutting stores simply because of the bad economic conditions, but because some of its stores were cannibalizing its own other stores. This cannibalization would occur no matter what the conditions are, and hence I highly doubt it will open a huge number of stores up as soon as the economy gets better.
