A short note originally written on the Insight Community (and lightly edited here) as a response to Implementing Big Ideas During A Recession, which includes a number of thought-provoking responses well worth a click and a read.
Recessions ground large organizations. Locked in groupthink and the inability for individuals to drive or commit to risky change for fear of change, big companies under-innovate and focus on reducing risk and maximizing current revenue from existing lines of business. Thinking about (and investing for) the future dries up.
But recessions provide opportunities for individuals and small teams to implement big ideas. Recessions create flux, and smaller teams are better equipped to make nimble changes to take advantage of change. Examples? Consumers (businesses and people, B2B and B2C) are more open to re-evaluating consumption decisions to save costs, finding new providers, cutting or renegotiating long-term leases or expense commitments. Consumers and businesses need good, quality information on how to change and adapt, where to find new services and providers, how to trade, barter and sell assets and services. Creating, analyzing and using structured data becomes even more important for people and companies to find niches of opportunity and swim against the tide; creating pockets and niches of success are important seeds to build consumer confidence and corporate energy for innovation and change.
Government’s role during recessions is to provide opportunities for individuals and small teams, not to support large industries. True innovation will not come from supporting the business models of the past. Layoffs and “reorganizations” are inevitable even if governments bailout dying companies. Instead of attempting to support existing jobs, governments are better served to help create new jobs, starting by helping smaller organizations find and hire the newly laid-off and by helping the newly unemployed create their own businesses.
How? Reduce the transaction costs behind corporate change, make it easier for new companies to find and access startup equity and credit, and level the playing field for small and large organizations. Even if revenue is tough, small businesses that create value, solve problems and acquire customers can “cash in” when the economy recovers; either revenue improves or the company can sell it’s valuable asset to the public (IPO) or to a private acquirer (mergers and acquisitions).
Businesses need time, people and money to turn costs into revenues, and government’s role is to help time, people and money flow towards the right opportunities. Instead of blindly repairing the old, build bridges to the future.
[Addendum: The oddity? Big companies and institutions that take advantage of recessions and crises to reallocate resources and create new business models can capture supra-normal profits. But that change has to come from within, not poked and prodded through government support.]
