While it may appear to be financially prudent to stop or delay new product work in badeconomic times, it is actually one of the worst things you can do. It insures you will lose when the recession is over.
Here is what we have found from our experience in both concept testing and analyzing consumer technology sales during the last 3 recessions.
- Early Adopters cut their spending a lot LESS than mainstream consumers during a recession.
- For an Early Adopter, buying a new technology is like going to the movies for the rest of America. It's inexpensive entertainment.
- An Early Adopter's self-image revolves around being seen as an innovator by peers. They are not going to abandon their social status . . . recession or not.
- Timing is your friend in a recession.
- The average length of a post-WWII recession has been 7 months. Economists think this current one will last 5 to 6 quarters in the U.S.
- The average adoption time for a new consumer technology is 18 to 24 months.
- If you launched a new product at the start of a recession, Early Adopters would have not completed the adoption cycle by the time the recession was over.
- Smart marketers beat their competitors by focusing on marketing new products to Early Adopters in a recession.
- Competitive noise is lower.
- Marketing costs are lower, and in today's media environment, Early Adopters are more efficiently targetable than ever.
- Early Adopters are still hungry to try innovations
- The viral endorsements of Early Adopters are more likely to be heard by mainstream consumers.
Bottom line, when the recession ends, new products initiated during a recession are competitively established in the marketplace. Last month, Intel launched the first member of a much anticipated microprocessor family, a product known as Intel Core i7. Like other technology companies, Intel has learned that holding back innovation slows recovery. As Sean Maloney, Intel's EVP and chief sales and marketing officer, said in the Wall Street Journal, "You recover from a recession with tomorrow's products, not today's."
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The natural tendency for companies, when a recession hits, is to curtail IT spending. More often than not, it is a blanket policy without a cost benefit analysis or a view to the ROI. That’s where the problem lies. Mixed in with the with the low return and no return investments that should be cut are low cost, high return investments that should be kept. While technology for technology’s sake is almost always a bad idea, innovative technology can deliver dramatic increases in productivity, quicker response times, higher revenue generation, enhanced employee productivity and increased customer satisfaction in good times and bad.
ReplyDeleteThe benefits of technological innovation are why major retailers have invested millions in hardware and software for self-serve checkouts, why gas stations automated their pumps and voice mail systems handle the bulk of company calls today. It’s why car companies have invested in robots for their assembly lines and the use of common XML standards has exploded.
Investing in new technology is even more critical in difficult economic times than when things are good. The challenge is to do more with less. Indiscriminate cost reductions will have the result of doing even less with less setting off a dangerous downward spiral. The companies left standing after a recession will be the companies with a business strategy to selectively invest in new technology that generates a high ROI. Only they will be able to deliver new products and services to the marketplace that will give them a competitive edge.
Companies need to embrace new technology. One is XML-based systems integration. It is an area where productivity gains can be monumental and the ROI is extremely high. While many companies have cut budgets and IT spending without looking at the big picture, others recognize that this is the time to exploit the opportunity by innovating. Tools like PilotFish’s integration solutions can increase IT worker productivity by 10X. And it is a far less expensive alternative to hiring new employees. What 4 or even 10 used to do, one can do with these tools. Plus companies can respond to customers quicker, make administrative operations more efficient, increase their revenues, deliver new products and still comply with overall belt tightening.
Now is the time to invest in the right technology, not ignore it or postpone it.