Article
Tough times, optimistic view
This article has been taken from The Gen newsletter - Spring 2009.
Click here to download the pdf.
While the roots of the current global economic downturn can be traced to an implosion in the
US sub prime mortgage market, fuelled by rising interest rates during 2004 – 2006, the consequences of this seemingly ‘local’ problem have been nothing short of extraordinary. In the past 12 months we saw some of the biggest names in US banking go to the wall, witnessed the biggest fall in the Dow Jones Index for more than 20 years, interest rates dropped below 0.25 per cent and the federal government announced $ trillion plus fiscal stimulation packages. Yet even against this backdrop and general acceptance that the next few years are going to be tough, there remains a level of business optimism that I am heartened by.
Since the beginning of 2009 we have had plenty of opportunity to gauge current views – at conferences, technology council meetings and during our day to day contact with clients and prospects. The tone and sentiment of these conversations are relevant to the global economic situation. Overall, feedback paints a picture of the present and the future of innovation in the
US which is at odds with the current gloomy economic situation.
Broadly, our conversations have addressed two areas: is this recession different to the last one where we saw significant pull-back in innovation activity in industry? and are we looking at an ice-age or major storm, ie will the business landscape be radically different when this recession ends or will we just be looking at major damage?
Considering the first of these, the overwhelming response from industry is ‘growth!’. There is a clear need and mandate to grow businesses to survive and capitalise upon the recession. This desire to grow through consolidation and the discovery/innovation of new markets, products and services is driving an appetite for innovation. We know this is a sound strategy, since those who invested in innovation through the last recession generally emerged strong and gained market share; not least Apple, who opened its
retail stores in the teeth of the last downturn. Vitally, it is growth that will fuel
America’s ability to regain its grip on GDP and counter the increased deficit that government stimulus action will inevitably create.
Additionally, we see significant pointers toward a sea-change in the way innovation is positioned within industry. The emergence of terms such as Chief Innovation Officer and Innovation Tsar indicates the importance of innovation as a growth mechanism to the board and shareholders. The difference is that innovation is no longer seen as the sole behest of internal teams; external cooperation and open innovation have become the de-facto standard. It is even possible that the end of ‘not invented here’ syndrome is upon us!
Considering the question ‘ice-age or major storm?’, the unanimous response is ‘major storm’. Industry leaders see their businesses thriving in the future, one which they fully intend to define themselves. Acquisitions look like good value at the moment and as funding is hard to find, the start-up community offers ideal targets. Internally, innovation and development teams are working furiously. The only difference between now and previous years is more exacting requirements for risk reduction and return on investment, helping to trim ‘fat’. R&D portfolio planning (and independent, informed perspective thereof) is a key business tool for 2009.
These sentiments were echoed when Sagentia attended the recent Frost & Sullivan Medical Devices MindXchange. The mood was upbeat, with particular interest in future trends and new market opportunities around convergence, service innovation and the changing dynamics around Medicare and private insurance reimbursement practices. It is accepted that the medical device industry will see some consolidation, with greater emphasis on ROI and risk reduction. However it is recognised that growth is essential and being poised to capitalise upon opportunities in the wake of the storm is the defining strategy of the moment.