If you’re cutting costs, what happens to innovation?

Right now we’re all adrift in a sea of conversation about whether or not there’s going to be a recession. Last week yes, this week no, next week who knows. At the same time, we’re also riding endless waves of chatter about things like Generative AI (think ChatGPT), Web3 and Edge Computing—emerging technologies that may represent significant disruption in the years to come.

These waves often prompt internal discussion about this new thing on the radar, threatening to sweep us all off course. And then inevitably, the conversation turns to the current state of the market and where resources should be best allocated to help the company shore up its position or ride out the current market circumstances. It can seem like there’s a choice to make between cost predictability and efficiency or keeping pace with innovation.

So are companies feeling like they have no choice but to cling to islands of stability in the form of business as usual? And that there’s no space or time for those innovation waves? It might be time to reframe the innovation conversation.

Shift your thinking about innovation

Innovation is often confused with invention, with shiny new discoveries and leaps in technology or manufacturing, with dramatic change delivered through new business models, moonshots and big bets. And some innovations are exactly that. 

But innovation is also about accelerating progress through continuous improvement for right-now results or delivering an outcome in a completely new way with what you already have. When talking about innovation, I always reference the successful problem solving by mission controllers of Apollo 13 in 1970 to adapt the command module parts to work on the lunar mobile so that the astronauts could use it as a lifeboat to safely return to the earth after a catastrophic accident in space. 

At DiUS, we define innovation as solving a problem in a smart way by choosing the best way forward for the situation to deliver a positive impact. We build with the future in mind, setting our clients—or ourselves when working on our own startups—up for success. But it’s not necessarily about a new technology and there are always constraints and context to consider. 

Ultimately, our conversations around innovation with clients help them take stock of where they are at and what it will take to get where they are going. Most often, we help clients with innovation building blocks, foundational aspects that help pave the way for an acceleration in their progress. 

It shouldn’t be a choice between ‘innovation’ or business as usual when you have costs to cut. Rather, look at it as a series of innovation-led steps towards achieving business goals, both short and long term. All that urgent stuff that’s important to consider and needs to be done ASAP? Do it, but take a breath to connect it to the big picture company vision. If it’s just helping you tread water, then it’s time for a rethink.

Take an innovation portfolio approach

Accepting that innovation exists on a spectrum, it then becomes a question of balancing time frames with the expected return on investment to drive priorities, rather than eliminating innovation budgets. In uncertain times, it makes sense to require the majority of activity to have a shorter time frame for return.

Consider, for example, McKinsey’s Three Horizons of Growth or Stratgeyzer’s three different types of innovation—popular frameworks for business growth and innovation. Both these frameworks maintain that innovation should be spread across known markets and customers as well as new markets and unknown customers, impacting both current and future capabilities. Using a framework like this enables companies to understand how their innovation initiatives are balanced and makes it easier to pivot when necessary.

Again, resist thinking of truly disruptive things as really far away and not likely to happen soon—another innovation misconception. This leaves a company open to an increased risk of disruption. Repurposing existing technologies into new business models that can be rapidly implemented can be just as disruptive as a brand new technology, approach or practice. 

As a company with a reputation for working with emerging technologies, at DiUS we’re a little more comfortable than most with areas that have a lot of unknowns and are further out. However, we still keep a close eye on the balance between deliver-value-right-now things and could-be-massively-disruptive further away areas. We’ve found it helpful to keep an eye on the pressing problems in our clients’ core business as well as constantly challenging our assumptions about how far away something is and what value it could deliver.

In a time with strong economic tailwinds, the balance of resources allocated to areas that are expected to deliver a return now, next and later might be 70% : 20% : 10%. When you are facing headwinds, it’s time to tweak the ratio but don’t completely take your eye of what’s coming. Instead, prioritise those initiatives that are closest to delivering a return. What makes most sense for your organisation’s circumstances could be 85% : 10% : 5%, but it’s important to maintain a spread.

A collective helps distinguish signals from the noise

We are facing a permanent state of change at a pace never seen before. A constant stream of information is coming at us—Everything Everywhere All At Once. We know that innovation shouldn’t be the remit of a few gifted individuals within a black box somewhere in the organisation. Rather, success comes from creating an internal culture of innovation, where all employees have the opportunity to be involved in both the sharing and investigation of ideas.

Providing clear and regular communication about where a company is heading and what it aspires to accomplish in the future helps employees feel connected and focused on accelerating the pursuit of that vision. And it also arms everyone with the context needed to filter all the information coming at them everyday—making them a valuable source of relevant information and signals in today’s market

At DiUS, our internal system of innovation combines a product trio approach with a focus on the market and strategy so that our exploration is cross functional, solution focused and delivers commercial value. DiUS’ EPD—Engineering, Product and Design—is a group of senior DiUS practitioners, Warner Godfrey, Tom Wall, Dan Livolsi with the addition of myself to represent the market, that leverages DiUS’ system of innovation to identify, prioritise, and investigate forefront tech, practices and approaches across all three horizons.

While it’s led by a group, it deliberately taps into the DiUS collective to continuously and sustainably collect, filter and prioritise relevant signals—in addition to leveraging this same group to investigate potential areas of value. To that end, we’ve set a goal of having 90% of our consultants participating in the DiUS system of innovation. Measured over 12 months, this metric is a key indicator that our system of innovation is working well.

We have found that setting a quarterly focus for our system of innovation makes it very clear to everyone what we’re investigating. Relying on organic sharing of signals is ineffective, so we’ve set up deliberate pathways to share what we are trying to accomplish and collect signals from the various internal groups and subject matter experts. A diversity of perspectives is important to ensure viewpoints from different backgrounds, expertise and experience are represented. Ultimately, these signals are clustered and then, if strong enough, they emerge into trends to be investigated.

For any company, creating a culture where employees can comfortably raise concerns, contribute ideas, and share unique perspectives is critical for innovation but also integrity and inclusion. 

Make evidence-based decisions

It’s unwise to get caught up in the next shiny new thing if it’s not going to help solve a problem, deliver efficiencies or reach new customers. Investigating by figuring out how something works only delivers so much, it also needs to be accompanied by a view on whether or not it’s going to deliver business value. And this becomes even more important in challenging economic times.

At DiUS, we have a range of experimentation techniques for our system of innovation that depend on how much we already know about the area and whether or not we have a real-world scenario to test it on. It also differs when we are testing a new business ideal or model versus comparing two different technologies or approaches. 

One thing that remains consistent in all our investigations is evidence. Assessing the strength of the evidence is a key input into the decision to keep going, pause—it might not yet be the right time—or kill. Or indeed to preserve or let go when cutting costs. Evidence provides the objectivity needed when dealing with the effects of sunk cost—we’ve already spent so much time, it would be a waste not to go further—or clinging to potential. Again, the type of evidence we are looking for depends on the area of investigation.

While there’s a lot in our experimentation kitbag—and it’s always growing and evolving—we do have a particular bias towards doing and learning. It’s aligned to our hands-on approach to problem solving that enables us to answer questions from our clients that range all the way from “should we build this?” to “what’s the best way to architect, design and build this?”. We work in the messy middle with lots of unknowns to steer a course away from knowing and building everything—and overinvesting—towards doing just enough to understand strengths, limits and potential impact.

The ins and outs of running innovation experiments is a really big topic and something that DiUS’ EDP will be diving into in our next blog. We’ll also share what’s worked for us and lessons gleaned from the many initiatives that haven’t gone so well. 

Navigate rough seas

In the meantime, we’re all being asked to operate in a changing and difficult macroeconomic environment. Whether you’re facing budget cuts or not, now is the time to check that you’ve got an efficient system for identifying, collecting and investigating signals and that you’re checkpointing—but not discarding completely—the investigation of new things all together. Rather you are shortening timeframes for expected return on investment and using evidence to make decisions about what to continue with.

Leave a comment

Want to know more about how DiUS can help you?



Level 3, 31 Queen St
Melbourne, Victoria, 3000
Phone: 03 9008 5400

DiUS wishes to acknowledge the Traditional Custodians of the lands on which we work and gather at both our Melbourne and Sydney offices. We pay respect to Elders past, present and emerging and celebrate the diversity of Aboriginal peoples and their ongoing cultures and connections to the lands and waters of Australia.

Subscribe to updates from DiUS

Sign up to receive the latest news, insights and event invites from DiUS straight into your inbox.

© 2024 DiUS®. All rights reserved.

Privacy  |  Terms