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In a few weeks, I'm heading to Brazil to speak to a large group of manufacturers on the perpetually-topical subject of innovation in a time of crisis. The forum, held by FIERGS (Federation of Industries of Rio Grande do Sul), addresses the well-known struggles of the Brazilian economy. Unfortunately, those same issues are now being faced by the Canadian economy.

With this week's announcement that Canada is in a "technical" recession, these two resource-driven economies are slowing to a crawl. The good news? For me, there's never been a better time for businesses to embrace innovation. And the best way to succeed in this perpetually challenging area is to look at innovation through the lens of crisis – or turnaround – management.

Innovation has always thrived in hard times. Desperation forces people to question the status quo. In good times, people may be less inclined to rock the boat, but when investors and customers are bolting for the doors, you have no choice. That's probably why some of the world's great companies were founded during recession – businesses such as General Electric, IBM, Disney, Microsoft and Adobe.

One of the world's most successful innovators, Apple, wasn't founded during a recession. But the same principle applies. When Steve Jobs returned to take the reins in 1997, Apple was facing crisis: too many products, too little focus, not enough revenue. What saved the day? Steve Jobs shaved Apple's product lines by 70 per cent. Even the best companies can become bloated and undisciplined during the good years and forget the core competencies that made them great.

To stay true to your strategic core, you could do worse than look to the process of strategic turnarounds. Once a company has accepted that it has lost its way, a successful turnaround requires an extraordinary commitment to self-analysis, questioning, reflection and day-to-day change. The same turnaround tools can be adapted to meet the enormous market pressures all businesses face today.

The main reason many companies fail is lack of focus. They start off doing one thing well, and then get attracted to – or distracted by – other opportunities. Some may be successful, others not. But all of them distract the business owners and leaders from what they set out to do. And all too often these shiny new opportunities are well removed from the business's original roots. That means there is little synergy with established operations, and way too much to learn – about new products, suppliers, distribution channels, markets and customers. It's falling into this pit of guesswork and improvisation that leads most companies to call in the turnaround experts.

It takes courage to admit that your company needs to reverse course. But successful turnarounds require everyone involved to face the brutal truth.

The best turnarounds usually begin with a strategic review that asks: What are our strengths? What do we do best? Where are we losing money? What operations are most profitable? Where can we grow? Successful change also requires that you reconsider some of the specific actions that got you into trouble. Stop doing the same old things; one definition of insanity is doing the same things and expecting different results.

Here are some of the key elements of a successful turnaround:

  • You need the right people on the journey. A winning turnaround starts with shedding employees who aren’t contributing sufficient value, or lack passion for their job. Once you get rid of the complainers and the complacent, your company has a better chance to bounce back.
  • You need a “change champion” to manage the turnaround – someone who owes nothing to the old, failed ways of doing things, and is prepared to listen carefully, consider many new ideas, and take direct action. His or her objective must be to stop the bleeding and get the company moving in the right direction. This is usually a hard job for the original owner/manager to do. Regardless of who takes charge, they require a formal process. As outlined in my book, The 90% Rule, that means knowing where your organization came from, knowing what it’s best at, and finding more ways to create value for more customers.
  • Focus is key. Trimming marginal operations is imperative – as Steve Jobs knew when he cancelled 70 per cent of Apple’s product lines in order to focus on only the best and biggest opportunities. In crisis, protect the core. Pull the plug on non-core activities.
  • Review prices and margins. Many companies are afraid to raise prices or set minimum margins for fear of losing customers, but it’s the best way to figure out who your best customers really are, and to clear out the unprofitable ones. Every penny of these exercises goes directly to the bottom line. No surprise, then, that the companies I have seen do this all wish they had done it sooner.
  • Refocus on the customer: What do your customers want and need? What are their biggest pain points, and how can you relieve them? Get out and talk to the customers. (It’s a shame so many companies wait till they’re in trouble to do this.) Once you have identified new ideas, opportunities and solutions, let the customers know the new directions your company is taking – and how they contributed to its success.
  • Keep employees well informed of the company’s plans and decisions. In the absence of facts, fear breeds confusion and negativity. Keep everyone informed, involved, and marching forward.
  • Paint a clear picture of what you’re trying to do and the process you are following. Share this vision with all your all stakeholders (customers, employees, suppliers, investors, bankers, etc.). You want everyone to know that there is a better future ahead, and that their sacrifice, hard work and faith will not be in vain. Make sure to offer a specific reward at the end, whether it’s increased job security, bonuses, profit-sharing, and/or a blowout party to end all parties.

Diamonds can only be created under great pressure. Whether your company needs a major rethink or you are simply looking for new opportunities for growth, crisis thinking can create the new opportunities you and your team are looking for.

Ken Tencer, CEO of Spyder Works Inc. is a business and innovation thought leader who is the co-authour of two books on innovation, including the bestseller Cause a Disturbance. Ken is also the co-creator of the D!Series workshops, and can be followed on Twitter at @90per centrule.

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