I work in the design industry, and everywhere I look, I see a significant downturn in work. This is a worrying sign for our wider economy. Design is at the forefront of business development, where new ideas are put into practice and old ideas are rejuvenated. So, if this isn’t happening, that means industry is stagnating.
Many of my clients are in the consumer goods industry. They are particularly in trouble with the continued downward pressure on prices and upward pressure on costs. The majority of the products they sell have been in the market unchanged for decades – the Mars bar is 93 years old. So, it is not surprising that their value to consumers is diminishing. They need to innovate to prosper, but clearly, they are not.
Innovation needed to find new value
Innovation is needed to find new value in products and services, not only in consumer goods but across the industry spectrum. It is only through finding increased value that we can kick-start our flagging economies. Yet innovation is a risky business. Its value is unpredictable, its inception is disruptive, and significant investment in time and money is required. It also requires the right mindset among staff and a company culture that cultivates the can-do attitude necessary to overcome the many hurdles and naysayers that will inevitably arise.
I was prompted to write this article by news that Unilever’s CEO, Fernando Fernandez, is fed up with mediocrity and intends to ‘refresh’ a quarter of his top 200 managers because they are not good enough. This will please their investors, I’m sure, as a means to reinvigorate their lacklustre performance – especially Nelson Peltz, the activist investor who has been shaking things up. Yet if you look at it from a staff perspective, I’m not sure it will encourage the performance hike he expects. This comes after roughly 18% of its workforce has already been cut. Teams feel under pressure. This is hardly the atmosphere in which staff will take the necessary risks required to introduce new innovations that would turn the business around.
Damaging consequences
Unilever are not alone, every client I have worked for over the last 5 years has had rounds of redundancies to reduce their overheads. This is a direct way to reduce costs and increase margin, but it has other, more damaging consequences. The process typically takes a year or more, and during those uncertain times when nobody knows if they are staying or going, initiatives and projects are put on hold. Like I said, I am at the coalface of innovation and directly see a complete loss of momentum in these times.
Survival of the fittest?
Back to Unilever’s managers. Does the CEO think this survival of the fittest will motivate them to up their game to the standard he is demanding? I think not. I am reminded of the story of the group of hikers who are being chased by an angry bear in the woods, where you don’t have to be the fastest runner to survive, just faster than the slowest guy.
None of the managers is going to stick their neck out and take risks, and only with risk will there be gain; they will do just enough to stay in the game.
Innovation requires trust, collaboration and a common shared goal to succeed. In the collective team you need R&D to work with marketing, sales and consumer insight teams. Similarly, you need production and supply-chain to be totally on board, and you need commercials and c-suite equally aligned and supportive.
Look at the extraordinary military innovation that is pouring out of Ukraine at the moment. This small, not-rich country has utterly changed the dynamics of conventional war in a few short years with extremely limited resources. They have achieved this through necessity, but also through the teamwork and ingenuity encouraged by their common cause and their supportive leadership.
Rounds of redundancy do not foster that ‘can-do’ atmosphere; in fact, they do the opposite. Boosting morale and self-belief and giving teams the space and trust they need to take risks is the only way these organisations will turn around their fortunes.
