These were the words of Alan Greenspan in 2000...in many ways it seems like just yesterday, in many ways it seems like a lifetime ago. Not only are we no longer in a time of innovation surplus, we are in a time when mounting evidence suggests our nation's innovation shortfall of the past decade may in fact have contributed to today's ongoing financial crisis.

Even as the economy recovers, attempting to drive meaningful innovation in these uncertain times may seem counter-intuitive at best. Even in a robust economy businesses often struggle to navigate the risks and rewards of investing in R&D and new innovation. In point of fact, in tough economic times such as these, the first tendency of most businesses is to cut costs – cut headcount, reduce advertising budgets, slash R&D budgets, push off potential acquisitions and generally hunker down.

You may be surprised to learn however, that numerous studies have shown that companies that have kept on spending strategically on acquisitions, advertising and innovation during recessions do in fact significantly better than those that make those big cuts. In fact, some would even go so far as to argue that tough economic times make innovation easier to manage and certainly more cost effective. Either way this data suggests that the greater risk in a recession is to fail to bring new innovations to market.

So what are the examples of successful innovation in the midst of a recession? As this current period of economic turmoil has most regularly been related to the Great Depression, let's begin with a handful of examples from that period to illustrate the point.

We can also look at more recent economic downturns, such as 2000, when Apple launched its iPod to unmitigated success. The list could go on, but the point is already clear. And, increasingly, it is a point echoed by senior managers across industries, including CPG leader P&G:

Several important characteristics separate these innovations (and innovators) from the many less successful examples, namely their willingness to invest in innovation across the business model and their unwavering focus on the unmet demands of key consumers. Now more than ever businesses with the type of precise understanding of demand we have discussed in previous mailings can leverage these insights for innovation success.

This precise understanding of demand is exactly what surfaces these game changing opportunities – whether it be an innovative marketing message based on new consumer insights, new product innovations to address unmet demands, optimized pricing/promotion strategies to extract the maximum price premium for your products or identifying supply chain savings based on precisely what does and does not drive value for target consumers. Recently we have used precise insights into demand to help introduce one of the most successful new CPG products of 2008, to introduce the most successful new insurance offer for a major insurer, to innovate the point-of-sale shelf, optimize pricing and drive trade-up for a major OTC brand and to significantly reduce supply chain costs for a food company. Precision guaranteed the success of all of these innovations across industries and across the business model.

So how do you find these opportunities for your business, and exploit them for maximum returns? In next month's mailing we will review in detail a new, proprietary technique from The Cambridge Group that has helped many clients identify and launch entirely new products during a wide range of economic conditions.