Industry experts say that economic upheaval is the most opportune time to be innovative, start up a company, pioneer new products, break into new markets, or revamp existing products.
“Challenging economic times can serve as the rebirth of entrepreneurial capitalism, leading to the creation of much-needed new jobs,” the Ewing Marion Kauffman Foundation, a think tank based in Kansas City, Mo., published in their June study titled “The Economic Future Just Happened.”
In another study, a survey respondent said tough economic times are fit to “Deal with the things you’ve been letting slide.” The study was conducted by Ernst & Young LLP (EY), a global auditing, tax, and consulting firm, and published in their white paper, “Entrepreneurship and Innovation: The keys to global economic recovery.”
Many businesses go under during economic upheaval, but just as many businesses start up, often because people have lost their jobs and finally take the plunge into something they have wanted to do for a long time, but were too risk averse.
“Well-over [sic] half of the companies on the 2009 Fortune 500 list, and just under half of the 2008 Inc. list, began during a recession or bear market,” the Kauffman Foundation said in its report.
Fortune 500 companies that were formed during recessionary, inflationary, or otherwise hard economic times include General Electric in 1873, Hewlett-Packard Development Company in 1938, Toys “R” Us Inc. in 1948 when inflation was rampant, Burger King in 1954, IHOP Restaurants in 1958, Domino’s Pizza in the 1960s, and Microsoft Corp. in 1975.
Firms need to be ahead of the game even more so during economic upheaval, as customers could be more selective and less willing to go with the established mature product lines.
Firms that dominate the market in one year may be gone the next year or a few years down the road. The Fortune 500 list, the NASDAQ Capital Market Composite Index, and S&P Global 100 are among the indices providing historical data that tell of the rise and fall of its listed companies.
“Globally, all the major indexes turn over every five years … The Global Forbes 2000 has experienced a 51 percent turnover; the HDAX (Germany), 50 percent; the FTSE 350 (U.K.), 50 percent; the KOSPI 200 (South Korea), 49 percent; and the Bombay 200 (India), 91 percent,” EY’s research found.
Large companies that are too institutionalized and bureaucratic often become leaner during economic distress to foster an innovative culture.
Chemical maker DuPont (E.I. du Pont de Nemours and Company), founded in 1802, did just that during the Great Depression. It committed funds to the research and development (R&D) that developed neoprene, which was ready for sale in 1937, and nylon, which has become one of the greatest innovations of that time.
Between 1929 and 1936, more than 70 R&D divisions were established by U.S. companies, according to a recent McKinsey & Co. report.
“We hear it daily across the global business community: the only way out of this crisis is to innovate our way out,” the EY report quoted Gail D. Fosler, president of The Conference Board, an independent think tank.
“Effective public policy stokes economic growth,” EY found.
The U.S. Small Business Administration has developed programs to help entrepreneurs stay afloat until they become profitable.
Executive Order 13329, “Encouraging Innovation in Manufacturing,” was signed in 2004 by former President George W. Bush. The Small Business Administration has been tasked to administer two programs that help small high-tech innovative businesses gain a foothold: Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR).
Under these two programs, firms must be a small business, may have up to 500 employees, and the work cannot be outsourced outside U.S. borders. What makes these programs successful is that small companies keep their intellectual property rights to whatever they develop. The funds are awarded under competitive bidding.
The Department of Defense SBIR program funded projects totaling around $1.14 billion in 2008. The STTR program funded projects totaling $132 million in 2008.
Given its high unemployment rate and to foster entrepreneurship, the State of Michigan announced in June that it “is making FastTrac entrepreneurship training available for those interested in starting a new business or retooling an existing business.”
Close to 300,000 aspiring entrepreneurs finished FastTrac training in the U.S., a program that was initiated by the Kauffman Foundation.
“Challenging economic times can serve as the rebirth of entrepreneurial capitalism, leading to the creation of much-needed new jobs,” the Ewing Marion Kauffman Foundation, a think tank based in Kansas City, Mo., published in their June study titled “The Economic Future Just Happened.”
In another study, a survey respondent said tough economic times are fit to “Deal with the things you’ve been letting slide.” The study was conducted by Ernst & Young LLP (EY), a global auditing, tax, and consulting firm, and published in their white paper, “Entrepreneurship and Innovation: The keys to global economic recovery.”
Many businesses go under during economic upheaval, but just as many businesses start up, often because people have lost their jobs and finally take the plunge into something they have wanted to do for a long time, but were too risk averse.
“Well-over [sic] half of the companies on the 2009 Fortune 500 list, and just under half of the 2008 Inc. list, began during a recession or bear market,” the Kauffman Foundation said in its report.
Fortune 500 companies that were formed during recessionary, inflationary, or otherwise hard economic times include General Electric in 1873, Hewlett-Packard Development Company in 1938, Toys “R” Us Inc. in 1948 when inflation was rampant, Burger King in 1954, IHOP Restaurants in 1958, Domino’s Pizza in the 1960s, and Microsoft Corp. in 1975.
Firms need to be ahead of the game even more so during economic upheaval, as customers could be more selective and less willing to go with the established mature product lines.
Firms that dominate the market in one year may be gone the next year or a few years down the road. The Fortune 500 list, the NASDAQ Capital Market Composite Index, and S&P Global 100 are among the indices providing historical data that tell of the rise and fall of its listed companies.
“Globally, all the major indexes turn over every five years … The Global Forbes 2000 has experienced a 51 percent turnover; the HDAX (Germany), 50 percent; the FTSE 350 (U.K.), 50 percent; the KOSPI 200 (South Korea), 49 percent; and the Bombay 200 (India), 91 percent,” EY’s research found.
Large companies that are too institutionalized and bureaucratic often become leaner during economic distress to foster an innovative culture.
Chemical maker DuPont (E.I. du Pont de Nemours and Company), founded in 1802, did just that during the Great Depression. It committed funds to the research and development (R&D) that developed neoprene, which was ready for sale in 1937, and nylon, which has become one of the greatest innovations of that time.
Between 1929 and 1936, more than 70 R&D divisions were established by U.S. companies, according to a recent McKinsey & Co. report.
“We hear it daily across the global business community: the only way out of this crisis is to innovate our way out,” the EY report quoted Gail D. Fosler, president of The Conference Board, an independent think tank.
Government’s Role Seen Imperative
Ernest & Young suggests that governments that promote entrepreneurship and innovation through various incentives, such as reduced taxes, will come out of recessions much faster than those that stifle free enterprise.“Effective public policy stokes economic growth,” EY found.
The U.S. Small Business Administration has developed programs to help entrepreneurs stay afloat until they become profitable.
Executive Order 13329, “Encouraging Innovation in Manufacturing,” was signed in 2004 by former President George W. Bush. The Small Business Administration has been tasked to administer two programs that help small high-tech innovative businesses gain a foothold: Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR).
Under these two programs, firms must be a small business, may have up to 500 employees, and the work cannot be outsourced outside U.S. borders. What makes these programs successful is that small companies keep their intellectual property rights to whatever they develop. The funds are awarded under competitive bidding.
The Department of Defense SBIR program funded projects totaling around $1.14 billion in 2008. The STTR program funded projects totaling $132 million in 2008.
Given its high unemployment rate and to foster entrepreneurship, the State of Michigan announced in June that it “is making FastTrac entrepreneurship training available for those interested in starting a new business or retooling an existing business.”
Close to 300,000 aspiring entrepreneurs finished FastTrac training in the U.S., a program that was initiated by the Kauffman Foundation.
Venture Capital Scarce
The alternative energy industry is in its infancy and could be a breeding ground for many innovative products that bring energy and cost reduction to market in the near future.
“Alternative energy has emerged as a key investment area for venture capitalists. The increasing need for cheaper and cleaner energy sources has made firms realize that the sector holds great potential,” Dow Jones & Co. said in its “Alternative Energy Innovations 2009 Roundup” study.
Dow Jones called for smaller start-ups to bring innovative ideas to the table and suggested that these smaller firms have greater success in garnering scarce funding sources.
In the first quarter of 2008, only $287 million were invested in innovative alternative energy sources, almost 71 percent less than in the last quarter of 2007.
“While the new government emphasis on green investment is set to pour billions into the sector, venture investors at the Dow Jones Alternative Energy Innovations conference say new companies have to be lean, mean and focused to gain their attention,” Dow Jones said in its “Cleantech Investors Drawn to Lean, Mean and Green,” report on its Web site.
