With an unrelenting war in Ukraine, continued inflation, and unpredictable energy prices driving economists’ concerns about recession in Europe and North America, it’s no surprise that companies are tightening their belts.
Under pressure from stakeholders, executives might be tempted to shelve their growth initiatives until the economic skies clear. But that would be a grave mistake.
Christian Lindener, Co-Managing Partner of EMEA Delivery and Client Success at Mach49, recently joined the Innov8rs community to share why strategic investments in growth during the current downturn will pay off.
Even at the best of times, large corporations have significant advantages over startups in building new ventures, including customers, resources, and people. That’s especially true if the whole organization is engaged in making growth initiatives a success. Times of financial stress can further exaggerate corporations’ edge.
For one, access to capital is much easier when the economic skies are sunny. But when more traditional funding sources are hard to come by, Chris explained, corporate venture investments are a far more competitive option for founders. Plus, the current economic turmoil is cooling previously overheated valuations, allowing companies to invest at more palatable prices.
In today’s environment, a slew of tech layoffs also offers companies access to talent that they haven’t seen in years. Corporations that buck the downsizing trend and hire professionals with the skills they need to build new ventures will be far ahead of their competitors when the economy rebounds.
Chris knows a thing or two about maximizing growth through crises. Before he joined Mach49, he ran innovation for a leading European aerospace giant⇀just as the COVID-19 pandemic grounded planes around the world. But instead of backing off, Chris simply refocused on venture building, investing, partnership, and M&A efforts that would drive value even in the context of the crisis.
High-functioning venture factories, Chris pointed out, reassess the makeup of their portfolios constantly. Limping forward with an overfull portfolio is even more of a liability in times of tighter budgets, and effective venture leaders must learn to kill faltering projects and pivot to more promising initiatives. A wide, flexible view is important: acquisitions, partnerships, venture investing—there is more to growth than venture building alone. In any circumstance, a scrappy, nimble mentality is central to success, but working through financial constraints is one of the quickest ways to develop it.
“Scarce resources can drive more innovation than overfunded innovation units,” Chris pointed out. In fact, half of today’s Fortune 500 companies were founded during economic crises. And Uber, Venmo, and Whatsapp are just a few of the giants that rose from the ashes of the 2009 recession.
And it’s not just startups that benefit from focusing on growth through down periods. In fact, research has shown that organizations that kept up their innovation efforts during the Great Recession significantly outperformed the market and continued to do so for several years after the recession ended. Investing in growth factories today pays dividends for years to come.
There’s another big reason not to slow down on growth initiatives: today’s recessionary environment arrives as the future of the planet and humanity hang in the balance.
“This is the biggest economic opportunity of our lifetime,” said Chris.
Climate change won’t wait for markets to rebound, nor will the innovators at the forefront of developing and delivering new sustainability solutions. Today, companies face a choice: innovate now to protect their longevity and open new revenue streams, or wait for economic conditions to improve and let competitors corner this emerging market.
“Businesses are facing the challenge of how to be sustainable for the next 50, 60, 70 years,” said Chris. “Right now, everyone’s interested in decarbonization, hydrogen, and electricity storage, and the total addressable market is all of humanity. The demand for new technologies and new business models will be huge, so the business case for investing in this area is also huge.”
Given the right funding and commitment, major corporations have the scale to make unmatched impacts with their net zero and nature-positive venture efforts. The key to success? Tying venture-building efforts to business objectives.
“Every major company right now says they want to drive sustainability and net zero efforts,” said Chris. “Attach your innovation strategy to that and to driving new revenue. There’s a huge business case behind it because it’s not a nice-to-have; it’s an imperative. Now is not the time to be cheap.”
Generate growth that matters with the experts at Mach49. Contact growth@mach49.com to learn more.
