Page 133 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

5. Invest in the future through M&A and divestments.
6. Employ game-changing strategies.

■ FOCUS ON INNOVATION ■
History has shown us that innovation is the engine that spurs
new periods of growth. We have already referred to
Kondratiev’s work and how some of the greatest technological
advances heralded new eras of prosperity. And even if one does
not subscribe to the theory of K-cycles, one need only look at
the Great Depression to see how innovation can make all the
difference to the fortunes of individual companies.
Take a look, for example, at IBM—a company that during the
Great Depression did an effective job of combining research and
development, investing in building technical capabilities, and
understanding changing customer needs and business condi-
tions. The small but growing business-machines industry was
one of the worst affected during the Great Depression—the
production of business machines saw a 60 percent decline
between 1929 and 1932. Many firms filed for bankruptcy, and
the few survivors scaled back costs.
IBM, then a relatively small player in the industry, was less
severely affected than its larger rivals. It decided that it could
leverage its position by maintaining (rather than reducing)
production capacity and by increasing its investment in
innovation.
These bold decisions were driven by Thomas J. Watson’s
conviction that the industry faced a huge opportunity for
growth in the years ahead. In 1929, only 5 percent of business
accounting functions were automated. Watson, then president

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