“[Recessions] can cause people to think more about the effective use of their assets. In the good times, you can get a bit careless or not focused as much on efficiency. In bad times, you’re forced to see if there is a technology [that will help].”

Craig Barrett, Chairman of Intel

Water hides the rocks at the bottom of the ocean. Lowering the water level exposes the rocks underneath.

In a great economy, money hides problems and opportunities. Companies will get orders whether or not they innovate. But in a bad economy, lowering the water level will expose new opportunities to our corporations.

Reduced spending will spur businesses to create products that even newly poor customers will buy. Products that customers truly need and value. Products with enduring value.

And businesses will create better ways of designing, manufacturing, marketing, and selling the products customers already buy.

At a minimum, they will learn existing practices they ignored while the water level was high.

Constraints spur creativity. Bad economies demand it. Innovation is easier when the alternative is death.

“The Toyota production system was conceived and its implementation begun soon after World War II. But it did not begin to attract the attention of Japanese industry until the first oil crisis in the fall of 1973. Japanese managers, accustomed to inflation and a high growth rate, were suddenly confronted with zero growth and forced to handle production decreases. It was during this economic emergency that they first noticed the results Toyota was achieving with its relentless pursuit of the elimination of waste. They then began to tackle the problem of introducing the system into their own workplaces… Prior to the oil crisis, when I talked to people about Toyota’s manufacturing technology and production system, I found little interest.”

Taiichi Ohno

Inspiration and Data: Toyota Production System, Depressed? Summon Your “Animal Spirits”, Inventory Hides Problems!, Implementing Lean Software Development

Topics Downturn · Innovation · Lean

3 comments · Show

  • Amy Jo Kim

    YES! I love this analysis — it rings true. Creativity arises from constraints.

  • Jon Miller

    Good point about necessity being the mother of invention.

    Typically the water covering up the rocks is a metaphor for excessive inventory or any sort of slack in the system which covers up systemic problems. Easy sales, cheap money, a ponzified stock market are all good examples of the water covering the rocks.

    In the case of the recent economic problems we might say that it was the easy money banks were giving to unqualified loan applicants. When this led to speculative building, house-flipping and other unsustainable activity, the result was a bubble. Those companies that built their business models around bubbly conditions are now in trouble, including the automotive companies.

    I’m no critic of discreet economic stimulus packages by the government especially when it comes to infrastructure, education and technology. But propping up businesses that have failed is only adding water and covering up the rocks. When the rocks keep knocking holes in the bottom of the boat, there is never enough buckets to a bail out failing businesses. Bailing out = adding water to cover up the rocks.

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