Cutting Innovation in a Downturn? Here’s Why That’s a Strategic Mistake.

When times are tough, innovation is often the first thing to get cut — but it’s the last thing businesses can afford to lose. 

Innovation during disruption is tricky — and non-negotiable

Demonstrating innovation’s value during a downturn is tough. ROI metrics arrive too late for meaningful course corrections, while early metrics get dismissed as “soft.” Perceived risks and uncertain outcomes often tempt leaders to pause innovation until conditions improve.

But because building innovation capability takes time, organizations that break new ground amid turbulence often pull ahead, while those that play it safe risk falling behind or becoming obsolete. When the path forward is unclear, resist the urge to cut innovation. Instead, double down on your effort — and how you show its value.

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Don’t stall innovation. Adapt it to achieve current business objectives.

Use the following three-step approach to quantify and increase innovation’s value.

Align innovation goals to current business goals

In a downturn, check with your CEO or executive peers for changes to business goals. If new goals suggest slowing down innovation, challenge that impulse and instead clarify which types of initiatives best align with today’s objectives. For example:

  • Should we focus on incremental innovation — i.e., improving what we already do?

  • Is there room for bold “moonshot” innovation in new business models?

  • How can we validate an idea’s potential before making major investments?

Combine input, process and output metrics to show innovation’s value

Timing is essential when demonstrating the value of your revised innovation portfolio. To strike the right balance, use a combination of input, process and output metrics and not just success.

Input metrics include tangible resources (e.g., staff assigned or funding allocated), as well as qualitative factors like time invested, team interest, target failure rates and new learning from innovation efforts.

  • Don’t overlook cultural inputs. Track how much time employees feel they can spend experimenting, their willingness to take risks and how freely they share lessons learned from failure. Regularly survey teams to spot barriers before they stifle progress.

  • Track the diversity of your idea sources. Encourage submissions from employees, customers, partners and external collaborators. A broader pipeline increases creativity and surfaces emerging opportunities faster.

Process metrics measure work from ideation through execution. Count new ideas generated (potential), speed through the process (throughput), conversion rate (ideas made real), plus quality checks such as how often teams use or bypass formal processes and whether you’re hitting healthy failure-rate targets. 

Output metrics assess success and failure. Quantify successful initiatives, contributions to business goals, financial gains and operational improvements. Also track how often teams capture lessons from unsuccessful initiatives, and how those insights drive future improvements in process or culture.

Review innovation metrics regularly for relevance

Innovation metrics do more than demonstrate business benefits; they reveal shifting priorities and open doors to strengthen culture.

Metrics shape team behavior in unexpected ways. For example, too much focus on success rates can make teams risk-averse. A focus on building the idea pipeline may soon reveal a need to boost idea quality, not just quantity.

Prune metrics that no longer provide value so your measurement system stays focused and actionable.

Don’t let reviews become box-checking exercises. Use metric insights to adjust resources, refine priorities or launch new efforts. Share results across teams to build trust, celebrate progress and create a safe environment for experimentation.

Innovation FAQs

What are the risks of reducing innovation investment in tough times?

Cutting innovation investment during economic uncertainty may offer short-term savings but creates long-term risks. Organizations that slow or stop innovation lose momentum, fall behind competitors and become less adaptable to future market shifts. Because the benefits of innovation often take time to materialize, pausing now can leave you unprepared when conditions improve. Maintaining disciplined investment in innovation helps your organization stay resilient, capitalize on new opportunities and avoid becoming obsolete — especially when others are playing defense.

What alternatives exist to cutting innovation budgets?

Instead of cost cutting around innovation, leading companies take the approach of structured cost optimization. They balance immediate pressures with long-term strategic objectives and maintain cost discipline without sacrificing innovation for future growth.

How should leaders prioritize innovation projects in uncertain times?

In turbulent times, keep a direct link between innovation and business goals to enable effective prioritization. This alignment helps leaders choose the right innovation initiatives and set clear, measurable metrics of success.

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