Create West Virginia

West Virginia University College of Business and Economics held its annual economic forecast event this week, and the picture they painted isn't rosy. [NOTE to B&E: We would love to see more drill-down reporting on WV's emerging economies such as the tech and tourism sectors.] According to the WVU economists, West Virginia has not suffered as deeply as other states who enjoyed more economic growth in recent years (the higher you climb, the harder you fall?), the overall United States financial situation will push West Virginia into recession in 2009.

They predict WV will lose around 5,000 jobs next year, with a rebound in 2010. From the Charleston Gazette: 

"We are clearly in stiff drink territory," [WVU's Tom] Hammond said Tuesday at the conference. "But, just one stiff drink. The national economy is in the two or three stiff drinks stage."

"There's not much a consumer can do right now," he said.

Perhaps the averge consumer may feel powerless, but we think that the business, non-profit and government community can act. In fact, during a slowdown, it's been observed that innovation-minded organizations and inviduals can set themselves up quite nicely to both affect and benefit from a turnaround.

BusinessWeek posted a list of 10 Worst Innovation Mistakes in a Recession earlier in the year. How can we apply these principles to our situation here in West Virginia? Here are some highlights: 

1) Fire talent. Because of America’s accounting laws, investments in talent are expensed, not capitalized, so cutting back on people, especially really smart, high-priced people, is a quick way to cut costs. The accounting rules only hurt companies who follow them. Talent is the single most important variable in innovation.

2) Cut back on technology. Xerox and others report that companies are already curbing investments in technology to save money. Banks especially. The rise of social networking and consumer power means that companies have to be part of a larger conversation with their customers. This means big money spent on IT.

3) Reduce Risk. Innovation requires taking chances and dealing with failure. Recessions push managers to be more conservative. They need to fight this instinct.

6) Retreat From Globalization. It's expensive to expand globally and managers often save money by cutting back on emerging markets. It's a big mistake. Emerging markets are sources of new revenue, business models, and talent.

7) CEOs Replace Innovation As Key Strategy. By turning defensive, top managers take innovation off the top of the official agenda and replace it with systems management and squeezing costs. The entire organization follows. It is extremely hard to reverse this when growth returns.

9) Hierarchy Is Reinforced Over Collaboration. Sudden drops in revenue and profit often lead companies to panic and mobilize to stem the decline. The need for fast decision-making often leads to a return to command-and-control management. This alienates creative-class employees, young Gen Y and Xers and stops the evolution of corporation organization toward a flat, collaborative, open source model.

It's normal to react to economic fears by retreating, but it is important for our state - our companies, entrepreneurs, investsors (the few that we have), schools and non-profits look at this time as an opportunity to think about their business model. How can they re-focus to add more value? How could we tap our resourcefulness and target new investment? How do we crack into new and bigger markets outside the state? 

What about your organization? Are you in retreat, or in innovation mode?