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Innovating In a Fragile Economy

December 17, 2008 - 3 Comments

Last weekend, on my marriage anniversary, I took my wife out to a fancy restaurant she cherishes. It usually requires reservations, and has a nice ambience with a quiet seating conducive for gentle conversation. Imagine our surprise when we found the restaurant had changed not just its menu, but also its business model and introduced a buffet section. Instead of a relaxed atmosphere, there was a sense of urgency. Menus were brought much quicker, food was served faster and the waiter came by a few times after a while to”check if we were doing allright”. We got the hint and left quickly. No, they weren’t being discourteous. It’s just their new business model demanded they service customers quickly and increase turnover to improve cashflow. With customers tightening wallets, they were just trying to survive. On the way back, we hit a mom-and-pop grocery store we frequent, which also had made a few changes. Previously with wide aisles, they now had a video rental in one corner, a take-out service in another and had sub-leased yet another corner of the store to a travel agent, who sat at a desk with a computer and phone booking air-travel and cruises. Sure the aisles got squeezed, but these guys were trying to increase revenue per customer. It looked like a win-win with the grocery owner amortizing expenses, the travel agent having low-set up costs, and us, the customers getting”integrated services”. There is gloom in the financial services industry and the retail sector, but nimble business owners are offsetting the economic downturn by focusing on operational efficiency and productivity, through innovative out-of-the-box thinking.This brought into mind a conversation I recently had with Zeus Kerravala, a Senior Vice President at the Yankee Group. I’ve known Zeus for a while and he’s usually at the epicenter of innovation. During a typical Network-related conversation he made some comments on innovation and the economy that I thought had a broader applicability across multiple businesses and had a common-sense approach. He postulated that in a down market economy, it is easy for an IT department to overly focus on cost savings, or even do nothing, but this posed a danger to the business falling apart. Simply put, I read his words that investing in innovation is important independent of whether the economy is looking up or down, so we can expect a return-on-investment. He said depending on the economy, such innovations could be driven from the IT departments or the business units. Zeus cited video collaboration through Cisco Telepresence as an example of a business unit driven innovation.Sure, this economic downturn is going to hit some businesses hard. In this fragile global economy, where CAPEX is precious, a smarter way is not to clamp down entirely on innovation and CAPEX spending, but rather to look at savings through increased operational efficiency, whether these be through travel reduction, consolidation of services, better network convergence or increased collaboration. Done right, OPEX savings will offset CAPEX, and quickly. If restaurant owners and grocery stores have set their mind to it, hi-tech should not fall behind. What do you think?

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  1. A colleague sent me links to Ken Hess's Linux blog with 10 Linux predictions for 2009: myself was reading Anthony's article on Ten tech predictions for 2009: like there's general agreement across the board on a few things like virtualization, embedded systems and cloud computing. Web 2.0 and social media also seems to be on the ascent, especially if these companies can streamline their business models. Wonder if the general economy will bounce back soon in 2009. Crossing fingers (and toes!)

  2. Hi Maria,Thanks for your comment. I believe these RoI models are ools with a conscience"". Not only do they help save money, they help save the planet. Happy Holidays :-)"

  3. It is a pity that IT managers seem still to be 'stuck on' cost only. Cost is just one side of the coin; the other is growth. I agree that the focus of all business managers must be on ROI. There is a Cisco internal ROI model that quantifies the tangible and intangible benefits of TelePresence. It calculates the carbon footprint savings of using TelePresence. It helps customers 'realize' (pun intended) the value of new technology.