It is now official.

Berkeley economist Barry Eichengreen, a scholar who studies the Great Depression of the 1930’s, has shown that the current global downturn is steeper (measured from the peak in April 2008) than the decline during 1929-33, in terms of global industrial production, global stock prices and global trade. (See the graph below).

“It’s a Depression, all right,” he says.  

Now that this ‘baby’ has been given its true name, innovators must ask: What type of innovations  are appropriate for such desperate times?

Here are a few ideas:

* Don’t kill innovation to survive — when the upturn arrives it may prove fatal. McKinsey Global Institute shows that most companies are wise enough to know this — R&D spending has for the most part not been slashed.

* Rethink every single one of your business assumptions, including ones that are sacred, because during and after a Depression, all the rules of the game change, sometimes radically.

* Have a Depression mindset. Think about what people need during a Depression. In the 1930’s, movies boomed — it took people’s minds off their troubles. What will boom during the 2009-12 period? How can you amuse and divert and relax people?

* Value for money is crucial. Everyone is more price sensitive, even the billionaires. Wal-Mart and McDonald’s are doing booming business for that reason. Starbucks is not. Create value for money and make super-certain your clients realize it.

* Branding’s importance grows in a Depression. There is so much uncertainty, people seek certainty in what they buy, through brands. Build and strengthen your brand, or create one.

* Be ready to turn on a dime. This Depression may last a long time. But when it stops, the inflection point will be rapid. Be ready for a rapid change in mindset — people will welcome a return of the good times and their preferences, behavior and wants will change accordingly.

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