12/10/2010 04:48 pm ET Updated May 25, 2011

Innovation in a Crisis Economy

I recently spoke at a marketing conference in Athens, Greece. Predictably, the conference theme was creativity in the face of austerity. Although the mood was dour, it was fascinating to hear delegate perspectives on what would heal the economy.

I asked many for their take on green innovation. Most thought it was a luxury for more prosperous times. Few made the connection between sustainability and cost savings, although they knew the story of Wal-Mart's rise to green fame with eco-efficiency.

That said, I unearthed some great innovation stories, like the imaginative (and popular) subsidies Piraeus Bank was offering customers for everything from solar power to organic farming.

There were also rumblings that 'old school' public officials were being drummed out in favor of younger, more innovative thinkers. But on this front, the opinions seemed to reflect wishes more than facts.

The feeling overall was surreal. Although everyone sensed a pending emergency, nobody could paint a picture of the future or see the innovation opportunities the coming upheaval might bring.

Greece's situation is anything but unique. Ireland has signed up for EU bailouts, with Spain and Portugal on the brink. Closer to home, Detroit's demise and reinvention has been the subject of a yearlong reportage by TIME Magazine. Throughout North America, there is an incredible sense of uncertainty. What will the new normal be?

Less Is More

Necessity is the mother of invention. Desperate times breed desperate measures. Diamonds form under pressure.

If these old saws are to be believed, innovation should accelerate in bad economies.

After all, teams with tight budgets and tough goals make critical decisions more quickly than teams with abundant resources and no pressing agenda.

Recessions are also wonderful for clearing the forest of competitors. Large, cumbersome companies fall, while small wily upstarts gain ground.

And recessions lead to rethinking. When the status quo fails, it makes you question your beliefs. Should my product even be a product? Or should it be a new business model, or service?

The examples of recession success are legion. Instead of boring you with them, I'll simply guide you to some examples that will make every recession-weary entrepreneur smile.

Lessons From Detroit

While it's too early to say how economies like Greece and Ireland are going to react to austerity, Detroit provides a successful example of radical rethinking.

As TIME writers Daniel Okrent and Steven Gray write, "Detroit once thrived on bigness, but now it has to leave that idea behind. The secret of Rust Belt urban revival: smaller is better. If you want a healthy, bustling city, huddled masses are better."

Necessity has forced Detroit to abandon sprawl -- servicing vast, deserted suburbs simply isn't viable. Instead, the city is focusing on building density. Tighter, interconnected communities that are easy to navigate on foot are bringing a flourish of small business with them.

And big business. Drawn by the reinvigoration, Quicken Loans chairman Dan Gilbert moved 1,700 employees into downtown Detroit. Gilbert's business incubator Bizdom U was launched in Detroit in 2007.

Detroit's rebirth warrants a closer look for more than economic reasons. Abandoned suburbs are quickly turning into green corridors, with the promise of urban agriculture. And smaller live/work hubs mean fewer cars -- and a healthier pedestrian populace.

Of course, the transformation is messy, and there are casualties. School systems need to be overhauled to draw young families. And people isolated in the suburbs can't simply be abandoned. But Detroit is proof that innovation does flourish in a crisis economy.

Innovation Learnings

There are consistent innovation themes that can be seen in examples like Detroit.

For example, the key to innovation is getting outside your personal comfort zone, your status quo, your jar. Outsiders have an incredible power of perception when it comes to spotting root problems, consumer needs, and potential solutions. It's one of the reasons clients turn to us for solutions, instead of working exclusively with in-house innovation teams. It's also the reason companies like P&G mandate 50% of their innovations come from outside sources.

Another learning is that innovation needs champions as much as great thinkers. Working in green business innovation, I have seen again and again that the mandate for change needs to come from the top. Otherwise, challenging new ideas will be killed by the defenders of the status quo, and progress logjammed.

Finally, innovation should not be expected to turn a crisis economy into a utopia. In fact, idealists and utopians are often the worst agents of change. A crisis can't be solved through social engineering -- instead, the process involves co-creation, brainstorming and support from a wide swath of constituents. Yes, it could get messy. But economies and communities are living, organic things... not intellectual theories.