Throughout history, companies have taken the leap and invested in innovating during a slumping economy. Take for example Apple’s iPod, Microsoft’s Xbox video game console, and Procter & Gamble’s White Strips, which were all launched during a significant economic downturn in 2001.

As small business owners are dealing with what many economists are calling the worst economic downturn since the Great Depression, sadly many of them are dumping their strategies for innovation.

“Innovation is only important if you want to survive,” said business innovation speaker, author and consultant Stephen Shapiro. “There is no company in history that has been able to cost-cut their way to success. It is only a tactic. Innovation is about change and if you’re not changing and the world around you is changing, you’re going to be out of business. Innovation, change, adaptability, call it whatever you want, it is the only way for a company to thrive and survive in the long run.”

President and Founder of Delphi Group, a 20-year-old Boston-based thought leadership firm, Tom Koulopoulos agrees. “Innovation is critical for everyone. But the reality is, now is the prime time for small businesses to innovate. A lot of launch businesses have put innovation on the back burner. Everything is expensive when you think about it. Labor is expensive, office space is expensive, but it’s a fantastic time to make an investment in an idea you believe in. I think it’s absolutely the best time for small business owners to be thinking about innovation.”

What is innovation? Many people are confused as to what it really means.

“To me, it’s about an organization’s ability to adapt change and evolve repeatedly and rapidly on an ongoing basis to basically stay one step ahead of changes in the marketplace,” Shapiro said. “It can be anything from the competitive landscape to the economy to changing demographics to regulations to social norms that shift. I wouldn’t define it like most people do, which is about new products, new processes.”

Koulopoulos defines innovation as a process of change with measurable value. “That differentiates it from this process of invention, which creates new things. If you can’t measure the value, then it’s not innovation.”

Businesses are even starting to use social media to drive innovation.

“I think Twitter and other forms of social networking play a huge role in innovation,” Koulopoulos said. “They especially play a role in innovation in this recession. So many people are now using that as their safety net. People are realizing how important networking is.”

Businesses need to know that they have to manage innovation differently in an economic downturn.

“The main difference is that we could in the past fund innovation,” Shapiro said. “Now innovation has to be self-funding. We are looking at the first types of things that are going to find money and find money quickly. The other shift is recognizing that we’re not trying to come up with things that are bigger, better, faster. Nintendo Wii has outsold the Xbox and PlayStation by two-fold. That’s an example of accessibility being the mantra of innovation. I think that same concept holds true due to the economy. Either we need to make things more accessible, or make them more affordable. I think accessibility is the name of the game.”

One of the biggest mistakes a business owner can make is to develop paranoia about their idea and protect it, according to Koulopoulos. “The reality is in a recession, that’s probably where their idea is the safest. Don’t be paranoid; test the idea. Get it into the hands of the real marketplace. Don’t keep it in a box. Unleash it now; unleash it today.”

In order to succeed in the future, it is necessary for small business owners to innovate. The economy was founded on small businesses and they must embrace new ideas and change in order to survive in any economic climate.