What do doughnuts, cable television and shampoo have in common? The answer is not, sadly, Homer Simpson (not enough hair). Rather it’s the fact that three global businesses which today dominate the markets for these products - Krispy Kreme, CNN and Johnson & Johnson - all launched in times of economic adversity. All three revolutionised modern life. All generate multibillion dollar revenues.

And there are plenty of other organisations which have succeeded in building success on similarly parlous foundations (for a selection, see box: inspiration). In some cases, their founding leaders are almost - if not more - famous than the household name goods and services their companies sell. General Electric’s Thomas Edison and Microsoft’s Bill Gates, for example, need no introduction.

Opportunity

Are housing’s leaders similarly placed to innovate and thrive in adversity? After all, custard-filled confections are hardly the stuff of repairs and maintenance, inflation-linked rents and getting your head around housing revenue account reform. The answer is that calls are growing for housing’s decision-makers to view the UK’s current economic difficulties as an opportunity to innovate.

In May the Scottish Government published Housing: fresh thinking, new ideas. The discussion paper warns that capital funding cuts have left the nation with no choice but to overhaul housing provision for all tenures north of the border. ‘To make progress we will need to change the way we produce, allocate, price, manage and think about housing,’ reads the foreword to the document.

The National Housing Federation, which represents 1,200 English housing associations, had published a similar call to arms just days earlier. Facing the future: evolution or revolution argued the need for creative new ways of financing affordable housing development. Less than a month on, Peter Marsh, chief executive of Tenant Services Authority, was one of many who used the Chartered Institute of Housing’s conference in Harrogate to demand fresh thinking on how housing associations raise money to fund a wide range of activities, from nuts and bolts housing management to worklessness programmes.

It’s certainly clear that from now on social landlords must do more with less - and that’s simply to maintain current service levels. In addition to the £450 million coalition ministers have already slashed from the Homes and Communities Agency budget, providers face further cuts of between 25 and 40 per cent following the autumn spending review. In January, landlords will suffer a planned 2.5 per cent VAT hike. And inflation continues to rise, squeezing landlords’ budgets with it. The pressure is on for the housing world to come up with something new. The bath is run and the scene is undoubtedly set for its leaders to experience a ‘eureka’ moment.

Finding the will

Can they pull it off? It’s certainly easy to find housing chiefs who agree that the current climate offers opportunities to innovate in a variety of fields. But as the NHF report points out, creativity in the face of social and economic challenge is risky. Once risk and reward have been weighed, leaders may not have the stomach to put their brilliant new ideas into practice. And even if they do, are they equipped with the leadership skills to see them through to a successful conclusion?

‘It’s not a question of if we should innovate, it’s a question of we’re going to have to innovate. Public expenditure is going to go down, and yet housing need remains,’ says Graeme Brown, director of Shelter Scotland, summing up a commonly held view. He praises the Scottish Government for seizing the initiative with its May discussion paper, and hopes the debate it has started will prove ambitious: ‘It’s an opportunity to look more broadly at the housing market and why it became so imbalanced over the past 10 to 15 years.’

Mark Rogers, chief executive of 60,000-home association Circle Anglia, agrees that leaders have no choice but to innovate. ‘There’s a risk for housing that we simply look to cope with these cutbacks, for example, [by] squeezing the services we provide,’ he warns. ‘We need to look for solutions that don’t cost the government anything.’

Circle Anglia has begun with investing in leadership, training for 64 of its middle managers. In 2008, when the credit crunch hit in earnest, the landlord spent £108,000 teaching the staff skills to increase their confidence and deliver tangible business improvements. Positive results included the ‘trainees’ identifying £900,000 in cost savings and a £133 million increase in the landlord’s asset valuation.

Now Mr Rogers says the onus is on him and other senior staff to work with local communities to devise more radical approaches to service provision. ‘It’s about being nimble and looking out towards the external environment,’ he says. He lists tackling overcrowding by finding affordable ways to build extensions and incentivising people to vacate underoccupied homes as ‘part of a range of things that … we should be looking at’.

He adds that finding ways to offer homes for ‘intermediate rent’ - where tenants’ weekly payments fall between a social and a market rent - could be one way of ‘enabling [landlords] to produce more with your money because there’s more rental income coming in.’

There’s appetite for such schemes elsewhere, as reflected in the NHF report’s suggestion that the sector might exploit the tough external climate to ‘respond to the growing “excluded middle”’ who don’t qualify for social housing but cannot afford market rent. Government plans to pay people less housing benefit to make up rental shortfalls, which critics warn could see thousands homeless, make this an area many of housing’s decision makers may wish to consider.

Off the mark

London & Quadrant housing association already offers this kind of product. ‘Up to you’, where residents pay a 20 per cent discounted market rent and are able to buy stakes in their home until they own it outright, launched as a pilot last year. Initially devised as a way to shift homes originally built for outright sale the scheme is now ‘very much part of the future’, says David Montague, chief executive of London & Quadrant.

Earlier this month the 60,000 home landlord announced a new scheme called ‘Down to you’, where rents are charged at 65 per cent of market rates. Mr Montague says that his organisation’s future now lies in offering ‘something for everyone’ - ‘social rent for the most vulnerable, something for the people who would like to buy some or all of their home and we’re still building for [market] sale’.

Would he be implementing this vision without the adverse economic climate? ‘That’s an interesting question,’ says Mr Montague. ‘To use a cliché, necessity is the mother of all invention. This is going back three years when the credit crunch was upon us. At that point L&Q had an appetite for development. We had 9,000 homes in our pipeline, around half for sale or shared ownership.’

When they wouldn’t shift, ‘it was necessary to develop new products’ that people could access. ‘There was still huge need, we had a huge pipeline - it was just a matter of getting the two together,’ Mr Montague adds.

Clearly his organisation contained the leadership skills necessary to do so. Like Circle Anglia, L&Q has invested heavily in leadership training ‘in order to survive and prosper’. A L&Q leadership academy teaches senior staff collaborative learning and shared leadership techniques which the top boss argues has ‘transformed the culture’ at L&Q.

Of course it helps that Mr Montague himself exudes the type of collective self-belief that allows him to say things like ‘we are at our best when we are facing an impossible challenge’. Strong leadership, and staff given the tools to help them follow it effectively, are a good start when it comes to bringing innovative ideas to life. But is it realistic to expect leaders without Mr Montague’s 1,000-strong workforce to do the same? Isn’t there something to be said when times are this tough for sticking to what you know best - providing good homes?

‘That’s a legitimate position to take,’ admits Mr Montague. ‘But for those of us that have the capacity and skills to [innovate] I think we must. And L&Q is in that position. I refuse to be miserable.’

That alone will prove a challenge. ‘Up to you’ was bankrolled in part by a £42 million handout from the Homes and Communities Agency. The days of such largesse are gone. Which is why financial innovation is perhaps the key challenge facing today’s housing leaders.

‘All roads lead to private investment’ is Mr Montague’s mantra. Indentifying new funding streams is crucial. Recent months have seen increased activity in the bond markets, the Welsh Assembly looking to pension funds for housing finance and the Scottish Government considering following suit. Inside Housing recently revealed that England is edging closer to securing significant institutional investment in the private rented sector (Inside Housing, 25 June).

Shelter Scotland’s Mr Brown is looking to the larger Scottish landlords, such as Glasgow Housing Association, to help attract private investment to the Scottish private rented sector by declaring an interest in managing some of that stock. But while he urges the entire gamut of housing providers to investigate non-public sources of funding he warns: ‘It’s quite obvious that people are going to have to look very closely at the risk assessments’. Leaders must judge whether or not their organisations have the skills needed to manage the risks.

Sustainability

One area where some are adamant that housing does not have the necessary talents is finding innovative ways to finance the sector’s sustainability agenda. Which is ironic given that there is certainly some creative thinking out there. For example, Richard Baines, director of sustainability at Black Country Housing, is trying to get private money to finance the sector’s carbon-cutting obligations.

UK landlords must cut emissions from their properties by 80 per cent by 2050. At present, under the government’s Green Deal, the cost of doing so will effectively be met through a combination of households’ fuel bills and private investment. Mr Baines argues it’s unfair to expect a single generation to pay for righting a damaging legacy built up ‘by six generations’. He proposes ‘a completely different economic model’ which attracts private investment and finances more sophisticated and energy efficient homes than the current system permits.

‘We need to collaborate with stock transfer associations, arm’s-length management organisation and the private sector to come together as a collective purchasing power and to administer large loans from the pension funds and the investment banks,’ he urges. The problem with implementing what Mr Baines calls this ‘truly radical’ approach? The housing world simply doesn’t have the skills, he says. ‘The voluntary and public sectors really aren’t skilled to work in these areas. We need to have some very serious discussions with economists,’ he adds.

The autumn spending review will reveal just how tough the coming years will be. But housing’s leaders have already got the message: finding new ways of operating is a must. The quality of their leadership will determine how radical - and effective - that innovation proves.

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