When there are concerns about a recession coming, most companies are going to focus on keeping costs low and take a more conservative approach. The assumption is that innovation also slows during economic downturns, but that is not always the case. Innovating during a recession can create a competitive advantage.
Per Dartmouth professor Scott D. Anthony’s HBR article, economic downturns provide several opportunities for innovative companies.
If you have a product or service that can “reverb” off of the driver of an economic downturn, you may be able to use the event as a way to springboard your company. Square, Airbnb, and Uber all appealed to cost-conscious consumers during the recession of 2008.
“It’s reasonable to expect the need for alternative energy sources to combat climate change and reduce dependence on autocracies, greater food safety, and more dependable supply chains to attract today’s entrepreneurial energy.”
Simple, Affordable Solutions
If your product provides cost savings and value, recessionary times can provide your business with an influx of new customers. A great example of this is the approach adopted by McDonalds after WWII during the recession of ‘48-’49. When people are spending less, they are still looking for value, but at a lower price point.
Bold Strategic Moves
These historical periods can also provide a launching pad to make a significant change. Adobe used the economic downturn in 2008 to redefine itself by moving to SaaS-based products and entering the analytics and advertising services business through an acquisition.
Anthony wrote about these opportunities in his book, The Silver Lining. He highlights that it often takes an economic crisis, like a recession, to get companies to do things they should have done already. Some examples include:
Reducing your focus. He recommends trimming at least 50% of your innovation initiatives. Where will your efforts have the most impact? Which projects are stuck in neutral? There are likely programs you know you needed to cut but haven’t, now is the time.
Focusing on the projects that benefit the customer. When you’re cutting costs, look at the outcomes of how it impacts your end user(s). If a proposed cut could save money and negatively impact customers, think twice before eliminating it.
Trying new things. Technology has provided us with the ability to test and learn more quickly than we’ve ever been able to do in the past. Be smart in your trials and approach them with a process and methodology. “Test in a way in which you can measure and assess your prediction. You never know for sure, so remember the acronym HOPE (hypothesis, objective, prediction, execution plan).”
The changes we’ve gone through in the past few years will continue. You can’t predict what will happen, but you can roll with the differences instead of retreating and focusing on what you’ve done in the past. Look at economic difficulties as an opportunity to try something new and break away from the pack.
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