The FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) have gotten a lot of attention in recent years, with innovations in social media and search, online shopping, streaming, and mobile computing that have transformed the tech sector and our society (and caused stock portfolios to soar). Steve Jobs famously challenged the world to “Think Differently” and it’s amazing how much our lives have changed for the better in the last twenty years.
While innovation is often seen as a catalyst for positive change and economic growth, it also plays a critical role in gray-sky moments when the economy is down.
When a recession hits, sales and profits in corporate America slow, leading business leaders to instinctually cut costs, reduce headcount, and otherwise shift into survival mode. While these actions can help preserve cash flow, they can also lead to missed opportunities. In Part 2 of our blog series, we highlighted how companies that invested in growth during recessionary times grew share and emerged stronger. Today, we’ll focus on how innovation and reinvention can play a similar role in driving growth.
White House Chief of Staff Rahm Emanuel once quipped, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” Companies that embrace innovation during a recession often find ways to reinvent their business or deliver goods and services for less, helping them stay ahead of the curve and prosper longer-term as the economy recovers. One example of a recession-born invention is the barcode, which was created to help track inventory and reduce costs during the 1973-74 recession. Another is Standard Oil’s expansion of service stations during the Great Depression, which helped them cement a lasting competitive advantage.
Here are some tips on how to build a culture of innovation in your company during a recession:
1. Necessity is the Mother of Invention
Leverage an economic downturn to bring renewed focus and energy to your team or organization. Challenge them to find new ways to deliver your goods or services for less – think of how much Netflix saved when it shifted its model from mailing DVDs to customers to delivering them in real-time through streaming. Similarly, Kraft created Miracle Whip in the early 1930s in response to lagging sales, and promoted it aggressively at the 1933 World’s Fair and through a two-hour radio program devoted to the product. By the end of the decade, it was out-selling other brands of mayonnaise;
2. Look Ahead, Not Down
Many leaders focus too much on the bottom line during a recession and fail to look ahead, hunting for new opportunities that can help take their company to new heights. During the most recent COVID-related downturn, McDonald’s reinvented its operating model, creating a new mobile ordering app to support drive-through and delivery sales and offset lost in-store sales. Post-recession, they’ve continued to innovate with dual drive-thru lanes, in-store kiosks, and experiments with voice-recognition software for order-taking. As a result, sales and profits have accelerated;
3. Be Persistent and Stay Focused on Your Goals
Don’t get distracted or give up when things get tough. Your team may be fearful of what lies ahead, but now is the time you need to dig deep as a leader and find a way to succeed despite the pressures of the recession. In the 1930s, Sears grew significantly by expanding its mail-order business, coming out with innovations like low-cost refrigerators and increasing its store count. Similarly, DuPont grew sales significantly with the introduction of nylon and other innovative synthetic fibers. Both companies committed to out-sized growth in new markets. Think: “Where can my organization focus its strategy and energy to win decisively in a category or sub-category, a customer segment, or a geographic segment?”
A final word of advice from a brand marketer. Leadership’s job is to communicate the organization’s vision and plan, and to engage all of its team members towards the achievement of shared goals. It’s the responsibility of the organization to communicate its unique positioning and value propositions in an inspiring and convincing way to its priority customers. Customers experience uncertainty and anxiety during recessions too. Let them know who to trust, who to follow, and who to lend their loyalties to in the pursuit of the win-win in a brand relationship.
Gain a competitive edge with our Recession or No Recession series.
In our next Insight Tuesday, my partner, Tom Sullivan will build on this topic by addressing How to Leverage Competitive Insights and Positioning to Build Strategies that Win Market Share.Subscribe to Read.
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