Innovation During an Economic Downturn
If the current economic downturn is crushing your entrepreneurial hopes and dreams, there is good news for you – history has shown that a recession can provide a significant opportunity for innovation.
By developing an innovation strategy that foresees a recession, you can help your business survive the hard times as well as find profitable ways to gain a competitive edge. This means going from defense to offense to secure a stronger position in the market.
The Shift to a Low Touch Economy
The COVID-19 pandemic has affected businesses across the world. The US economy has already seen a decline in Q1 and is headed towards another decline in Q2 of 2020. At this time, it is impossible to predict exactly how this health crisis will be resolved and how it will affect the economy long-term.
However, economists have already validated a socioeconomic shift in our country. This has been seen through an increase in remote working, higher demand for e-commerce and home deliveries, an increase in E-health systems, and higher attention for hygiene. This hyper-digital society brings fewer people physically together and has changed safety standards for day-to-day public interactions.
This behavioral shift is referred to as the Low Touch Economy and is believed to be our post-pandemic economy. Enterprises should take this opportunity to pivot in their business model and innovate to gain a competitive edge on the market.
Innovation during previous economic slowdowns
In 2009, Amazon experienced a 28% sales increase during the Great Recession. Amid the slumping economy, Amazon continued to innovate with new products, primarily with new Kindle products. On Christmas Day of 2009, Amazon customers purchased more Kindle e-books than printed books. Amazon innovated during a recession to grow its market share by introducing a lower-cost alternative for cash-strapped consumers.
Mailchimp originally catered to large corporate clients with yearly retainers. In 2009 during the Great Recession, Mailchimp was forced to change its previous model. The company decided to add a freemium business and its user base skyrocketed from 85k to 450k users in a single year.
In 2007, Airbnb had a humble beginning when Brian Chesky and Joe Gebbia had the idea of renting out an air mattress in their living room in San Francisco. When the Great Recession began the following year, it opened a door to a new opportunity. Airbnb revamped the market of short-term living quarters who were priced out by hotels. In the year 2009, Airbnb received funding from top venture capital firms and experienced exponential growth.
In 2003, when the Dow was at historical lows over 10 years, Apple continued to invest. When asked why he had not reduced research spending when others in the industry had experienced a slowdown, Steve Jobs stated, “What has happened in technology over the last few years has been about the downturn, not the future of technology. A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of [customers], they would continue to open their wallets. And that is what we’ve done.”