1. Game-Changing Offerings

Startups with radical products or services that “reverb” off of the big event driving the recession can take off. For example, Airbnb, an online marketplace for “places to stay and things to do,” was founded during the height of the recession in 2008. Its service appealed to thrifty millennials looking for a cheap way to travel, as did Uber’s car-sharing model.

Lingering distrust in traditional finance providers after the global financial crisis helped to spur novel payments providers. For example, Jack Dorsey founded Square (later named Block), the financial services startup known for its square-shaped white credit card reader, in 2009. “There is no better time to start a new company or a new idea than a depression or recession,” Dorsey, who also helped to found Twitter, reflected. “There [are] a lot of people who need to get really creative to create something new.”

 

2. Simple, Affordable Solutions

Downturns can be great times to introduce offerings that connect with consumers who have tighter purse strings or are naturally frugal given continued uncertainty.

There was a recession on the heels of World War II, in 1948–1949, before the post-war boom. In 1948, the McDonald brothers fired all their carhops, closed their flagship store, installed new equipment, and reopened three months later with a novel approach for preparing food. Instead of having a single skilled cook who would custom-make orders, McDonald’s simplified the menu so that less-skilled people could prepare the same thing over and over again. All McDonald’s menu items could be eaten one-handed while consumers were driving.

 

3. Bold Strategic Moves

Downturns can be great times for established companies to make dramatic changes. Shantanu Narayan took over as the CEO of Adobe in late 2007. The 25-year-old company seemed stuck, with products such as Photoshop and PageMaker stagnating. Nimble software-as-a-service (SaaS) competitors were emerging. And the onslaught of the global financial crises would challenge even the strongest incumbent companies.

In the face of these challenges, Narayen and his team undertook a bold transformation strategy. In 2008, they tested a software-delivered model of Photoshop. A few years later Adobe “burned the boats,” stopped producing packaged software and went to a fully SaaS model. In 2009, Adobe purchased Omniture for approximately $1.8 billion, a price 40% lower than its pre-crisis peak (but 2.5 times above its mid-crisis trough!). That acquisition served as the cornerstone of Adobe’s efforts to build a new growth business related to advertising services and analytics. From 2009 to 2019 Adobe’s revenues tripled, and its stock price rose 29% a year, making it one of the decade’s top transformers.

 

Read the full article, including ways to navigate resource scarcity, at Harvard Business Review. 

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Source: Innosight

3 Ways to Innovate in a Downturn