“Tough times never last, but tough people do.” The moments of economic recession brings with it an opportunity for every business leader to understand business from a whole new prospective. Only during recession the true nature of market can be understood. Every dollar counts and therefore the customers are willing to spend only if the product or service is really valuable. The market speaks its soul during recession .A business executive can use recession as an opportunity to understand this aspect of market and make fundamental change in the business activity. This is where innovation comes into play and becomes so important.
Innovation at the time of recession is the creative response by the business entity, after understanding the real nature of market. During the normal economic period it is difficult for a business manager to understand the real value of his product or service and the benefits it can provide to the consumers. Thus lot of energy and resource is wasted on enhancing the aspects of product and services which are of no value or give provide less value. Recession acts as a filter to bring before the business managers, the real needs of the consumers .Now the business managers are equipped with more valuable information and can guide the innovation through proper research and development. Therefore it is necessary and inevitable for a healthy business unit to innovate in recessions. Many business leaders in past have used recession to innovate and were able to turn recession into an opportunity.
The biggest mistake many organizations make during these turbulent times is that they stop listening to the market. They cut back on research and development and the time when market is speaking most loudly. According to A.G. Lafley, former Chairman and CEO of Procter & Gamble “It’s more essential to innovate through a recession, and certainly what we’re trying to do at P&G is to continue to bring sustaining and even disruptive new brands and products for our consumers, to make their lives better, to offer them a little more value.”
At the time of recessions and depressions not only the magnitude of market response is large but many unmet demands also come on surface. A business manager can make use of these unmet demands to steer the organizations to new horizons. Henry Luce launched the Fortune magazine on February 1930 just four months after the stock market crash of October 29, 1929. Throughout the great depression Fortune magazine made good fortune for the Time Inc. By 1937, the magazine netted a half-million dollars on its circulation of 460,000. By the end of the decade, Fortune had become required reading on Wall Street.
Why did Fortune worked? It worked because of the great insight of Luce who listened to the market and created a product which met an unmet demand. During recessions or depressions the market demand does not disappear but they become more even more exposed. In case of fortune the stock market fall increased the interest of general public in the business culture. There appeared an unmet demand of knowing what happens behind closed doors, in boardrooms, and in the hallowed halls of corporate
Historically many companies have invested in innovation during recessions. Thus were able to not only recognize and meet the consumers demand but were also able to leave an impression which lasted long. Remember that at turbulent times not on the business managers but the consumers are also equally worried. A business organization by innovating at such times sends a very positive signal to the consumers that they are being taken care off. Innovation and launching of new products keep the consumer and employee motivation and they remember this in long term.
In 2003 when companies were cutting back following the Dow’s historical low, Apple continued to invest. Steve Jobs recall “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’s what we’ve done. We’ve been turning out more new products than ever before, and Apple is one of the only two companies making money in the PC business. We’re not making a lot, but other than Dell, we’re the only one. Others are losing money – a lot of money.”Apple has a long history of innovation in recessions. Through strong innovation and new launches Apple has always maintained the belief of its costumers .It always strived to identify their need and fulfilling it successfully through innovation, especially at the times of economic downturns. And customers have responded well.
It is important for business organizations to cash upon the opportunity of recession to widen the gap between them and their competitors. While competitors are cutting back on research an organization can work on improving its products, invest in new opportunities and thus by meeting the customers demand valuably can leave their competitors far behind. What is required at such a time is integrity and belief on oneself. In 1929 after the stock market crash Adolph Ochs of The New York Times, issued a memo to his staff: “We must set an example of optimism. Please urge every department to go ahead as if we thought the best year in the world is ahead of us.”The New York Times faced the depression with optimism and kept innovating. It increased the quality of editorial though there were less advertisement contracts. By increasing the quality of editorial it became a paper that contained less advertisement and good editorial. Ochs evaded the lay off by using the surplus of 1920’s.Thus the employees of New York Times responded positively to him and remained motivated to perform. Once the great depression ended New York Times emerged as a newspaper with highest readership in the country which also increased the advertising volume.
Thus an executive can take recession as a signal to introduce cutback on technology, fire staff, stop product development, reduce risk, avoid globalization, retreat from investment and finally get walled into safe castles of traditional markets but he/she does not realize that by doing so they are increasing their venerability to recession as all these actions lead to dilution of customers base. The other path is of self belief and innovation, investing with strategy, providing more value to customer, keeping the morals of employees high through investments and new product/service launches. History has proved that the executives who followed the latter path have come out brilliantly from the downturns. They have not only saved their organizations from potential mergers or bankruptcy but have also opened a whole new market. They won the belief of customers and were able to translate it into long term profits.
Recession is not an abnormal behavior of economy but it is an integral part of the economic cycle. We can’t avoid it. We can only make ourselves ready to cash upon the opportunity it brings. When a business managers start seeing the recession from this prospective, recession becomes a boon not a bane as it is usually perceived. It requires a little courage, and an ability to transfer it to the staff, especially the ones who are involved in research and development. Recession is the time to cut loose the research team so that they can innovate without restriction. On the other hand it is also the duty of the manager to strategically analyze the financial health of the organization to support such an innovation.
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