Throughout history, the world’s economy has seen its fair share of exhilarating highs and terrifying lows, but despite fluctuations, over time, the markets have always proved resilient and continue to grow. The Wall Street crash of 1929, known as the Great Crash, is widely cited as one of the business world’s darkest days. Looking at the Dow Jones Industrial Average for that year, it’s a pretty bleak picture.
Millions wiped off stock prices and years of ongoing uncertainty. However, over time, if we look back at that day as part of the stock market’s history as a whole, one of the biggest crashes of all time looks a bit different. As does the more recent Great Recession crash of 2008.
While I of course acknowledge the adverse effects of these downturns and the enormous amounts of effort on all levels needed to rebuild confidence in the markets, my point is that markets adapt and move forward. They always have and always will. The real question I have been asking is how businesses should react when faced with this type of situation? The most common knee-jerk reaction is often a short-term strategy to protect, hunker down and survive. But is that the way to go?
Staying open, involved, and active is actually a less risky move than closing up and trying to weather the storm. Because when the storm ends, and it will end, the landscape may look a whole lot different. If history has taught us anything, it’s that over time, bear markets are replaced by bull markets and the companies that apply a little ‘uncommon sense’ in those trying times are very likely to come out on top.
Figuring out how to survive is one thing, but how do you ensure your company thrives in uncertain times? The key is to keep thinking ahead. In uncertain times, people crave certainty. So what better way to provide it than to focus on turning doubt into something concrete. Gather your team and make them aware of your plans. Focus on a few key areas that will improve your value set, ensure everyone’s bought in, then get to work. Take advantage of the time you’ve been given to figure out how you can bring even more value to your customers. Whether that’s internal factors such as identifying and eliminating waste or taking a look at your essential spending, or external factors like improving your product, solving a problem or taking onboard valuable customer feedback. Positive moves in any of these areas will enable you to create significant value for your customers. When the difficulties of the moment have passed, who are people going to look to for help? The guy who disappeared into a cave, or the guy who kept in touch, listened to their feedback and solved one of their major pain points with a disruptive new product? I know which one I’d choose.
History has shown us that some of the biggest names in business were catapulted into the stratosphere by innovating through difficult times. The most famous example is Apple. Cited so often, it truly is a textbook case for successfully innovating during uncertain times. While Apple has been around since the 1970s, it transformed itself during the dot-com crash of the early 2000s, and in the wake of 9/11. Steve Jobs was back at the helm and the company launched its iconic iPod, which changed its outlook overnight and set them on a trajectory to becoming the world’s first trillion-dollar company. If you look at every downturn since, Apple has consistently launched new and improved products, always with big, keynote announcements, which position the brand’s products and people around their latest innovations. Bill Gates and Paul Allen developed the concept for an easy-to-use computer system during the prolonged US recession in the 1970s, which saw the country’s GDP take its worst hit in nearly two decades. Eliminating complex user interfaces and making technology accessible to the masses, Microsoft’s subsequent success speaks for itself. Netflix and Airbnb are also great examples of companies that saw gaps in a downturn market that solved a problem and made previously expensive services more accessible to more people.
DJI is another, potentially lesser-known, example of a company that shot to the top by focusing on innovation. Founded in 2006 by Frank Wang, a mainland-born student at Hong Kong University of Science and Technology with a penchant for planes, he had an unwavering desire to make a flying toy that wouldn’t, like most models on the market at the time, crash due to lack of control. Wang spent time developing drone parts such as autopilot systems and gimbals, trialling, testing and perfecting each element. What started as a vision to enhance toy technology has seen DJI become what many consider to be the world’s leading drone technology company, with over $2 billion in annual sales. All thanks to one man’s drive and determination to create the best product he could, finding new applications for his superior technology along the way.
While these innovation successes are certainly inspiring, it’s important that you ensure your foundation is rock solid before embarking on your own innovation drive. Under normal operating conditions, it’s important to be well-organized, deliberate, and strategic when conducting business. However, when you look to innovate through a downturn, it becomes absolutely vital. Ensuring you have the right structures in place starts with a strong internal innovation team. One made up of experts from different functions across your operation, that fully grasp the risks, challenges and opportunities of working outside the box.
It’s also essential that the company’s C-suite fully supports your innovation team, and its decision-making, understanding that the innovation strategy is an essential element of the business, which may require significant funding for research, development and testing. The company’s leadership also needs to understand its tolerance for risk and that not all new avenues may lead to profit.
Regardless of the market conditions, innovation remains one of the most critical levers for organizations to achieve their long-term strategic objectives. Business leaders that prioritize innovation in a downturn may be surprised to find that the budgetary constraints and barriers inflicted upon them during times of crisis actually end up working to their advantage. Creative thinking, stripped-back solutions and pulling resources are all positive bi-products of innovating under pressure. When considering the right course of action for your business, it may prove useful to consider a few key points:
Innovation is driven from the top - While every employee plays their part, the CEO is key to driving the agenda and prioritizing innovation in-line with the business strategy.
Be ruthless in your assessment - Not all innovation will bear fruit. You need to take a pragmatic and calculated approach to explore new ideas and products. Ask yourself questions like, how much risk are we willing to take on? What is the true cost of continuing down this particular path in terms of time, money, resource and effort? Keep a tight hold over budget allocation and weigh up making additional investments carefully.
Be careful when choosing short-term gains over long-term strategy - It’s important to stay focused on your overarching vision. While prioritizing short-term profit might help this year’s bottom line, consider the true cost of veering from your goals when it comes to securing your company’s longevity.
What do your customers want? - Making market needs central to your innovation process when developing new products and services is paramount. Communicate with your customers before, during and after launch to ensure you create the most useful end product. Whether it’s an improvement in efficiency, an issue fix, or an increase in productivity, ask yourself, what problem does this product solve?
Not all innovation is created equal - “Innovation” comes in all forms. Something as simple as upgrading a piece of equipment to drive efficiency, or updating your existing processes to save time can make all the difference. It’s not always about the big-ticket items. Cleaning up your operation can be just as effective.
Identify adjacent opportunities - If you’re facing increasing constraints or budget restraints in your existing market, figure out how your current service offering could be successfully applied within complementary verticals or industries. Exploring new applications for your product could open up previously untapped revenue streams.
The ongoing global Covid pandemic is probably one of the most unprecedented scenarios we’ll experience in our lifetime with significant and lasting effects on the world’s economy. If you’d told me in January 2020 that not only our industry but the entire world would shut down for an extended period this year, bringing unprecedented challenges to overcome and new ways of working to figure out, you might have forgiven me for not believing you. However, here we are, helping drive our customers’ businesses forward in the new environment, with a number of exciting developments in the pipeline that were conceived and tested this year, during the downturn. By helping our customers thrive, we thrive as a result.
It’s been proven time and again that innovation thrives in the face of adversity. Those companies that emerge from recessive cycles stronger and ahead of their competition are the ones that understand the true value of innovation. While the winners and emerging future stars of this latest economic cycle are yet to be crowned, what is clear is that the uncommon sense approach to innovating during a downturn makes a whole lot of sense.
Originally posted by Joel Sherlock, CEO of Vitalis on LinkedIn