The global crisis that began in 2007 dragged almost every country into a recession. The resulting economic downturn led to sharp declines in business revenues, outputs, and employment. Despite this, the world saw the emergence of highly innovative companies like Airbnb, which expanded exponentially in the following years.
When resources are limited, people are forced to either earn more money or save more money. And that’s what people started doing with Airbnb during the recession. They started earning extra money from the spare room in their house that nobody uses. The result was that an economic downturn gave birth to an innovative business model that people didn’t even know they wanted.
Fast forward to 2022, and many are concerned about another recession looming. This poses an important opportunity for businesses to learn from history and find ways to innovate during tough times.
Below, we’ll explore what it takes to innovate during an economic downturn and how you can set your business up for success.
Going Back to the Basics
Economic downturns often push people to do what they should perhaps already be doing, like saving more and spending less. For businesses, it’s a call to innovate and pivot to changing consumer needs, often while working with limited resources. A new business model, a fresh perspective, and an ability to invest in R&D are critical for breeding innovation and putting businesses on a path to success.
A company’s leadership goes through the toughest of times during economic downturns. All employees and stakeholders watch closely to see their next move, which often calls for strategic business decisions. Leaders who focus on building a robust internal innovation team that fully grasps risks, challenges, and opportunities are usually the ones standing tall when the world recovers.
When the world is changing fast, businesses must adapt faster. People’s behaviors, purchasing patterns, and habits change during tough times, and the companies that tap into what’s spurring at the moment are the ones to survive and thrive. For example, Zoom generated $4 billion in revenue in 2021. This was a 53% increase year-on-year, making it one of the fastest-growing apps of the pandemic. This happened while Skype, Google Meet, and many other competitors were already on the market.
Focusing on What Moves the Needle
Many companies spend thousands of dollars on look-good projects that don’t impact their business performance. Economic downturns help them step back and cut down on anything that doesn’t move the needle of their business. The following practices can help leaders foster innovation within their teams and drive valuable results:
- Building a culture that thrives on innovation.
- Celebrating ideas, diversity, and openness.
- Focusing on projects that bring them back to the vision of their business and make things simpler and easier for customers.
- Being adaptable to change and promoting critical thinking within their team.
- Focusing on simplifying and improving what already exists.
- Strategically making their team feel empowered and heard.
Acquire the Necessary Skills to Innovate
Scaling a business and achieving sustainability in the long term requires skills, knowledge, and strategies that work. The Henry Bernick Entrepreneurship College (HBEC) makes this possible for entrepreneurs and business owners by providing them access to qualified business and academic staff with experience building successful, sustainable businesses.
We can help you learn the skills you need to innovate and prepare for changing economic conditions. Contact us today to learn more.