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Indeed, innovation thrives in recessions. Government data for July confirmed that the US economy contracted for the second straight quarter. While this does not technically confirm a recession, it has raised concerns within the business community. An impending recession may be unnerving, but business leaders and entrepreneurs should welcome the opportunity to move their businesses forward by investing in innovation.
It may be counter-intuitive. After all, recessions are notorious for forcing companies to cut budgets and lay off employees. But history shows that periods of economic downturn are the ripest for innovative activity. From Snow White and Her Seven Dwarfs (the world’s first animated feature film made during the Great Depression) to companies like Instacart and Grubhub that have innovated and thrived during the COVID-19 recession. Through and through, a recession can trigger new habits that last beyond. It also encourages innovation.
A question arises here. What trends should businesses watch for today?
Situation for 2023
First, on the macroeconomic side, all consumers are suffering from inflation, which has a huge impact on where and how they spend. 80% of Americans said they would reconsider or cut spending soon. Consumers expect high inflation to continue, which means low spending will continue. Additionally, while customers have purchased many important consumer goods during the pandemic, such as new televisions and bread makers, they don’t need or need to buy new items anytime soon. Growing, let alone maintaining a business, can seem more difficult. But some smart innovations can help turn this dilemma into an opportunity.
Customers care more about price than brand loyalty, so companies can reimagine their configurations to offer the same product at a lower cost and in a more agile manner.
A company called Flexe, the “Airbnb of warehouses,” rents out 550 warehouses, equivalent to 25 million square feet, to shippers to help them cut costs, and sells directly to consumers with digital natives such as Casper and Hims. We have become an important partner for companies that
But to get a full picture of how consumers are responding to this inflationary pressure, we need to contextualize it as what happened after the pandemic. Deprived of years of meaningful experience, people are grappling with a practice economists call “revenge spending.”In August 2021, the average American will spend $765 more than the year before. was doing. Of course, this was before inflation skyrocketed, but businesses have ample opportunity to capitalize on this desire in small-scale ways. Bed, Bath & Beyond continues to report that consumers are coming to stores to indulge in modest luxuries. , stop buying big products, but buy small luxuries as respite from difficult times.
Post-pandemic life has flowed directly into the second trend, the Phygital Future. Pandemic restrictions have forced society to live, work and play as remotely as possible. This was an unfamiliar situation, but the taming of the virus did not lead to a complete return to normalcy. NBA attendance is at pre-pandemic highs of 95.1%, OpenTable reservation rate is 89.6%, and TSA check-in is 87.6%. However, the office occupancy rate remains at 44.2%. These numbers paint a clear picture. People want to combine the pleasures of the physical world with the convenience of digital, especially at work. Businesses need to ponder how their digital products can provide convenience and how they can actually provide excitement and novelty.
In recent years, in addition to changes in lifestyles, we have seen changes in people’s values. For one thing, consumers are much more environmentally conscious. Between 2016 and 2021, there was a 71% increase in consumers looking for sustainable products globally, and a 65% increase in posts about biodiversity loss over the same period. In a 2019 survey, half of respondents said they switched products because they didn’t align with their values, with lack of sustainability being the most important value. Beyond social responsibility concerns, consumers are most interested in engaging with companies that reflect their identity. Millennials and his 68% of Gen Z shoppers say brands are important to their identity and the way they think about themselves.
Understanding Consumer Behavior: What Do You Offer?
Creating an affordable, entry-level version of your product can be a valuable, if not necessary, step in dealing with a recession. You get rewarded when your is improved so you can pay more. Duolingo, for example, offers a free language learning service and an ad-free premium version.
Does your company understand what your customers want to buy (i.e. products or experiences)? This is especially important in determining whether your customers are interested in owning or experiencing your product. Lululemon has grown from an apparel company to a lifestyle brand. They opened an experiential store where customers can take yoga classes, sip smoothies and browse traditional products. Businesses need to consider how their brand becomes a product, not just an experience.
Harnessing Phygital: How Do You Get Involved?
To combat package thieves, Amazon has launched a practice of having drivers take photos to verify that packages have reached their destination. By taking a picture, the driver was able to show the user where the package was placed and confirm that the item was successfully delivered. With this feature, stolen packages no longer lead to mass complaint calls, no more disputes over whether the packages have arrived, Amazon saves labor costs, and no need to resend packages.
Does your company understand how consumers want to be served? willing to pay In an age where online banking has never been easier, Capital One has an in-bank café for customers who want to come to the bank, do face-to-face banking, and get work done. This not only enables the sale of food and beverages, but also increases the opportunity to sell high-touch financial advisory services to face-to-face customers.
Express your values: What do you stand for?
Are your company’s values genuine, clear, and consistent? These efforts should go beyond easing buzzwords and be based on the actual work the company does. Warby Parker has a “buy a pair, give a pair” initiative. For every pair of eyeglasses purchased, Warby gives one of hers to someone who can’t use corrective lenses. The initiative allows customers to feel like they are contributing to a larger movement, in this case the democratization of vision, by purchasing her Warby glasses.
Finally, how can your company leverage its employees and, dare I say it, its customers to collectively define what the company stands for? cannot (only). Starbucks is a great example of a company that values its employees. Their baristas or partners are central to Starbucks management and are seen as key stewards and representatives of the brand.
It can be difficult to ask difficult questions about how a company can innovate in a recession, and the answers are even harder. Fortunately, find ways to reinvent your company in turbulent economic times There is a way. We call this the “Double Diamond” process, a design-led approach to discovering and validating our innovation bets. See Figure 3.
Are you ready to act?
Have you read it?
The Impact of the Need for Stronger Network Security on the Future of Tech Startups by Lu Zhang.
Strategic Communication and Human Resources by Fotis Pantopoulos.
Does your family business have a “family employment policy”? It should be by David C. Bentall.
America’s Hidden (and Much Better) Economy by Dr. Corey Rosen
5 Reasons Entrepreneurs Like Elon Musk Choose Purpose-Driven Education by Parul Agrawal.
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