In a recession, businesses and individuals often face economic challenges and may be hesitant to invest in new technologies. However, despite these challenges, there is great opportunity for innovation during a recession.
In fact, previous recessions have shown that companies who invested in innovation through a time of crisis greatly outperformed their competitors. A recent article by Harvard Law School Forum, Funding the Future: Investing in Long-Horizon Innovation shows how allocation plays a huge role in the outcome.
Economic downturns can be a good time for calculated changes - just ask General Motors. In the Panic of 1907, General Motors (GM) was formed. GM quickly grew through a series of aggressive acquisitions (Buick, Oldsmobile, Cadillac, Elmore, Welch, Cartercar, and Pontiac) in the early 1900s but soon found themselves over-leveraging at an alarming pace.
GM decided to pivot their GTM strategy with a new brand-based pricing model, instead of their previous ‘this year’s model’ strategy. Their long-horizon innovation proved to be extremely successful and by 1962 GM held 50% of the total car sales in the U.S, surpassing their top competitor, Ford Motor Company.
By thinking long-term and innovating at the right times, GM was able to expand their operations into manufacturing for the transportation industry including; aircrafts, construction equipment, trains, and appliances.
Fast forward to 2022, GM continues to innovate by entering the energy industry with GM Energy. This new business unit focuses on innovate energy solutions by providing battery packs, EV chargers, and software to help residential and business customers with charging and electrical grid disruptions.
As of today, GM ranks 22nd on the Fortune 500 list of the largest US corporations by continuously leveraging long-term allocation for innovating and creating value.
Here are a few ways companies can continue to innovate and drive growth during difficult economic times:
Focus on cost-saving technologies
During a recession, businesses may be looking for ways to cut costs and improve efficiency. Innovations that help companies save money or streamline their operations can be especially attractive during this time. For example, the use of cloud computing and next-generation mobility tools can help reduce the need for on-site hardware and software, resulting in significant cost savings.
Leverage technology to adapt to changing market conditions
A recession can lead to changes in consumer behavior and market demand. Companies that are able to quickly adapt and pivot their operations using technology may be able to weather the storm more effectively. For example, the widespread adoption of e-commerce and online shopping during the COVID-19 pandemic has allowed businesses to continue to sell products and services even when traditional retail channels were closed.
Invest in research and development
While it may seem counterintuitive, investing in R&D during a recession can pay off in the long run. By continuing to innovate and develop new technologies, companies can position themselves for success when the economy recovers.
Discover opportunities in underserved markets
Some markets may be hit harder than others in a recession. Companies that are able to identify and target underserved or overlooked markets may be able to find new sources of growth. For example, a company that develops a technology that helps small businesses operate more efficiently may be able to find a niche in a market that has been particularly affected by the economic downturn.
In all circumstances, industry leaders should have strategic priorities on top of their minds. A recession can easily change your operating environment, so if you want to stay ahead of the curve, companies need to find new ways to adapt, while keeping the future in plain sight.
It’s often believed that innovation means seeking out risk. When in fact, successful innovation is all about managing risk smartly by sharing it widely with strategic business partners. Now is the time companies should embrace open innovation and find smarter ways to work.While a recession can present many new challenges for businesses, it can also be a time of opportunity for those that are able to innovate and adapt. By focusing on cost-saving technologies, adapting quickly to changing market conditions, investing in R&D, and discovering opportunities in underserved markets, companies can continue to drive growth and stay competitive even during difficult economic times. It’s easy for leaders to freeze and focus on purely surviving in difficult times, but it’s those who find the unique silver linings in today that will be the successful innovators of tomorrow.