During economic downturns, there are many important things that business owners need to consider. Like accumulating cost-saving techniques, treading carefully and waiting for things to settle. But ironically economic downturns can also signal an important time to re-strategise and re-invent what you have been doing all this time. In this way, it can also be an important opportunity to innovate in your business. This begins with taking an important step back, re-evaluating your position and re-thinking your long-term strategies.
1. Carefully consider your innovation strategy
During downturns, you can take up the opportunity to connect with customers who are of fewer means, or naturally frugal. Perhaps they can help you understand how your existing product might adapt to the needs of your changing market. Bear in mind that there are different ways to look at innovation. Either you can work on upgrading your existing products or services, or you can put effort into finding new ones. The former is easier to work through and execute, but the latter (while more complex) may accrue higher returns long term. The trick is to carefully gauge the risk of your strategies and sense-check it in the market before pursuing it blindly.
2. Think about what the customer needs and fill that gap
Understanding what your customer needs and fulfilling it, is important under any circumstance, but this becomes particularly important during an economic downturn. In these times, customer habits and preferences may shift and even continue after things have improved. So ensure that your organisation is flexible and able to modify your plans so as to accurately fulfil your customer’s evolving needs.
3. Adapt existing processes
During an economic downturn, the trick is to find ways to do more with less. Here, innovation becomes crucial. So comb through your operation and identify clever ways to reduce operating or material costs without compromising the quality of your product. Perhaps there are ways to improve efficiency as well. In this way, sometimes innovation can happen on the ground at a production level, rather than only happening at a higher strategic one.
4. Accelerate the adoption of new tech
Consider how digitalisation can improve your business like working remotely or in a hybrid model. Technology can also make a big difference in improving things at a process level to increase productivity and reduce human error - which can be costly. While cash flow may be tight during a downturn, it is actually an optimal time to invest in these inevitable types of technologies. Ignore this evolution, and risk being left behind by your competitors.
5. Track your ROI
While innovation may provide long-term rewards, you need to carefully track ROI on innovation. Most companies will have a limit on funds and especially during a downturn when costs need to be controlled. While you always want to strive for new innovation, just make sure that the costs around your plans are realistic and carefully tracked. if you detect that the idea is going to be more expensive than it’s worth, rather cut your losses ahead of time and ‘fail cheaply’.
The bottom line
Economic downturns are an important time to consolidate and innovate. As a business owner, you need to strike that tricky balance between cutting the fat, tuning into your changing market and innovating in strategic ways. When done well, smart entrepreneurs can actually find unique opportunities to improve their existing markets and grow in surprising ways, in spite of ambiguous times.
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