Why the recession offers a good business opportunity
Jonathan Sands on why we're entering one of the most exciting periods for business
You don’t have to have been an economist or an investment banker to have felt the growing undercurrents slowly destabilising our economy over the past few years.
For those of us responsible for our own businesses, the anticipation of an impending economic collapse has been at the back of our minds for a number of years. I remember standing in front of my colleagues over a year ago, talking about how I felt that, not only were we entering a recession, but in my view, it would be the worst economic climate since the Great Depression of the 1930s.
Most of us associate that troubled period with large-scale unemployment and negative growth impacting across global economies. However, for sheer creative thinking, it was one of the most innovative decades in modern history. From Mickey Mouse, to sliced bread, the jet engine, FM radio and even humble Scotch tape, all these innovations were children of the 1930s. They are products that have played their role in revolutionising the way we live our lives and have spawned multi-million-pound industries borne out of smart, creative ideas that resonated with a changing society.
So exactly what was the catalyst that drove the creation of these inventions and innovations during this time of deep economic gloom? And, more importantly, how can we learn from these success stories and apply them to our own businesses to capitalise on the current recession?
The business ideas of the 1930s
During the 1920s, people were starting to put the horrors of the First World War behind them. Economies started to recover and, as a result, lifestyles were changing. This period bore a sense of optimism. It was accepted to live beyond your means, with people taking credit to buy furniture and cars, as well as to fund their increasingly opulent lifestyles.
The crash of 1929 quickly put a stop to this extravagance and witnessed the start of a new era characterised by high unemployment, radical politics and thrifty lifestyles. The resulting mood throughout this period, contrary to the economic situation, was one of expectation and aspiration – a yearning and belief that change was coming, coupled with the dawn of convenience.
There were businesses that survived and grew during this environment, and the key to their success was an acceptance of changing needs, along with a willingness to adapt in order to cater for them. They recognised that people wanted to feel better about their situations and be transported somewhere new where they would forget their current troubles.
Sales of chocolate, for example – an inexpensive treat with that immediate feel-good factor – went through the roof. Mickey Mouse’s foray in The Klondike Kid introduced the joys and escapism of animation to the masses for the first time. Alka Seltzer, invented in 1931 to treat heartburn and back aches, meant people could continue to go out to work and earn a wage even when they felt ill. Sliced bread allowed mothers the convenience of making breakfast and lunch for the family in less than a third of the time, while also generating less wastage from the loaf.
These were all brilliant, but simple, ideas that recognised life had changed and spoke to the new generations living through those changes.
The fact was that people were struggling. Businesses and entrepreneurs at the time knew that in order to survive the depression, they needed to ease the struggle or capture people’s imaginations and take them away from life’s hardships.
It has been proven that in times of conflict – and for business this period was war – innovation multiplies 100 fold. The enterprising seek invention and change as the means to their own survival and, in turn, open up the gateways for everyone else.
Boom from gloom
There’s no doubt 2009 will be a painful year for some, but it’s important to remember there will also be winners. Just like the 1930s, the next few years will bring us countless opportunities – but only for those of us who are truly aligned to the new world and the lifestyles and moods of people today.
A few weeks ago, one of my business heroes, Archie Norman, was asked for the single piece of advice he’d offer to ‘recession virgins’. He said the most important thing to do was communicate to colleagues that this was not going to be a short-term situation. “If we accept this,” he said, “we can get on and enjoy it.” Masochistic? No, simply sound advice that if the new world is going to be tough, use the changing times to your advantage and be a winner. Or, as American billionaire Warren Buffett pronounces in his new biography: “Where there is greed be fearful, but where there is fear be greedy.”
We need to accept that the bubble has well and truly burst and that frugality is here to stay for the foreseeable future. My view is that the new frugal, thrifty, but creative consumer mindset will define the tone of business for the coming decade.
Innovate to succeed
During the 1930s, those entrepreneurs and businesses that recognised changes taking place across consumer habits, lifestyles and behaviours, and adapted or evolved their ideas and propositions accordingly, emerged from the depression as successes.
In my eyes, innovation will manifest itself most strongly when a business can offer its customers or consumers a completely unique experience, a point of difference that allows them to retain and gain customers even when belts are being tightened.
I firmly believe businesses should focus on delivering an antidote to the defining theme of today – anxiety from terrorism, property prices, job instability, even the threat of flu pandemics, which will all be amplified by the recession. But it’s here, among all the stress, that businesses can truly find their point of difference and emerge as winners.
Whereas in the 1930s, the expectation for change and hope meant people were open to extravagant technological developments, such as the jet engine and helicopter, this time around, we’ll see the antidote to anxiety through both a desire for personal security or even through the use of humour as defining themes.
For example, the growing demand for retro goods and services can be linked back to a desire to feel secure, reminding us of our childhoods or a time when we felt life was safer. Take the growth in sales of classic trainers or vintage clothing over the last few years as a prime example.
But non-retro businesses can tap into this desire equally effectively. There are some great examples where this is already emerging. Take the Geek Squad, the IT support helpline company that’s been positioned as an emergency service complete with uniforms, badges and squad cars to help those in “IT distress”. It’s a serious company that doesn’t take itself too seriously; a business that gives you a reason to smile, even in these difficult times.
I’m not suggesting that businesses should adopt risky strategies or avant-garde approaches for the sake of it. But we should be mindful that consumers are open to, and looking for, an antidote to the stress the recession years will undoubtedly bring.
So, just like during the 1930s, innovation will once again create our future. It doesn’t have to be expensive or difficult, indeed it should be simple and true, empathetic and creative. No wonder Mickey Mouse was so successful despite the crash. Recession may, after all, be the mother of all invention.