Recession-Proof: Silver Linings

Recession Proof: Silver Linings

Many of the most disruptive company cultures started during a recession. Companies like:

  • General Electric (GE)shutterstock_796243573
  • General Motors (GM)
  • IBM
  • Disney
  • HP
  • Trader Joes
  • FedEx
  • Microsoft

Companies like Google, Salesforce, and Facebook began just before a major economic meltdown. Instead of failing, each of these companies started their global rises. In the process changed their industries. During a downturn, we typically see billion-dollar companies hunkering down. Instead of improving the company, CEOs borrow money. Then to reduce costs, avoid investing in new capital, fire employees, and hope the recession is short. “Hunkering” companies assume that after the bad times, everything will go back to the way it was. We all know the old saying about “Assuming.”

Despite a recession, the companies on this list (some over 100 years old) did not need to borrow or take government handouts. What did they do? Instead of hunkering down, these companies invested in innovation. While their competitors thought things would go back to the way, they had always been. When the recession ended, these companies were surprised because the industry and customer expectations had changed.

What is Innovation?

To understand what innovation is, look back just a little over 100 years ago to the automobile industry. Henry Ford did not invent the first car. Karl Benz first patented the automobile in 1885 (Note: John Stevens patented the first American combustion engine in 1798). Henry Ford did not invent the assembly line. That was Ransom Olds in 1901. December 1, 1913, Henry Ford created an automobile assembly line at his Highland Park Plant in Michigan. Within ten years, Ford Motors was selling millions of Model T cars and trucks. Plus, the company owned a 50% market share of worldwide automobile sales. Ford was not the inventor, but he was an innovator. By combining two ideas, manufacturing and the assembly line, he created innovation.

Wikipedia defines innovation as “…a new idea, creative thoughts, new imaginations in the form of a device or method.

The simplest way to create industry-disrupting innovation is by combining a new idea with a technology that the industry is ignoring. The result will be a method of doing things that were not possible before integrating the technology with a new idea. The new methodology will make it difficult, if not impossible, for others in the industry to compete with the innovator. Innovation was seed over 100 years ago when Henry Ford combined the assembly line with automobile manufacturing.

How is Innovation different from efficiency?

It is easy to confuse efficiency and innovation. Market messaging can confuse by using the terms interchangeably. Innovation is about inventing a new method. Efficiency means reducing the losses when following the present methodology. The newspaper publishing industry focused on being the fastest source of printed information. Whether the information was about business, news, or local events, newspapers always had the latest information.

As an industry, the bottleneck for newspaper publishing profits has always been printing speeds. The business customer reading the first newspaper delivered at 6 AM, would have a competitive edge over the customer getting their paper at 8 AM. Making that earlier newspaper more valuable to the reader. This value was because, during that hour or two, the first business reader knew more about the world than the reader’s competitors.

When adding computers to the printing press, publishers could print more papers in an hour. For the publishers, this meant that more readers would not have to wait until 8 AM for a delivery. If a competitor’s newspaper could not catch up, the faster publisher sold more papers. For newspaper publishers, the key to profitability meant the competitor with the most efficient printing press became the industry leader.

We all know how the Internet changed this dynamic. With a computer connected to the Internet, the 6 AM reader no longer needed a newspaper. They still needed the information. The information just didn’t need to be printed on paper. Ironically while computers make printing presses more efficient, there are now many ways for customers to get the same information in real-time.

Innovation and Recessions

The silver lining in recessions is that they force change. Changes like,

  • Mainframe computers
  • Overnight Shipping
  • Mickey Mouse as “Steamboat Willie”
  • Network computing
  • Sophisticated Information Search Algorithms

The present expansion has been going on for 11 years. On paper, this makes the last 11 years the most extended period of economic growth in the history of the country. What can we expect from the next recession?

In the next few posts, I would like to introduce technologies that a business owner could setup in less than 30 days. Technologies that will improve EBITDA by improving employee productivity, reducing the risk of business loss or both. These tools are being used by billion-dollar corporations. Thanks to technology getting less expensive, can be leveraged by a solo-entrepreneurs or the mid-size business that wants to be a billion-dollar company someday.

Recession Proof: Unified Communication

Recession Proof: Artificial Intelligence

Recession Proof: CRM