Economic decline leads to increased innovation

Market uncertainty. An ongoing global pandemic. Supply chain issues and unstable prices. Today’s headlines can stir up anxiety even for the most herculean among us. Yet downturns are also a time of innovation. Just as mathematics and nature follow a pattern, so does the relationship between market downturns and innovation. When we look over the past 100 years, there have been many examples of downturn-wrought necessity sparking innovation that helps brands evolve for the future. From the 50s to the 2008 financial crisis, brands we all know and love – like Amazon, LEGO, Play-Doh, Starbucks and Time – found themselves in a metamorphosis during a crisis, and evolved to cement their success in modern times. HERE ARE FIVE TALES OF BRANDS WHO INNOVATED THEIR WAY THROUGH UNCERTAIN TIMES: Child’s play: Play-Doh’s shift from cleaner to toy. It first landed on the market in 1933 as a wallpaper cleaner to remove soot produced by coal stoves. Within the next decade, coal stoves went out of fashion, reducing the need for the brand’s product. Faced with declining demand and a recession in 1953, the product needed reinvention. After discovering that some teachers were using the products as a material for kids to play with, founder Joseph McVicker saw the potential to pivot the product to a children’s toy. By 1965, the product was available in a mix of bright colors that we all know today. Time launched People. During the Great Depression, Time magazine bet on its own success with the launch of a new publication, Fortune. When faced with another downturn, between 1973–1975, Time magazine took a bold approach to shift from journalistic rigor to personality reporting with its launch of People magazine. The new magazine was also a change from the era's tabloids, featuring a range of personal stories from the public. This bet continues to pay off: in 2009, amidst a global financial crisis – and well into the decline of print – it had 46.6 million readers, the biggest audience of any magazine in the U.S. LEGO built a global brand by expanding during a downturn. During the 2008 financial crisis, LEGO was primarily focused on the North American market, and was in a rut when it came to product innovation. The economic crisis forced the Danish toymaker to rethink their approach and build a new path forward. They initiated licensing deals with brands such as Star Wars, and licensed their own brand for The Lego Movie — a unique move for a toymaker at that time. They also expanded their targeted geographic reach beyond North America, as well as introducing production facilities in new countries. By 2019, all of the pieces seemed to fit into place with LEGO’s 65% increase in pre-tax profits – with the iconic blocks, loved by children and adults alike, arguably becoming the world’s favorite toy. Amazon didn't stop innovating. Throughout the recession period of 2007 to 2009, Amazon's stock declined, putting the company’s upward trajectory in doubt. While the financial crisis was hurting their competition, they doubled down on innovation, using their driving company principles, including long-term thinking and a passion for invention, to launch a whole suite of new products: Amazon prime, Amazon Kindle, and AWS, their hosting service. By 2009 their profits were up 68%, and each of the products introduced has become a category leader and major profit driver for Amazon. Starbucks ordered a double shot of customer participation. During the 2008 economic downturn, Starbucks closed hundreds of stores. Then, the company appointed a new CEO, who drove a change of focus “away from bureaucracy and back to customers.” This shift brought a series of changes, from cafes, to welcoming hubs, to the launch of “My Starbucks Idea,” an online portal where customers contributed ideas for products, services, and stores. Starbucks brought the voice of the customer into their decision-making — transforming their brand experiences to emphasize human values of belonging and connection. THE TAKEAWAY: GIVE PEOPLE WHAT THEY NEED Among these five success stories, three elements stand out. The first: A focus on the voice of the customer by understanding the motivation behind their purchase, known as the jobs-to-be-done theory. A deep understanding of the customer’s goal spawns products and services that solve real market gaps and pain points better than their competitors. 95% of new products fail in-market largely because of brainstorming sessions where the customers' core needs are not well understood. The second: An understanding of the changing economic and sociocultural context, fundamental human needs, and tensions to identify a meaningful brand shift. And finally: Balancing short-term ambition with long-term business sustainability. Each of these products or services launched during a recession was created with longevity in mind — not a short-term hedge during uncertain times. Which brands will be referred to as points of inspiration next time there's a downturn? It won’t be the ones that simply “play it safe” and avoid risk, but the ones that see the bigger picture, respond to evolving needs, and invest in innovation for the long term.