Razeghi (2008) wrote that “When the going gets tough, the tough innovate.” He listed seven ways to manage a cost-effective innovation during economic downturns. For each in the list he gave concrete examples on how the tough innovates:
1) Listen to the market. It’s quieter when it’s less crowded. Unmet needs abound.
“In February 1930, four short months after the stock market crash, Luce launched an audacious, irreverent, and vibrantly-colored arsenal of human interest stories in the form of new media product called Fortune Magazine. Not only did he have the gall to launch a new product in the shadow of the Great Depression, he launched an expensive new product. At the outrageously-lofty price of $1 per issue, Fortune launched with only 30,000 subscribers. By 1937, the magazine netted a half-million dollars on its circulation of 460,000. By the end of the decade, Fortune had become required reading on Wall Street. . . . Fortune worked for the very same reason that all great new products work: it made a uniquely relevant contribution to its customers’ lives (period). . . Fortune magazine worked not in spite of the Great Depression. It worked because of the Great Depression. Luce did what all great innovators do: he found an unmet need in the market and filled it.”
2) Invest in your customers. Now they need you most. Loyalty hangs in the balance.
“La-Z-Boy launched its iconic reclining chair in 1929 just months before the stock market crash but sales continued as customers bartered everything from wheat to coal to farm animals for their very own chair. Nothing stood between a man and his La-Z-Boy. The company’s founders did everything they could to keep their customers seated in their products. Extend better terms. Service their accounts more quickly. Help them stay afloat. By the end of the Depression, not only had La-Z-Boy collected a wide-array of farm animals it had amassed unparalleled customer loyalty for its service and quality.”
3) Rather than reduce price, offer more value to your customers and demand greater value from vendors.
“Not only did Vlasic, the famed pickle company, slash the price of its products, it loaded them up into gallon jars and sold the oversized products at Wal-mart for $2.97 (that’s less than the price of a quart of Vlasic sliced pickles found at grocery stores). The product worked for Wal-mart insofar that it garnered the attention of consumers. The big jar-o-pickles screamed value to Walmart’s customers. Although, the fact that it was a jar of pickles didn’t really matter. What mattered was that it was a big, cheap jar of pickles! After all, who needs that many pickles? It could have been a big, cheap jar-o-socks; a big, cheap jar-o-batteries; or a big, cheap jar-o-peanut butter. Vlasic was nothing more than an in-store advertisement for Wal-mart’s Everyday Low Prices. Although the gallon jar fiasco wasn’t solely responsible for Vlasic’s demise, it certainly helped the company find its way to bankruptcy much more quickly.”
4) Increase communication with your customers.
“Consider Ralston Purina who, between 1930 and 1932, saw its sales plummet from $60 million to $19 million. Rather than stop its marketing in its tracks and in an effort to build brand awareness with limited marketing dollars, the company launched a historic product placement by sending its Dog Chow Checkers dog food to the South Pole with Admiral Byrd thereby helping the company cut through the clutter and win the attention of consumers. By the way, it’s a good thing they chose Byrd’s expedition and not Shackleton’s: with “food and stores gone”, Shackleton’s crew ate their dogs. Nonetheless, by 1939, Ralston Purina’s creative marketing strategies and growth plans worked putting the company back in black, never to operate in the red again.”
5) Move longer-term projects forward not back. Now is the time to grab market share.
“Following the stock market crash in 1929, Adolph Ochs, publisher of The New York Times, issued a memo to his staff: “We must set an example of optimism. Please urge every department to go ahead as if we thought the best year in the world is ahead of us.” Although fifteen advertisers cancelled their contracts with Ochs in a single week, Ochs mitigated employee layoffs opting to use the $12 million surplus he had built during the roaring 1920s to pay salaries. He also maintained the editorial quality of the paper even though advertising had fallen off. So, in effect, the paper became a “better” product insofar that it contained fewer advertisements, but still had the same editorial and news coverage. Finally, rather than spin the financial horror story of the day, at the end of the year, Ochs chose Admiral Byrd’s exploration of Antarctica as the most important news story of 1929. Once the Great Depression had ended, the New York Times had more readers than any other newspaper in the country which, in turn, translated into higher advertising rates. Ochs stayed the course and emerged triumphant.”
6) In recession, not all costs are created equal. Maintain or increase investment in “good costs”; prune “bad costs”; use judgment on “it depends costs”
“An example is Gillette’s 1990 introduction of its Gillette Sensor brand of shaving products. Launched in a recession, more than 8 billion Sensor razor blade cartridges and 400 million Sensors razors have been sold. By 1997, 49% of Gillette’s sales came from new products launched in the previous five years and R&D spending had reached $212 million.”
7) If you don’t have the money, at least spend the time.
“Consider the birth of the world’s first instant coffee: it too a Depression era baby. In 1930, the Brazilian Coffee Institute had a problem: it was sitting on a huge surplus of coffee beans. Thinking, correctly, that a new product could help increase consumption, the Institute contacted Nestlé’s chairman with a request to develop “a coffee that was soluble in hot water and retained its flavor.” If you want to sell a lot of coffee really fast, conventional wisdom suggests that it be quick to make and to consume. But that’s not all that mattered — as evidenced by the fact that there were pre-existing crystallized and liquid forms of coffee on the market and in laboratories around the world dating back to 1903. There was only one problem: they tasted terrible. Therefore, the Brazilian challenge seemed reasonable and worth the time to figure out. Alas, seven years after the initial request, Nestlé’s scientists emerged with the solution and by 1938, Nescafé was launched in Switzerland. Shortly thereafter, it became a staple beverage of consumers through the world most notably among the United States armed forces. In fact, by World War II, Nescafe had become so popular among American military personnel that the entire production of its U.S. plant (one million cases per year) was reserved for military use only. The next 60 years stood witness to variations on the theme of every new, big, and bold idea in what I call the “New Product Waltz”: new packaging, new flavors (dark roast, light roast, decaf), new sizes, and — today — a range of specialty coffees. It’s all very au courant, yet it’s not at all. Nonetheless, it works.”
Some of us would disagree with the above, even others would proclaim: “We are not a publishing house, furniture shop, store or grocery, thus these are not applicable to us!” Oh, innovation-ignoramus, the lesson here: the business of business is making money, but creativity is the key even during recession. Unless innovation is ingrained in the corporate’s mind-set, there is nothing a company can do but retrench employees and add to the rising unemployment; time-share and bloat the under-employed statistics; yet, the most dreaded: close shop or declare bankruptcy.
Notes:
Razeghi, Andrew J. (1988), Innovating through Recession. Illinois: The Andrew Razeghi Companies, LLC., 2008. 12pp. back to text
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