3 ‘business forces’ that can help you innovative in a struggling economy
Nigeria’s economic state has been quite tumultuous since the crash of oil prices in 2014. The crash led to record levels of inflation, the rapid weakening of the Naira and a very poor business environment as highlighted in the World Bank’s 2017 doing business report (Nigeria ranked 169 out of the 190 economies evaluated on the basis of ease of doing business).
When an economy is struggling, organisations tend to be less risky and generally opt for safety in their decision-making. However, the highest payoff in a struggling economy lies with those who innovate and implement new possibilities amid uncertainty and risk aversion. The rewards for innovators are considerable and failure to innovate can be quite costly, as proved by well-known companies like Netflix and Blockbuster during the 2008 Financial Crisis.
Blockbuster and Netflix were both in the video rental industry, with Blockbuster being the largest video-rental chain in America. In 2007, Netflix began to move away from its original core business model of mailing DVDs and decided to innovatively introduce video on demand via the Internet. However, Blockbuster, safely opted to continue with its traditional business model and tried to facilitate more in-store sales rather than modify its business model.
In 2009, at the peak of the recession, Netflix had gained 3 million members while Blockbuster was on the decline and unable to make its debt payments. Blockbuster had stuck too long to an outdated strategy and failed to understand changes that others eagerly exploited.
By 2010, Blockbuster was officially bankrupt while Netflix thrived and became notable for its digital content distribution and customer service. Today, Netflix continues to grow with 100 million subscribers and a net worth of $1.92 billion.
Business model innovation is a powerful mechanism for establishing a culture of change in a company and coming up with solutions in the face of ever-changing economic conditions. But how do you stay innovative when the circumstances around you aren’t favourable? How do you keep an innovative mindset in a struggling economy?
The best way to adopt an innovative mindset is to continuously question the fundamental assumptions ingrained in your organisation’s processes, with a focus on how to improve. However, how to keep an innovative mindset is to use the following business forces, which stay ever-present regardless of the economic situation, as guides to innovation:
Your customers’ tastes are ever-changing and novelty inevitably wears off. Regardless of the health of the economy, customers will have various wants and needs. To move your business forward, you need to study your marketplace and understand how to innovatively and continuously add value to your customers.
For example, Apple continued to perform at a high level during the 2008 recession, even setting record numbers of iPhone and Mac sales because of this innovative mindset. This trend continues to this day and this is largely because Apple understands how to continuously enhance customers’ satisfaction through convenience by using platforms like iTunes and Apple music, which not only build brand loyalty but also increase the number of its customers.
This refers to the innovative means through which value is provided to customers. This usually involves some form of technological sophistication in your product/service, evidence of which is the number of Nigerian companies (e.g. Banks) which have included online features and e-services in order to be able to compete. The focus of the channel employed should be on finding a unique and adaptive way to provide customer satisfaction.
Companies continue to learn and develop better business models, thus intensifying competition in an industry no matter the economic climate. Keeping a close eye on your competitors’ strategy, could make or break your business. It is important to strive to be one step ahead of competitors at all times.
As highlighted earlier, Blockbuster used to be the king of movie rentals, but competitors like Netflix quickly capitalized on high-speed Internet and self-service trends to overtake it. Blockbuster was never able to recover from its lack of innovative planning and it eventually went bankrupt. Bill Gates has a great quote which applies here, “The only big companies that succeed will be those that obsolete their own products before somebody else does”; this is true whether the economy is good or bad.
These three business forces clarify the ‘WHAT’, ‘HOW’ and ‘WHY’ of business innovation and will help guide innovative decision-making even in the face of a struggling economy. It was during the 2008 recession that Apple was busy working on a new business model for selling digital content, and when the economy eventually recovered, those innovations helped transform the music and entertainment industry. Likewise, the foundations for tomorrow’s winners in Nigeria are likely being built today, during these tough times. It is important to keep innovation strong, when the economy is weak.