So how might you offset the recessionary challenges of reduced demand and tighter credit conditions?
There is opportunity in a recession
It’s human nature to focus on the bad rather than seek the good in challenges. But the first step is to recognise that even in the bleakest of times opportunity can usually be found, whether the scale of the opportunity is about steadying the ship or launching an armada, it is there.
This is evidenced by recent lessons from the COVID pandemic, which has shown many businesses that they are capable of moving at a pace they may not have believed prior to that crisis, to implement new ways of working to overcome challenges.
If we look at businesses that did well through covid, there’s the obvious “right place, right time” successes like streaming services, e-commerce and gaming that benefited from the circumstance, but others that relied on physical interaction like hotels, restaurants, gyms, took the opportunity to innovate through new business models to allow them to continue to operate at a time when physical interaction was extremely limited.
Forced to close their doors by lockdowns, many restaurants took the opportunity to pivot into home delivery, allowing them to utilise their existing resources in a new way. Launching via food delivery platforms such as UberEats, Deliveroo and JustEat, restaurants were able to continue to serve customers, but the more interesting approaches came from the ghost kitchen approach.
Using the ghost kitchen approach meant that restaurants could create new virtual brands and menus to diversify from their existing offering. Why would they do this? There’s a few reasons;
- Serve a different audience
When you shift your delivery model to take away, you’re serving people within a given delivery window based on your location. If prior to the pandemic a restaurant was, attached to a hotel, a fine dining destination or special occasion restaurant, for example, the audience for that proposition may not live within what is now the take-away delivery window. So using a ghost kitchen approach restaurants are able to shift their proposition and menu to better meet the needs of the new audience.
- Test new menus, themes and branding
Free of having to stick to their current proposition meant that restaurants could test new menus, themes and branding with minimal risk and investment. A good example of this is from The Restaurant Group, the UK business behind brands including Frankie and Benny’s, Wagamama and Chiquitto amongst others. In the pandemic, they launched several virtual brands, including Birdbox, utilising the facilities and resources of their Frankie & Benny’s kitchens they were able to bring a brand new offer to customers local to their Frankie and Benny’s restaurants.
- New revenue streams
If we expand The Restaurant Group example, while in the pandemic these brands were a life line, but these brands did so well that post pandemic, they continue to be available and now provide an additional revenue source from existing resources. Investing in innovation through the pandemic meant that businesses like The Restaurant Group exited stronger than they entered.
Investing in innovation
What will your equivalent of a ghost kitchen be? Businesses that invest in innovating their products, services, and delivery models are more likely to emerge stronger from recession.
The details of how to best go about innovating vary depending on your current products, services, business models, investment levels and your brand but there are two starting points;
- Outside in - Start with gaining a fresh understanding of your customer in the context of recession.
- Inside out - Start with your understanding of the impact of the recession on your operations and delivery models.
As customers, whether they are consumers or businesses, are forced to make more difficult decisions on how they spend their money, they may start thinking differently about your products and services.
You need to take steps to investigate what changes this may mean for your customers and their needs. Ultimately you are looking to understand what impact this might have on your business model, products and services to be able to answer more questions to surface the challenges and opportunities.
- Are your customers' needs still the same?
- What’s new?
- Is your target audience still the right audience?
- How might you adapt to address new needs?
- What adjacent audience needs might you be in a position to address?
Recession may also impact your operations through your supply chain, costs and delivery channels. In which case your approach needs to take into account exploring alternative models and approaches for delivery.
Where might you be able to reduce costs, improve productivity and employ new models to not only maintain existing, but create new growth opportunities?
The innovation hokey cokey
At Freestyle we believe that the best opportunities lie in the intersection of both customer and business need, overlaying the outside in and inside out findings should highlight areas that will benefit your business and your customer.
We have lots of content expanding on these methods and approaches including Four smart ways to win in a recession, a piece looking at growth and Disruptive innovation and 3 key ways to challenge BAU which looks at the three horizons of innovation.
Can we help?
We are experts in identifying opportunities, generating solutions, validating and launching them. If you’d like to know more about how we can help you, get in touch. Drop us a line: firstname.lastname@example.org
Author: Ritchie Brett, Strategy Director, Freestyle