Is a Recession Good for Business Model Innovation?

Is a Recession Good for Business Model Innovation?


It seems that many entrepreneurs have crawled into their caves to wait out the recession.  For many of them, the battle cries have become:

This general attitude of intense risk aversion leads to abysmal business model innovation.  Many businesses only innovate when they are on death’s door- when there is no other option but to innovate.  For many small businesses, this innovation comes too late.

Is a recession good for your business model?

It takes years for powerful innovations to take hold and fundamentally change a business.  Take the success of the iPad.  It may have taken Apple two or three years to move from conception to sellable product.  However, the genesis of the iPad was in the late 1990s with the Newton.  The failed Newton lead to the successful iPad.  Great innovations take patience and time, something entrepreneurs tend to be short on.

Is it possible that business owners need to think more counter-intuitively?  Rather than passively riding out the recession, could slow economic times be the perfect time to innovate the business model?  I say “Yes.”  Other than finances being tight during a recession, all other factors are favorable to experiment with your business model during tough times.

Why do college enrollments go up during a recession?  Since there are fewer job opportunities, people figure, “I wasn’t going to get a job anyway, so why not put the time to good use.”  Businesses should do the same thing.   Innovation and the corresponding initiatives are easier when sales are slower.  Yes, by innovating during tough times, the economic pain may be greater.  Yes, it may be more difficult to fund the innovations to your business model.  However, savvy entrepreneurs find a ways to innovate more during a downturn so they can “make more hay” when the economy turns.

How can you innovate despite the recession?  Here are some starting points:

Do you agree that entrepreneurs should innovate their business model more during a recession?

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