There’s no good way to say it: Recessions can be hell on businesses. Economic growth takes a hit, and unemployment figures skyrocket.
The current economic downturn, specifically, could last a long time. This scenario is particularly likely if it takes a while to develop a vaccine and restore consumer confidence. Wall Street had originally hoped for a V-shaped economic recovery (i.e., a rapid rebound) from the COVID-19 pandemic, but central bankers have predicted a more rocky road that includes plenty of fits and starts. There’s even concern about a potential W-shaped recovery — a quick rebound followed by a second, severe decline.
This might paint a dismal picture for the future of business, but there’s hope for companies that can stay agile and creative. Some of the biggest success stories have emerged during previous recessionary cycles. When startups are backed into a corner, their scrappy roots and grit come out. It’s not a coincidence that companies born during recessions tend to be the most resilient.
Here are a few of the most notable recession-born businesses and the lessons they can teach us:
The Story: Before the Great Recession, Mailchimp had focused on securing annual retainers from large corporate clients. It added a freemium business in 2008, when the recession forced it to pivot its business model. Mailchimp’s user base more than quintupled that year, growing from 85,000 users to 450,000.
The Lesson: Don’t be afraid to pivot. It could end up being the catalyst for your entire business.
The Story: The founders of Warby Parker saw a customer pain point (difficulty finding affordable, fashionable glasses online) and matched it with timing (customers being more frugal during the Great Recession). They went on to grow Warby Parker into a thriving direct-to-consumer retail and e-commerce leader.
The Lesson: They say “timing is everything” for a reason. Consider customer pain points, the economy, and market needs to find your angle.
The Story: Microsoft also launched in tough economic times — it incubated during the recession and oil crisis of the mid-1970s. The company wisely provided services for a booming product: personal computers. By 1981, founder Bill Gates had already expanded the company and partnered with IBM to run his products on IBM personal computers.
The Lesson: If you can make your product essential to another trending product, you can ride the wave of success together.
The Story: Jack Dorsey (who also co-founded Twitter) founded Square in 2009 with Jim McKelvey. At first, the company’s only product was a plastic card reader that could be inserted into the port of a phone to enable merchants to accept credit cards. Now, the company has expanded into other ventures — including a cash app — and is valued at $ 26 billion.
The Lesson: It’s OK to start small.
In tough economic times, innovation isn’t just a way to get ahead — it’s the only way to survive. Just as these companies were able to marshal their resources to overcome the challenges of an economic downturn, so can your startup. In some ways, it might end up being the best time to launch.
Interested in learning how you can translate and prioritize your best ideas into new digital business models, successfully leverage existing assets, quickly enter emerging markets, and maintain your competitive advantage? Check out my company’s guide to getting started on a path to innovation.