disrupting in a recession

Being a Disrupter in the Face of Recession  

The threat of recession has caused many businesses to pare back investment but investment in technology offers a means to innovate, disrupt, grow revenues and secure a competitive edge. 

Every recession is different from the one that preceded it. Back in the late 2000s, the economic downturn that descended on much of the world after the Great Financial Crisis was largely caused by a sharp decline in lending as banks repaired their balance sheets. The current period of economic turbulence – which looks set to become a recession – has its origin in a complex web of separate but linked events, such as the fallout from the pandemic, labour shortages, disrupted supply chains, sky-high energy prices and the war in Ukraine.

The common factor, however, is uncertainty. Despite the efforts of economic forecasters, no one really knows for certain when the expected recession – as defined by two quarters of negative growth – will officially begin, when it will end and how deep or shallow it will turn out to be.

And for many businesses, uncertainty breeds a certain fearfulness. Investment decisions are put on hold. Hiring is suspended. Marketing may be cut back. The hatches are well and truly battened down. Survival is the order of the day. Innovation and growth can wait until things improve.

There is another way to look at a recession. Over the last decade or so, businesses have become used to disruptive players entering their markets. Challenger banks have shaken up the financial services market. Incumbent insurers are competing with tech-driven startups.

Vivel Swaminathan of Gartner put it like this: “Very few companies are disruptors but almost every company has been disrupted.”

And in all cases, businesses operating in those industries have responded. When challenged by technology, they have developed their own solutions. Their services have become better as a result. Indeed, in some cases, companies that respond to disruption are themselves disruptive.

All of which brings us back to the likely economic downturn. Recessions are also disruptive. They force businesses to address their markets in new ways. To survive and thrive businesses need an aggressive plan to take them from where they are now to where they want to be.

Technology is Key 

Over the past two decades, technology has itself been an increasingly disruptive force and some businesses have struggled to cope with the pace of change. But in a time of turbulence, technology – and particularly, digital transformation – holds the key to growth. Using technology, businesses can optimise supply chains, streamline internal processes and develop new relationships with customers. They can become disruptors, positioning themselves not only to weather any economic downturn but also to reshape their markets.

Is that overly optimistic? No. If we look back to previous recessions, there are plenty of examples of new ways of doing business emerging from the economic gloom. It’s a point underlined by Mike Maddox in Forbes earlier this year. As he points out, Airbnb, Hootsuite, DreamWorks, Twilio and Uber were just some of the fast-growth businesses that were born during economic downturns. As Maddox sees it, the disruption wrought by a recession is a signal that the time is right to create something new.

Becoming Disruptive 

But how does a business become disruptive rather than one that is simply being disrupted?

Well, the response of businesses to the Covid lockdowns points the way forward. All organisations were forced to adapt to the pandemic restrictions but small and medium sized companies proved particularly agile. Many turned to digital solutions to allow them to carry on trading. Those ranged from collaboration tools to manage home working to digital-first customer engagement and sales strategies. This proved to be more than a temporary fix. As the restrictions eased, these businesses continued to invest in technology. Digital transformation provided a means to boost performance and surprise and delight customers.

But there is, of course, a question that faces all businesses – and particularly those who have limited resources. While there is a strong argument to be made for investing in technology during uncertain times, does the expenditure represent an unjustifiable risk?

Actually it seems to be the key to growth. Verizon’s 2022 Small and Midsize Business Survey suggests that companies who invest in digital transformation – even in the face of huge challenges – are seeing the benefits. When asked about their investment, 63% said they had transitioned to digital online operations and 65% said revenues from this source were higher than before the pandemic.

Over the next few years, we expect this trend to continue as businesses of all sizes press ahead with digital strategies. This will require fast, flexible and reliable networks, but the technology is already in place. For instance, 5G is delivering a huge increase in network capacity.

The current period of economic uncertainty will pass but disruption is an ongoing fact of life. The disrupter may be a competitor, a pandemic, an economic shock or indeed a new technology. The imperative for businesses is to use technology to stay one step ahead of competitors.