Economically difficult times create a lot of uncertainty in organizations and many businesses have to cut back their activities in various areas to limit expenses and protect the sustainability of their business. A lot has been written about the importance of customer-focus, innovation and design in a recession. The conclusion is always the same: these areas are just as important as ever and if you have to trim back in your organization you better do this in non-core business areas and keep on investing in the core-areas of your business.
This is obviously not rocket science but where are the real-world examples of companies that have reinvented themselves in a downturn?
Economic challenging times require a focus on customer value
There are some and my personal favorite is an analysis in BusinessWeek from May 2001 (Sorry Steve, Here’s Why Apple Stores Won’t Work) where the author outlines why Apple’s new retail outlets are not going to be successful.
[The] Problem is, the numbers don’t add up. Given the decision to set up shop in high-rent districts in Manhattan, Boston, Chicago, and Jobs’s hometown of Palo Alto, Calif., the leases for Apple’s stores could cost $1.2 million a year each, says David A. Goldstein, president of researcher Channel Marketing Corp. Since PC retailing gross margins are normally 10% or less, Apple would have to sell $12 million a year per store to pay for the space. Gateway does about $8 million annually at each of its Country Stores. Then there’s the cost of construction, hiring experienced staff. “I give them two years before they’re turning out the lights on a very painful and expensive mistake,” says Goldstein.
- Twenty percent of Apple’s revenue comes from the Apple Store
- Apple made $1.25B at the Apple Store in the fourth quarter of this year, which is 42 percent more than last year
- Apple makes $4,000 per square foot of Apple Store surface area every year
Reflecting on this example we can see that even though analysts and journalists believed that this is not the right way to go, it was obviously (or maybe luckily) a successful move. In a recession it is easy for everyone to predict the failure of new products, services or distribution channels. The article additionally shows how much you should rely on others to estimate the success of new products or services.
Indeed it is more difficult to launch new products and services in a downturn compared with boom times. Instead of building new products and services based on any random hype topic in boom times where value is defined investors, media or other entrepreneurs, new products and services have to deliver real value to customers in a recessions.
The world doesn’t need another social network which is merely a clone of Facebook, LinkedIn or Xing. What is needed in challenging economic times are transformational products and services that provide value to customers.
Of course the case study with Apple is not the only one, the UK Design Council, the national strategic body for promoting the use of design in business, has published an article titled “Designs to overcome a downturn – Facts, Figures and case studies” with several case studies where designers worked together with companies from different sizes and sectors to improve their performance during challenging economic conditions. The case studies that are presented are from Castle Rock Brewery, Thistle Hotels, McCain Oven Chips, HMV and Ian Macleod Distillers.
You should also check out the collection of other case studies that highlight the role of design in action.
So what is the role of the design in challenging economic times?
As we can see from these different case studies, approaching these situations with design in mind (in a sense of focusing on delivering “designed” artifacts) as well as with a design mindset (solving the problems through the eyes of a designer) can lead to successful re-definitions of value propositions.
Cost-cutting and trimming excessive resources has been and will be an essential approach to focus on the essential core of a business and to provide the necessary resources so that new products and services can be designed, produced and marketed.
If you think that this downturn is different and you do not need a designer to make your products “look nice” you should think twice. Making things look nice is not the job of a designer. Solving problems and providing value is one of the essential goals of design and looking at current problems from a different perspective might just provide the insight or solution that could prepare you for the next upturn.
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