Global recession can not only change the way insurance does business, but it also may change the way your clients do business – which may lead to the next big recession-proof opportunities for insurance sales growth.
Economies in recession don’t necessarily mean less business innovation, Scott D. Anthony, a clinical professor at Dartmouth College’s Tuck School of Business, writes in a blog for Harvard Business Review. “History shows that recessions create three specific opportunities for innovators.”
Economists at the Royal Bank of Canada predict the country will head into a moderate and short-lived recession in 2023, the National Post reports, “with inflation, historic labour shortages and rising interest rates drag on the economy.”
Commercial brokers and underwriters shaking the trees for new business during the lean years may take hope that business innovations can thrive during recessions, as Anthony observes. And entrepreneurial insurance professionals may be interested in chasing business where they see potentially recession-proof innovations taking place.
For example, businesses with “game-changing offerings” can thrive during a recession, Anthony notes.
“Startups with radical products or services that ‘reverb’ off of the big event driving the recession can take off,” he writes. “For example, Airbnb, an online marketplace for ‘places to stay and things to do,’ was founded during the height of the recession in 2008. Its service appealed to thrifty millennials looking for a cheap way to travel, as did Uber’s car-sharing model.”
Other examples include the founding of Walt Disney during the Depression Era of 1923, “a time where the world desperately needed hope,” as Anthony observes. “It’s reasonable to expect the need for alternative energy sources to combat climate change and reduce dependence on autocracies, greater food safety, and more dependable supply chains to attract today’s entrepreneurial energy.”
Recessions are also a great time for innovations around simple, affordable solutions.
“Downturns can be great times to introduce offerings that connect with consumers who have tighter purse strings or are naturally frugal given continued uncertainty,” Anthony writes.
He cites the example of the recession in 1948-49, immediately after World War II. At that time, the McDonald brothers fired all their carhops, closed their flagship store, installed new equipment, and reopened three months later with a novel approach for food preparation.
“Instead of having a single skilled cook who would custom-make orders, McDonald’s simplified the menu so that less-skilled people could prepare the same thing over and over again,” Anthony writes. “It was Henry Ford’s assembly-line approach applied to food service.”
Now, McDonald’s Canada is among the world’s biggest food service retailers, serving meals to more than 2.5 million people in over 1,400 Canadian locations every day.
If insurance professionals are looking for new clients to help diversify and bolster their books of business, finding an innovative company rationalizing its business during a recession may be a place to start.
Finally, brokers and underwriters may also wish to keep an eye out for business leaders who are making bold strategic moves during a recession.
“Downturns can be great times for established companies to make dramatic changes,” Anthony writes. “Shantanu Narayan took over as the CEO of Adobe in late 2007. The 25-year-old company seemed stuck, with products such as Photoshop and PageMaker stagnating. Nimble software-as-a-service (SaaS) competitors were emerging. And the onslaught of the global financial crises would challenge even the strongest incumbent companies.”
Narayen and his team undertook a bold transformation strategy in 2008, when they tested a software-delivered model of Photoshop, as Anthony observes. A few years later, they stopped producing packaged software and went to a fully SaaS model.
Anthony’s point is that recession can lead your clients to succeed, because the leaner times can cause them to do innovative things they should have been doing already. To wit:
Pruning down innovation initiatives
Cost-cutting efforts that focus more on investing in customer-centric initiatives
Conducting smart, strategic experiments, starting with and then testing hypotheses
Collaborating with others parties to help “share the innovation load.”
Feature photo courtesy of iStock.com/Biserka Stojanovic