And what are some impactful ways to leverage research during a downturn...
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US recession odds, per a bloomberg survey with economists had climbed to 70% by December 2022.
Link: https://www.bloomberg.com/news/articles/2022-12-20/economists-place-70-chance-for-us-recession-in-2023
How do companies react to such indicators? Well, no points for guessing. They revert to what is most comfortable, & brace for impact by cutting everything other than what is strictly necessary to keep lights on. However this may just be the wrong way of looking at a downturn.
Why so? Knee jerk reactions are not what one should engage in, as suggested by this below HBR article. Instead of just taking a predictable route, good companies should use a potential downturn as an opportunity for growth.
Article below:
Focusing on profitability doesnt mean exclude research. On the contrary, research has a pivotal role to play in helping companies achieve stronger bottomline.
But then, it takes some vision and trust in your resources for this to work.. Afterall, only 9% of the companies achieve high growth during downturns.
Source: HBR 2015. “In their 2010 HBR article “Roaring Out of Recession,” Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen found that during the recessions of 1980, 1990, and 2000, 17% of the 4,700 public companies they studied fared particularly badly: They went bankrupt, went private, or were acquired. But just as striking, 9% of the companies didn’t simply recover in the three years after a recession—they flourished, outperforming competitors by at least 10% in sales and profits growth. A more recent analysis by Bain using data from the Great Recession reinforced that finding. The top 10% of companies in Bain’s analysis saw their earnings climb steadily throughout the period and continue to rise afterward. A third study, by McKinsey, found similar results.”
Following are a few positive actions companies can take during recession- All utilizing their research & design functions.
Double down on focus, and invest in what will drive profitability and efficiencies such as value chain enhancements.
Cut out efforts that are just focused on mindless growth.
Approach here would be to shorten the failure cycles for blue-sky ideas, and iterate faster with rapid customer research and experimentation with a combination of qualitative and quantitative research methods
Investing in understanding and simplifying enterprise processes for value chain enhancements and investing in digital efforts for optimization
It is time companies befriend Usability Engineering and other process improvement functions to identify and invest in efficiency improvements - if they aren’t doing it already.
Look to increase the CLV of the customer base, acquire or create more high value customers.
The flip side of this is to give value to the customers - ie increase customer Willingness To Pay through network effect, and also through a clear understanding of customers’ latent needs.
Generate and study the company’s value map that includes a clear understanding of
1) Customers - with the use of primary and secondary research
Understand, identify, and create customer based rankings of high value efforts to generate Unique Value Proposition often through a deep understanding of unaddressed customer needs. These are the high value, high risk (of execution) efforts. A small list of high upside efforts are crucial for a chance for growth during the downturn. Since the risks are high, companies should invest in research here and not cut corners, as opposed to popular stance. This should be an investment companies make, to give chance for it to be the 9-10% that grow during downturns.
2) Competitors - including parity, & overshoots
This helps in understanding what competitor offerings are
3) Our activities and synergies among the activities
Synergies are particularly important during recessions, to ensure efficiencies for enterprise activities as well as from a customer perspective, since they can contribute to network effects
4) Use WTP as a way to prioritize customer efforts
Look for strategic alignment and invest in bargain M&A
Primary research can help here as well, contrary to some notions. An example? To get an understanding of what value customers place in the offerings of this competitor, and how it aligns with our value Map.
How can research help? What are some methods that are usable for these different scenarios?
Contextual Research
User research using techniques such as Contextual Research is the way to get to understand unmet customer needs. Contextual Research requires deep expertise and systematic approaches for it to be effective. Hugh Bayer and Karen Holtzblatt’s book on contextual design is still one of the best resources in my mind to learn this skill.
Once you understand the key opportunities, its important to prioritize them. There are a variety of tools, both behavioral and attitudinal that can help here. Idea here should be to triangulate methods, analytics, financial & business value information to ensure we are able to understand the opportunities from different angles and inform the prioritization.
Some techniques from a user research perspective are
user interacting with an early stage concept in context.
Attitudinal: My go to approaches for attitudinal studies are usually a combination of Kano method, Max-diff, as well as willingness to pay.
Note: Here is an example. I’ve removed any specifics to protect the business information here. Also please note the use of multiple methods. This is to ensure that garbage data doesnt skew the result i some studies. Also gives more confidence and ways to understand nuances in a study.
Increasing efficiencies and create value chain enhancements
Usability engineering and other process improvements should be a focus here. Understanding employee processes and improving them with one of the several task flow analysis techniques can be really helpful here. Here is a paper that describes a Cognitive Task Analysis technique called PARI.
Note: This was just an example of one type of task analysis. There are other task analysis techniques as well, which focus less on experts as the source of information, but by studying users in a behavioral environment as well.
Usability Engineering helps understand, and simplify customer and employee workflows and help create efficiency, which is of high value during a recession to support bottom-line.
Understanding competitor Landscape
One of the better ways to do this in my mind is to combine desk research, heuristic reviews, as well as body storming and other primary research techniques. This is an example of a past research where the team also immersed ourselves in different c-store digital experiences to understand how these experiences fared against each other. The ratings here are an average of subjective ratings for most from the cross functional team. There were also some primary qual, quant as well as business research that went into the analysis.
Building and studying the value map
This is something I should credit my studies at Stanford GSB for - Particularly Dr. Shiv's course. Value Mapping is a high value tool to help us look at our business from a 360 degree perspective, and should be adopted. This can also be part of a collaborative workshopping exercise after customer and competitor research.
We have done a large scale workshop at my previous company back in mid 2022 utilizing this technique, and came away with some high value opportunities to focus on for the future.
I will pause here. If you take away one thing from this write up, it should be that recession does not mean de-prioritize research. It just means you invest smartly, and investing smartly requires a clear understanding of what you are investing in, and research is the way to go for that. I hope you find this brief write-up helpful.
Note: This article focused only on some opportunities companies can focus on to come out a winner during a downturn- and some research techniques that can help. I am sure I missed mentioning many things. What are your thoughts on the matter? How can companies win during a recession? How can research help? What have I missed mentioning here? Please do comment.
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