by Format-3

Share article

Introduction

Recessions. They’re nobody’s favourite economic event. Budgets are slashed, projects shelved, and businesses are told to “do more with less” (the corporate equivalent of being asked to power your house with a hamster wheel). But while recessions are undeniably grim, history shows they’re also when humans—and businesses—get their most creative.

Take wartime inventions like radar and penicillin, or recession-era breakthroughs such as Disney’s Snow White or the rise of Airbnb. The message is clear: challenging times have a knack for forcing us to innovate our way out.

So, how do you take this lesson and apply it to your business? That’s what we explored in my recent talk at the Product Design Week, diving into the opportunities recessions create, particularly through customer experience (CX) and the emerging power of artificial intelligence (AI). Let’s break it down.

The CX Advantage: Proof in the Numbers

Before we talk AI, let’s start with something more grounded: the link between CX and market performance. If you’ve been in design or product long enough, you probably suspect this already—but there’s actual data to back it up.

Take this report from Watermark Consulting. Their studies consistently show that companies excelling in CX (the leaders) outperform their competitors financially by a staggering margin—up to 100%. Meanwhile, CX laggards don’t just lag; they underperform by the same amount. In other words, being mediocre in CX is fine if you want to be average, but being terrible? That’s financial suicide.

Now, here’s the catch. When costs go up—as they do in a recession—the first thing many businesses cut is their CX budget. Less spend means lower-quality experiences, which ultimately lowers customer loyalty and satisfaction. And this creates an opportunity: to stand out in a competitive field, you don’t have to be brilliant—you just have to not be awful.

In politics we might call this the “Keir Starmer Window”: you don’t need to be great; just don’t be a Tory.

Why Recessions Are Innovation’s Best Friend

It might seem counterintuitive, but recessions are actually prime time for innovation. Why? Two reasons.

First, necessity is the mother of invention. When the old systems break down and customers start demanding better, you’re forced to get creative. Second, the stakes are higher. With resources tight, every pound spent has to work harder, leading to smarter, leaner solutions.

History proves this. In the 1970s, FedEx used early digital tools to revolutionise logistics, making shipping cheaper and faster. In 2008, the gig economy exploded, with platforms like Uber and Airbnb disrupting entire industries. These weren’t just random sparks of brilliance—they were answers to urgent economic needs.

And today? We’re in a similar place, with economic pressures mounting and two transformative technologies—AI and near-zero latency connectivity—reaching maturity. The question isn’t whether these will disrupt industries, but how and who will make the most of it.

The AI Advantage: A New Era of CX

Let’s talk AI. Specifically, how it’s changing the game for CX. Tools like ChatGPT have made AI accessible to everyone—no coding required. This isn’t just a flashy feature; it’s a paradigm shift.

Think about how businesses historically delivered intelligence to customers. In the pre-digital era, everything was human-powered (e.g., your bank manager giving tailored mortgage advice). Then came the design-time intelligence era: automated systems designed to follow pre-set paths. Efficient, but impersonal.

Now, we’re entering the runtime intelligence era. AI can deliver real-time, personalised interactions at scale. It’s as human as a bank manager but as scalable as a chatbot. Examples like Clio, the money management app, show how AI can learn individual habits, adapt to unique needs, and even roast you for spending too much on McDonald’s.

Practical Steps: Where to Start with AI and CX

If you’re sold on the opportunity but unsure where to begin, here are a few pointers:

1. Start with the Customer: Remember the Steve Jobs mantra: start with the customer experience and work backwards to the technology. Don’t just bolt on AI because it’s trendy.

2. Meet Customers Where They Are: Integrate CX improvements into platforms customers already use, like WhatsApp. One project I worked on allowed people to chat with their pensions via WhatsApp, offering real-time insights and advice without forcing them into clunky apps.

3. Think Beyond Chatbots: AI isn’t just about chatbots. It can personalise experiences, handle complex queries, and adapt dynamically. Don’t stop at replacing humans; rethink how the entire system works.

4. Manage AI Like a Team Member: Worried about AI “hallucinating” (making stuff up)? Humans do that too—we just call it guessing. Train your AI with clear prompts, like “If you don’t know, say so,” and you’ll cut errors significantly.

Looking Ahead: System-Wide Transformation

Right now, most businesses are dabbling in AI with point integrations—replacing one part of a system (like a chatbot). That’s fine as a starting point, but the real potential lies in system-wide transformation.

Think back to the adoption of electricity in factories. Initially, they replaced steam engines with electric generators, keeping the rest of the setup unchanged. It wasn’t until they rethought factory layouts entirely—using conveyor belts and single-storey designs—that productivity soared.

AI is at the same stage. We’re still figuring out how to redesign entire business models around its capabilities. But those who lead in this space will define the next era of commerce.

Conclusion: Innovate, Don’t Hibernate

Recessions might feel like the worst time to innovate, but they’re actually the best. The stakes are higher, the competition weaker, and the opportunities bigger. With tools like AI and a renewed focus on CX, businesses can do more than just survive—they can thrive.

So, ask yourself: if you had infinite intelligence at your disposal, what would you do differently? Because with AI, you might not be far off.

So, ask yourself: if you had infinite intelligence at your disposal, what would you do differently? Because with AI, you might not be far off.

Kevin Stewart

Watch the talk from PDW London 2024
https://tinyurl.com/zhy2976u

By Format-3

Press & Media

More thoughts

Thought leadership creates value, builds knowledge and takes a stand, bridging the gap between traditional and digital platforms