Prevailing During the Periods of Economical Crisis and Recession through Business Model Innovation

Abstract

There is a consensus among economists on the measures to be taken in economical means during an economic recession and crisis. In this context, these measures include establishing and managing capital structure in a way to cover costs of long term losses and expensive loan payments, avoiding borrowing to finance the losses, being cautious on the use of long-term bank loans only for long-term loan needs, managing stock's levels efficiently and, if possible, reducing inventories, making savings, changing business model since the current economic conditions may well be very different from the pre-crisis environment, even if the economic crisis is over. There are many companies, in Turkey and in the world, that outlast and increase their market shares and profits through changing their business model in this regard. Serious problems and insurmountable obstacles are considered as a boon for creativity and innovation in business model and in the mean time; innovations are reported as a powerful trigger in times of crisis [1]. Jeffrey Fox identifies that companies surpassing their rivals in innovation, during the Great Depression and 12-recession period afterwards in the United States, possessed always much stronger market shares after these economic crisis and gained more profits [2]. Ken Chenault, American Express CEO, expresses, “difficult periods require you to be more innovative” [3]. In other words, the path to be pursued for prevailing, during periods of crisis and the difficult economic conditions, passes through innovation. Business model innovation is gathering key resources and processes of an enterprise in harmony and in a totally different way than competitors’, in order to create value for itself and its customers. Therefore, business model innovation is the best and the most valid way to cope with the crisis and recession periods to increase market share and to profit. However, it is observed that enterprises considering their existing business models as steadfast phenomenon do not divert from their traditional processes and are rarely successful in business model innovation. This study determines the failure causes of enterprises in business model innovation. If these determinations are taken into consideration by managers and CEOs they will help enterprises to cope with difficult economic conditions, such as crisis and recession periods, economic stagnation, lucratively.