The current market conditions, thanks to the ongoing COVID-19 crisis, have created a sense of instability and general unease across the business world, one that has the potential to have more profound impact than ever on entrepreneurs and business owners. Even before the current crisis, the margin of survival for small businesses was small: 50% failed after five years in business, with another 70% failing by their tenth year in business.
The gap between the winners and the losers has grown. In the past decade alone, it’s more than doubled; and the changes associated with the current crisis have the potential to create even more challenges for many entrepreneurs.
All this uncertainty poses a tremendous challenge for business strategy. Why? Quite simply, because traditional approaches don’t work in times of uncertainty. Raising capital in the current environment is very different. Many investors aren’t willing to invest in businesses when they don’t feel that they have the potential to show fast, reliable growth. In fact, many investment groups have dialed back their spending during this period, making it harder than ever for new business owners to get their products off the ground.
Thriving in the Midst of Crisis
The entrepreneurs that thrive during times of crisis are those that are quick to read and move on the signals of change. They’re the leaders who worked out how to experiment with the new offering rapidly, frequently, and, most of all, economically. It’s not just the products and services you offer that matter, though many businesses have already discovered that they must adapt their offerings in order to provide effective support for their communities.
It’s about the internal business models, processes, and marketing strategies that successful businesses utilize. In order to thrive, leaders must build their skills in making complex moves on short notice. Ideally, that means having a team already in place that can move on those changes and advance preset plans or adapt to new ones quickly and effectively.
Leadership must be highly turned in to market signals of change, including market volatility from the external environment. They must decode those signals, then act fast to refine or reinvent the business model and adjust its offerings.
The Questions Leaders Ask
Effective leaders must ask key questions during periods of market volatility:
What is the challenge? In the case of the pandemic, for example, the challenge was continuing to deliver value to customers despite social distancing measures or the need to shut down physical locations of the business.
How can the business make both short and long-term adjustments that will equal profits and revenue? Imagine, for example, a leading B2B service company suffering from a high rate of customer turnover. It was struggling to keep bringing business through the door and make those much-needed profits. By revamping its billing model and customer support approach, the company became more transparent. It shifted to offering limited contracts with fees billed as they went instead of large monthly contracts that often got cut when it was time to make budget changes. The company quickly saw an increase in year over year billable hours by more than 25%, simply by utilizing an offering that was less likely to get cut out of the budget, since the line item was deemed essential at the proposed rate.
Successful businesses need to be able to make similar alterations, and make them in a way that helps transform the industry and benefit customers and business alike.
In order to adapt to these challenging times, businesses must also prepare to accelerate deployment. Typically, deployment is local in nature: someone experiments with a product idea, then expands it further following success. If the experiment succeeds, the deployment becomes global in nature: that is, it expands to reach a wider potential audience. It is communicated, selected, amplified, and refined.
Effective organizations need to create environments that encourage accelerated deployment. That includes knowledge flow, diversity, autonomy, risk-taking, sharing, and the flexibility on which adaptation thrives. While classical strategic thinking implies that innovation comes from specific lightbulb moments, effective entrepreneurs have learned that innovation follows the organization of adaptive companies. When business owners create an effective setting for innovation, it follows—and deployment can go faster, which means that businesses can get their new products, solutions, and innovations out to a wider audience sooner.
Managing in the post-COVID world looks very different for many entrepreneurs. Some changes are likely to remain short-term; others, according to many economists, are likely here to stay. By learning to adapt and maintain flexibility, however, organizations can weather both these storms and the ones that are likely to follow, putting them in a better position to join the ranks of those small businesses that have ultimately seen success.