The consensus is clear: 2020 is a year that will not be readily forgotten. It has been a year filled with uncertainty and a sense of anxiety.
We should all strive to be prepared for dangers on an individual level, as a community, as a society, and indeed, globally, as the COVID-19 pandemic has so clearly indicated. Despite all the preparation, a crisis can arise at any time. Whether or not there is a controlled response to that crisis will dictate the outcomes.
A crisis can also have profound effects on any business, large or small. That is where an effective business model plays a pivotal role, allowing a company to identify challenges and implement effective response strategies to mitigate crisis aftermaths. Businesses must frequently reassess or reinvent these strategies to enable knowledgeable, swift decision-making throughout the organization.
So what can a business do to ensure that it survives a crisis? A myriad of elements require consideration.
What customers are being served? It is crucial for a business to know who its customers are, what benefits those customers derive from interactions with the business, how consumers think and buy, and how to maintain their loyalty and trust. Maintaining existing and building new customer relationships is essential when a crisis has turned the world upside down and consumer priorities have changed.
Communication is key, and a company must act quickly to let customers know that it has contingency plans in place and will be proactively addressing any negative impacts during and after a crisis. This enables the customer to understand that a business is responsible, responsive, and humanized, eliminating fears and doubts. It is also imperative to remain transparent, relevant, and accurate, without speculation.
Training should be provided for those involved in the company’s business and crisis model planning so that they are ready to act when necessary. Crisis simulation exercises can prove helpful.
Customers will gravitate toward businesses that will create value for them, with clear contributions to their needs. Your business has to communicate its worth and why customers should support it rather than the competition. For example, a business may want to reach out to potential customers with a new product or service that serves as a possible remedy for a new problem.
Purposefully developed capabilities can provide resilience to help a company address unpredictable situations. A business that recognizes its capabilities is in a favourable position to safeguard itself from the exigencies of a crisis and recover more quickly. Which capabilities are being put under strain? Which ones offer a unique advantage in the crisis? Rapid adjustments made through a data-driven approach can overcome volatile predicaments. Knowledge is power and businesses that harness it are more likely to survive and thrive.
And remain innovative during and after a crisis. A crisis, in whatever form it takes, is a golden opportunity for innovation. Let customers know the innovative steps your business is taking during and after a crisis because innovation does not end when a crisis ends. It is an ongoing learning process and shows customers that innovative adaptations may become permanently etched into daily operations, boosting consumer confidence.
All of these elements do not function in isolation; they are interconnected to deliver profits and purpose. However, a crisis can cause misalignment, so too can a change in leadership or poor communication of a business’s vision.
In fact, according to a study from PricewaterhouseCoopers (Pwc), “Sixty-five percent of companies investing 15 percent or more of revenue in innovation say that aligning business strategy with innovation vision is their top strategic issue.”
Businesses need to innovate with a goal in mind. To align business strategy with innovation, a business is required to understand the customer, create a feedback loop so that business and innovation strategies line up, and clearly communicate that vision to all stakeholders.
Some business models will understandably be too outdated to survive a crisis as the costs to manage an ongoing emergency may greatly outweigh any potential profits. In such cases, the best course of action is to start anew and retire the current model.
A better option may be to suspend business temporarily with operations resuming after the crisis, hopefully in a profitable manner. This type of business action requires investment during the suspension period, so enough capital will be required during closure along with readily available resources, especially human resources, for when business resumes.
Every business reacts to a crisis in its own way. Some, unknowingly, have fashioned themselves to be fragile, others to be ‘antifragile.’
The antifragile business model can be attributed to Nassim Nicholas Taleb, a risk management professor at the University of New York’s Polytechnic Institute. Taleb has been noted as saying in his 2012 book Antifragile: Things That Gain from Disorder: “Antifragility goes beyond resilience and robustness. What is resilient resists shocks and remains the same. The antifragile only gets better. This quality is the base for everything that changes with time: culture, ideas, revolutions, political systems, technological innovation, economic and cultural success, the survival of companies.”
The antifragile business model appears to have a better performance rating after a crisis and actually grow and thrive through disorder and chaos. These models build capacity when faced with unseen change, address the unpredicted, and can better take advantage of the stressors associated with such challenges. It is all about making informed decisions when faced with an unexpected crisis and realizing more favourable outcomes when a crisis subsides or if a new one arises. It is a learning experience for a business at all levels.
In summary, every business needs to have crisis management plans within their business models and ensure that clear, concise roles and obligations are familiar to all team members.
Frequent assessments of preparedness will ensure effectiveness and relevance. Weak or overlooked particulars of assessments can be readily addressed, rectified and enhanced if the situation calls for such.
And last, but not least, particularly for top management, is to look beyond tomorrow and adopt a long term perspective, to result in strength and sustainability, the core of any business model.
But it is essential to not become complacent if your business manages to weather the crisis somewhat unscathed. It is a huge mistake to consider such an experience as a one-time event. Undoubtedly there will be other situations demanding a proactive response and attention. Learn from the experience and constantly work on ways to improve outcomes and emerge stronger in the future.
Crisis management should not be viewed as episodic. Rather, it is a continuous process entailing new analytics at every decision stage. And do not allow emotions to overshadow rational decision making. A crisis is a time to remain objective and focused on recognizing and defining the situation.
As Andy Gilman of CommCore Consulting Group summed up nicely: “The secret of crisis management is not good versus bad. It’s preventing the bad from getting worse.”