We’re living and working in unprecedented, and therefore, immensely uncertain times. The COVID-19 global health crisis has already changed where and how we work, impacted businesses of all sizes, and had devastating effects on entire industries like restaurants, travel, and events. We don’t know when the crisis will be over, when our lives will return to what was previously our “normal,”and many of us don’t know how or if our businesses will survive. But, we can take lessons from economic downturns we’ve experienced in the past, and know that to survive, we must be resilient and adapt.
First, it’s critical to anticipate the possibilities of how your business could be affected by the crisis. Maybe you are insulated from any direct, immediate impact now, but what about later as the economic domino effect ensues? It’s important to have a plan to help your business be resilient, adapt, and survive. In fact, many of these things are healthy to do even in the best of times to keep our businesses evolving for the better. So, how do you get started?
First, identify the true capabilities of your business and its people. Take inventory of the skills, knowledge, processes, tools, and any other business competencies that you have internally that can solve any existing or emerging needs in the marketplace. This approach is not novel, but is the cornerstone of the “resource-based view” strategic concept. A good example of this kind of evolution is how formal dining restaurants have pivoted to offer takeout, curbside, and delivery services. Other restaurants are transforming into food kitchens to serve those in need, and still other chefs are now offering cooking lessons for the global community via social media!
“Is a company organized to exploit these resources?” This VRIO framework is adopted from Rothaermel’s (2013) ‘Strategic Management’, p.91
While these are somewhat obvious moves to diversify, businesses should not be afraid to consider more radical shifts. Get creative and take stock of your capabilities in a way that is agnostic from your current industry. Would this impact your positioning in the marketplace? Of course. It could also help you evolve and emerge in a better position than you were in before.
As an example, I’m always reminded of Slack, which was born from a series of failed IT start-up ideas. They never got those businesses off the ground, but they realized that the internal communication tool they created was a really unique capability – so they pivoted and made that the product.
After identifying the spectrum of your business capabilities, be ready to pivot however necessary to meet potential market needs. While it may feel counterintuitive to start by looking inward, that soul searching of your organization’s resources and capabilities is what may illuminate emerging needs in the market.
Second, know your finances in and out. Be sure you have a keen understanding of your fixed and committed costs. Essentially, if you are seeking new sources of revenue, you must understand what fixed costs you cannot remove so you can sufficiently weigh new opportunities. Then, evaluate new opportunities only by the direct variable costs it takes to fulfill those opportunities. I am NOT talking about pricing here. Rather, once you determine pricing based on value or market drivers, then you can evaluate whether or not to pursue opportunities based on the variable costs they require. The bottom line – each extra dollar earned contributes to paying already sunk costs (fixed and committed).
For example, you own a graphic design firm and would typically charge clients$100/hour for your employees’ time. Suddenly, your employees are at 50 percent capacity, and you’re turning down new business that does not fit that $100/hour threshold. This is a MISTAKE. If you are not at capacity, you take new business opportunities regardless of your typical fixed rate, because to put it simply, any money is better than no money. If you’re at full capacity, you can improve your revenue mix and select the opportunities that have the highest profitability. But, in challenging times, you do what you need to do to cover your costs.
Running the numbers and knowing the cost structure of your business is critical as you evaluate new markets.
Finally, prepare to pivot. Have peace of mind that a significant change in business direction isn’t a poor strategic move. In fact, according to management expert Henry Mintzberg, embracing “emergent strategy” and a continual process of learning and revision is something all businesses should be doing all the time.
Emergent strategy is a “realized pattern” of behavior and action not originally intended that evolves over time in response to an ever-changing reality. Mintzberg wrote that a “realized”strategy starts with an “intended strategy,” then allows for the adaptation of an “emergent strategy” bringing in new opportunities.
In the entrepreneurial world, this idea has been expanded upon with the concept of “effectuation” that abandons the idea of strategy with a pre-defined destination, and instead, embraces strategy as a process. The process begins with what you have (your means – who you are, what you know, and who you know) and then sets affordable loss or the idea of evaluating opportunities based on whether the downside is acceptable. You then take those two things and identify who you can talk to (interactions) and who will join you (commitments). From this, new goals and new means emerge and the process repeats.
If you want to get a clearer idea of what means are available to you, you can start by taking a closer look at who you are, what you know and who you know.
These three areas of internal investigation are key in identifying new business opportunities as we all struggle to find our footing in this new reality. Businesses of all sizes and types must flex their entrepreneurial muscle, transform, and adapt. Now is the time.
