Remember the days when we thought we knew what a crisis was? Or what a steep learning curve looked like? Well, now we really know. All the talk about agility and resilience is at last being tested in earnest.
The arguments over how crisis metamorphosed into catastrophe are likely to carry on for years, as will the debates about what sort of recovery might be possible. But this much is certain: Covid-19 has plunged us all into the biggest economic experiment of our lives.
Very different strategies have already played out as companies seek to plot a course through the storm. Some responses have been adaptive; others have been creative; still others have been at best passive and at worst dangerously inert.
Ultimately, the challenge for every business is one that Adam Smith outlined more than 250 years ago in his Theory of Moral Sentiments. Reflecting on the need for political wisdom in times of disorder, Smith highlighted the difficulty of deciding “when to re-establish the authority of the old system and when to give way to the more daring but often dangerous spirit of innovation”. In short: do you stay the same or do you change?
Some companies have entered a self-induced coma in the face of the pandemic, content to rely on government-backed furlough schemes to provide life support. When they fully wake up, though, they may discover the world they once operated in has altered dramatically – perhaps even beyond recognition.
Why? Because it turns out the range of genuinely essential activities is quite small. In extremis, we’ve realised there are plenty of things we can do without. The crisis has underlined that non-essential activities are fundamentally a matter of consumer choice – and consumers are notoriously fickle and unpredictable.
This means getting back to normal just won’t be possible for a lot of businesses, at least in the foreseeable future. Demand in whole sectors has vanished, and when – or even if – it might reappear is a moot point.
Look, for instance, at air travel, which was already under huge pressure from climate imperatives. There came a time when it seemed practically unsustainable, as evidenced by the short shrift given to Richard Branson’s call for a £500 million loan.
Elsewhere, far more encouragingly, opportunities have been identified and seized. Many businesses have accepted that a crisis can serve as a platform for positive and even long-lasting transformation.
These companies appreciate that the most effective weapons at their disposal can’t always be framed in terms of attributes such as assets and branding. Instead, especially in the midst of turmoil, core competences and dynamic capabilities are frequently what matter most.
It’s basically a question of understanding what you already do well, what you might do better and, above all, what you could do differently. This requires an organisation to be open-minded and fleet-footed, particularly when confronted by unprecedented disruption.
Unlike taxpayer-funded bailouts, which undoubtedly won’t last forever, such an outlook is geared towards long-term survival. It lends itself to innovation and sustainability in an environment increasingly characterised by uncertainty and churn.
Sink or swim
So where is innovation most likely to be found? And which businesses, by extension, are most deserving of assistance? Contrary to what the established big beasts would have us believe, the answer is SMEs.
In the UK, small and medium-sized enterprises comprise 99% of businesses, 60% of jobs in the private sector and more than 50% of annual turnover. Globally, they represent the high-growth, innovation-focused firms that are most likely to rebuild and reshape the economy.
As such, they’re the companies that should be backed – both throughout the remainder of the crisis and our emergence from it. They need financial support, whether from government, lenders, venture capitalists or other sources of capital; and they need non-financial support, whether from proven entrepreneurs, business schools or other sources of expertise.
The tide has gone out, and pretty much everyone has been handed a pair of inflatable armbands in anticipation of its return. But the truth is that some businesses are simply much better and more willing swimmers than others – and it’s these that should be helped to navigate whatever waters might lie ahead.
David Falzani MBE is a Professor at Nottingham University Business School’s Haydn Green Institute for Innovation and Entrepreneurship (HGIIE) and president of the Sainsbury Management Fellowship. Paul Kirkham is a researcher in the field of entrepreneurial creativity and Ingenuity Learning Support Development Officer at HGIIE.