SME resilience through decoding business strategy
Resilience is not just the ability to act quickly to immediate problems, it is also the strength to visualise and deliver the change that is required through a long-term lens.
Proactive resilience directly tackles the fundamental issues within business by predicting, anticipating, and building long-term capabilities. It looks beyond the pandemic and identifies the emerging market trends in relation to the long-term business strategy, powered by innovation and driven by a strong entrepreneurial orientation. A comprehensive business strategy is an essential component in ensuring business resilience and therefore the longevity of any organisation.
"Business survival at stake, no time for a strategy exercise, need new business" - a sentiment shared by many SME leaders over the past six months or so. Then, there are some business leaders who are quite candid in disclosing that they "never worked towards developing a business strategy, rather just went with the flow". I also often hear from many business leaders that "Covid-19 has forced me to take a pause and have a look at things differently".
With the pandemic wreaking havoc on the global economy, many businesses have seen their revenues wiped out overnight. When the lockdown was first introduced in March 2020, no one could foresee this would continue for so long. For many business leaders, this has been a roller-coaster ride of optimism, extreme pessimism, and a heavy emotional toll.
We now know that Covid-19 restrictions are not going to continue forever, if the latest government Road Map is anything to go by. However, the extreme disruption caused by Covid-19 is very much real and its ramifications will continue to be felt for foreseeable future. So how do we take this disruption in our stride and prepare for the future? How do we get businesses back on track to follow their intended growth trajectory? And, most importantly, how do we future-proof businesses so that any 'short' term disruption doesn't impact the overall business goals?
The common question I hear is, "where do I start"?
Looking beyond Covid-19
The uncertainty surrounding the future can be both exogenous (external) and endogenous (internal) in nature. Covid-19 and Brexit are both exogenous uncertainties in the macro-environment that lead to endogenous uncertainties within the business sector as a whole and/or within the organisation. Decimation of the hospitality sector or loss of revenue for a particular business are examples of endogenous uncertainties caused by the Covid-19 pandemic.
However, is there anything beyond these 'visible' cause and effect factors? In other words, are there any 'invisible' cause and effect factors? Let's look at an example. Can Covid-19 be blamed alone when an engineering subcontracting firm loses almost 70% of the business? A careful analysis reveals that this SME has been relying on a major customer in a single sector. When Covid-19 disruption hit the customer, business crumbled for the subcontractor as well. Therefore, one has to look beyond the pandemic to understand the 'invisible' cause and effect or the root cause for the present-day business disruption.
It's therefore imperative to look beyond the surface for understanding the root cause of any uncertainty driven business disruption. The question is how to look beyond the surface?
The power of reflection
Reflection helps with learning about oneself and the situation, by the conscious examination of past experiences, thoughts and ways of doing things. It helps in acquiring a deeper understanding of the present situation by challenging the status quo and helps us to plan better for the future. A simple yet powerful reflective cycle was developed by Graham Gibbs to give structure to learning from experiences and action planning for any future eventuality. It covers six stages:
- Description of the experience
- Feelings and thoughts about the experience
- Evaluation of the experience, both good and bad
- Analysis to make sense of the situation, is it really what it seems to be?
- Conclusion about key learnings and what you could have done differently
- Action plan and implementation strategy for future-proofing the business
To make the most of reflection, use it in creating and achieving goals and objectives, and through this build a reflective habit. And, most importantly, map the learning curve through this journey.
Strategy decoded – the foundation
Creating and achieving business goals and objectives are key to effective strategic planning and for it to be effective, one needs to start by asking three questions:
- Why - the value of what we do, why we do it and why is it important (purpose)
- What - what we want to be in the future (vision)
- How - strategy, the path to purpose, what we do to reach our destination (mission)
Unfortunately, many organisations do not have clarity on these which creates confusion that makes it harder to achieve the set objectives and goals. After all, "the underpinning strategic clarity, not the language that we put on our homepage, is of importance" as summarised by one business leader I work with.
Strategy decoded – looking beyond the present
"My team convinced me that it's enough to have short and medium-term strategies… long-term strategy will follow automatically," (a senior manager).
How can one charter a growth path if one doesn't know where the ultimate destination is? But then, with so much change happening around us, does it really make sense to think so much ahead of time?
The short answer is YES! Breaking down the strategic objectives to short, medium and long-term goals is all the more important now. The long-term business goal is like the guiding star. The short-term business strategy is meant for wading through the present gush of disruptions to stay afloat. The medium-term strategy is the bridge that connects the short-term strategy to the long-term business objective.
Strategy in uncertain times – agility through dynamic capabilities
"We realised early on that with the pandemic around, we need to have a fallback strategy… we partnered with a neighbourhood brewery for the canning line and launched our e-commerce business," (a micro-brewery owner).
What did this business do right? It activated a functional, early warning system by not falling for optimism bias, i.e. the lockdown will be over soon, and not succumbing to paralysis by analysis (too many ideas but no path forward). This was supported by integrated action planning and implementation - quick thinking on the strategic shift to Plan B (a legacy business model to e-commerce) and activating Plan B by establishing the right partnerships.
This strategic agility is a result of dynamic capabilities manifested by synchronisation of sensing (identifying and assessing opportunities), seizing (mobilising resources to capture value from those opportunities), and transforming (reconfiguring the business). During extreme uncertainties, dynamic capabilities help businesses to realign rapidly with the changes around.
The disruptions created by Covid-19 has provided business leaders with unprecedented opportunity for reflecting, re-calibrating and devising impactful strategies for future-proofing their businesses. A critical understanding of short, medium and long-term business strategies, in conjunction with developing agility through dynamic capabilities, is key to achieving a sustainable and resilient business strategy.
Dr Koushik Sarma is the Programme Lead for Help to Grow: Management at the University of Derby