Even in ‘normal times’, governments have recognised that, to survive and grow, SMEs need specific economic measures and programmes. In the present crisis, caused by the COVID-19 epidemic, SMEs have been especially hard hit. The doors of numerous restaurants, hair salons and other providers of personal services, of shops that do not sell basic necessities, dry cleaners, and car washes have been closed for over a month, there are no hotel services, taxi operators provide only limited service, etc. At the time of writing this article, auto repair shops and mechanics have started opening their doors to customers as well as construction material stores and similar shops. People will again be able to play golf or tennis, all under special conditions and in line with the preventive measures.
SMEs are especially vulnerable. There are liquidity problems, especially in micro and small enterprises that have no ‘reserves’ and that face major cash flow issues. It is difficult for small firms to downsize since they are already small, they are usually less diversified in their activities, they have weaker financial structures (lower capitalisation), they have lower (or no) credit ratings, and they have fewer options for finance.
The COVID-19 crisis requires us to observe all the measures adopted by the government. The economic impacts felt by SMEs are significant and they need to learn to adapt to rapidly changing circumstances. There are unanticipated twists and turns and we will only have a complete picture in retrospect. Nevertheless, we can already take a look at last month and see what we have learned, so that we can recommend a few ways of how to correctly respond to unfolding events during this time of crisis.
Information on a daily basis is essential. Events are unfolding exceptionally fast, and the picture changes every day. Governments are adopting measures aimed at mitigating COVID-19 effects, but cannot prevent them. Fake news is rampant, so be careful and critical of the source of the information before acting on it. Journalists focus more on news than on the big picture and often speculate. You are making decisions today based on yesterday’s news. Observe official news reported by the government. Listen to experts and their forecasts carefully – each epidemic is unpredictable and unique. We are still learning about the critical features of the current one. We need to employ an empirical approach to understanding what is going on and what works — albeit one guided by expert opinion. A Chinese proverb says: “Great generals issue commands in the morning and change them in the evening”. SMEs are flexible. Different information received on a daily basis does not necessarily affect the dynamics of your operations. It needs to be accepted through a longer time.
Beware of bureaucracy – assembling a small trusted team and giving them enough leeway to make rapid tactical decisions is critical. Overly managing information can be damaging.
Think twice before saying or writing anything – consider the dimensions of communication, communicate company policy promptly and clearly so that employees do not get confused and listen to their needs. You can create an information hub where employees can find all the information they need, e.g. access to education. Be clear about travel and remote work, create safety stocks, consider alternative sources, plan interim solutions, develop rapid-reporting systems that give you insight into the situation in the company and allow you to assess how your business is being affected, possibilities of taking action, and how quickly the measures are working – sooner or later, the market will judge how effective you were in implementing change. And: be sensitive towards the broader community – live your mission and help where you can.
Use resilience principles in developing company policies – the ability to survive and thrive through unpredictable, changing, and potentially unfavourable events. Shape redundant capacities rather than facing a lack thereof; facilitate diversity of ideas; modularity, i.e. the possibility of developing continual improvements in the light of new opportunities; prudence; a holistic look at the company ecosystem can create goodwill and trust (observing basic values).
COVID-19 is not a one-off challenge. We need to be aware that economic fluctuations are cyclical. We need to prepare for the next crises in advance. A system needs to be developed, as your response is more likely to be more effective than an ad hoc, reactive response when the crisis hits. Develop various scenarios and run simulations – ‘war gaming’ can be used to learn from behaviours under stress. Reflect on what you have learned and use the knowledge gained in this crisis to overcome future challenges.
Times are changing and new measures and new situations have become our new reality. Optimise your business in order to achieve (the anticipated) profit. We are witnessing the expansion of online shopping where this was not the norm or not present to the current extent, online education is developing, we are seeing public health investments. Supply chains will be configured differently and there will be less dependency on only a few major suppliers, etc.
Once the crisis subsides, companies need to consider what this crisis has changed and what they have learned and use this in their plans for the future.
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Summarised and adapted from:
HBR, Coronavirus + Business; Reeves, M., Lang, N., Carlsson-Szlezak, P., 27 February 2020: Lead Your Business Through the Coronavirus Crisis.
OECD, 2020. The Impact of the Global Crisis on SME and Entrepreneurship Financing and Policy Responses.
