Leading Small and New Businesses in an Age of Disruption
Friday, July 10, 2020
By Daniel Forbes
The Covid-19 pandemic has been a source of disruption for all businesses, but small and new businesses have been especially hard-hit. One recent study estimates that more than 40% of small businesses have had to close – at least temporarily. And another study estimates that nearly 75% of startups have had to terminate one or more full-time employees.
In some cases, entrepreneurs have been forced into such decisions. But in other cases entrepreneurs have had to carefully discern and choose among several difficult options. As the global economy transitions from the initial shocks of the pandemic to the “new normal” that will follow, entrepreneurs will need to make more decisions under conditions of prolonged, continually evolving uncertainty. How should they manage under these circumstances?
In what follows I’ve tried to summarize some practices that may be helpful to entrepreneurs and others as they manage their businesses in the wake of the pandemic. These practices are drawn from past research at the intersection of strategy and entrepreneurship, and they call upon entrepreneurs to pay attention to what is happening both inside and outside their firms.
1. Invest time and effort into a careful reading of your business environment.
One way to make sense of environmental change is to break it down into three different types of uncertainty. To do this, try asking:
- What’s the current state of the world?
- What’s the effect of this situation on my business?
- How should I respond to this situation?
We may experience uncertainty about all of these things, but it can help to address the questions in sequence. Start by trying to get a clear, accurate understanding of the state of the pandemic as it’s unfolding within your area and, more broadly, in the world at large. Doing this at any given time can improve your ability to anticipate how a situation will truly affect your business and, by extension, to identify the alternative ways you can respond.
Another way to make sense of changes in the environment is to consider the extent to which they can be predicted or controlled. Some changes are harder to predict than others, and some are harder to control than others. Stock market changes, for example, are almost impossible for most of us to predict or control. The environmental changes that stem from the coronavirus, meanwhile, are very hard to control, but they are not impossible to predict. For example, the recent surges of infection that have unfolded within “Sun Belt” states in the U.S. have been relatively predictable. We know a great deal about infectious diseases, after all, and at this point, we also have accumulated some useful evidence as to the kinds of responses we are more – and less – likely to see from various actors around us, such as customers, suppliers, hospitals, and governments. Identifying the key actors relevant to your business and developing some carefully-generated, evidence-based predictions as to how each of those actors will respond over various intervals will give you a stronger basis for formulating your own responses to the pandemic.
2. Prioritize clearly.
Prioritization is a powerful strategic tool at all times. In a crisis, prioritization becomes crucial. Business owners need to identify expenses and operations that are essential for continued operation under various scenarios and over varying periods of time. In determining priorities, too, entrepreneurs need to look beyond business considerations and consider their broader values and goals, including those that brought them into business in the first place. For example, entrepreneurs may need to think carefully about the ways in which their businesses support customers, employees, and communities, as well as their own family members.
Sometimes prioritization can help us strike a balance among several things that we hold dear. In other cases, when we are forced to choose among our values or goals, prioritization can at least help us to make these choices consciously and deliberately. That can aid us in communicating about our choices and in living with them in the future. Research shows that entrepreneurial experience can be a tremendous asset to a person’s future entrepreneurial endeavors but also that the value of that experience depends on how accurately a person interprets the successes and failures of their past. By making decisions based on our own best understanding of our options, values, and priorities, we put ourselves in a better position to learn what our experiences have to teach us.
3. Communicate with your stakeholders.
Once your business has developed plans for responding, reach out to the people and organizations affected by your business, and explain the bases for your actions as clearly and candidly as possible. Unlike some business crises, the pandemic presents a crisis whose impact and scale will be widely recognized by the people you work with, and this may make it easier to develop with stakeholders a shared understanding of the logic underlying your choices.
Remember, too, that part of proper business communication in the current environment entails recognizing the human costs of the pandemic. Amid the loss of jobs, businesses, and lives on such a large scale, much suffering ensues. Entrepreneurs who acknowledge these losses in honest and authentic ways will play a role in healing their communities, and they are likely to find their stakeholders more understanding and cooperative as well.
In summary, the pandemic presents extraordinary challenges for small and new businesses. Some firms will find ways to weather these challenges, while others will be forced into closure. In either event, entrepreneurs are likely to lead their firms more effectively if they analyze their situations carefully, formulate responses that accord with their most fundamental priorities, and then communicate candidly with those they work with.
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Associate Professor in Strategic Management & Entrepreneurship Department
Carlson School of Management
Daniel Forbes is an Associate Professor in the Strategic Management & Entrepreneurship Department at the Carlson School. He has also been named a Schulze Distinguished Professor of Entrepreneurship by the Richard M. Schulze Family Foundation. He is a senior editor at Entrepreneur & Innovation Exchange, where entrepreneurs can find further information on how to respond to the pandemic.