The evidence is growing about what makes businesses resilient in the face of adverse economic conditions and disruption.
There are a wealth of insights from researchers and experienced business executives on the features of business strategy, competitiveness and innovation that are decisive for success when confronting economic boom and bust cycles, new and unexpected competitors and fundamental changes in business practices, technologies and consumer expectations.
Key among the prescriptions for resilient businesses are:
- An adaptable business strategy: one that balances the improvement of existing business offerings with an eye to future opportunities for growth, new markets and different customers.
- A strong ‘over the horizon’ radar: priority to finding and using new knowledge and business intelligence, particularly technology trends and capabilities, growth prospects in adjacent sectors, and opportunities from business model change, unrecognised demand and/or unserved, hidden customers.
- Investing in people: recognition that human capital, perhaps more than financial or physical capital, distinguishes between high-performing enterprises and the ‘also-rans’—making it a smart move to fight for and develop talent with breadth and depth of technical and non-technical skills, diversity and devolution of decision-making.
- Deep engagement with current and prospective customers: not just the big and lucrative accounts, but understanding non-customers, unarticulated needs and radically different value creation and pricing models.
- Collaboration in varied external networks: complex business challenges are unlikely to be solved by individual enterprises alone, but need informed and trusted partnerships, including with suppliers, customers and even competitors.
- Learn by doing: business leaders deliberately providing opportunities for safe, sanctioned business innovation experiments that advance new ideas and commercial prospects without putting the whole enterprise at risk.
The latest compelling evidence comes from a study of the resilience capabilities of 400 small businesses in regional towns in Queensland Australia, affected by the end of the resources boom in local coal seam gas projects.
Conducted by University of Queensland researchers, Jerad A. Ford, John Steen and Martie-Louise Verreynne, this study examined the capacity of these small businesses to respond, adapt and transform in response to changes in the business environment—in this case, the ‘bust’ after the ‘boom’ of investment, construction and transition to operations.
The study found that four key resilience factors significantly contributed to the successful performance of these businesses post-boom. The researchers described these four qualities as follows:
- Pro-activeness: Proactive small businesses actively seek new product and service niches and reorient their business accordingly. They often are the first to initiate competitive actions such as introducing innovative products new to their industry. They are quick to recognise new business opportunities based on rigorous market analysis. They fully support reorganising business structures and investing in new capabilities.
- Connectedness: Connected small firms actively cultivate and maintain business network partnerships. It appears that robust external network connections provide the basis from which firms can see, anticipate and exploit market trends. Connected firms are more likely to increase their income in lean times because they use their diverse networks to mitigate against market demand fluctuations.
- Adaptation: Adaptive businesses find workable solutions to new challenges and accommodate market disruptions by using existing resources in new ways and by quickly shifting things around to ensure that customers are never let down.
- Access to ‘slack’ (readily available or spare) resources: Businesses with slack resources are more hopeful of surviving into the future. In good times, they actively invest in spare equipment, facilities and other production capacity. They accrue finances and build and maintain new staff, who are looking for new opportunities, not tied to the existing business.
Rather than being at the mercy of the winds of change, this research suggests that businesses can plan for and build up their own resilience.
Jerad A. Ford, John Steen and Martie-Louise Verreynne, Four qualities that helped small businesses survive the end of the resources boom, The Conversation, 28th July 2016.
University of Queensland, Measuring economic trends and benefits of CSG developments on local businesses, 20th May 2016.