Rethink your business model to keep the ship afloat during COVID-19

Organizations of all shapes and sizes are changing the way they do business as the COVID-19 pandemic forces the world to change.

For many small businesses, this unexpected economic slowdown is particularly difficult. Supply chains are vulnerable; Inventory isn’t coming in, and neither are customers. You don’t have extra resources: So what can you do now to ride out this economic storm?

We spoke with Kelley School of Business professors who regularly work with the entrepreneurship, startup and small business community, Todd Saxton and Kim Saxton, about their recommendations for small businesses right now.

Rediscover your business model.

Todd Saxton, associate professor of strategy and entrepreneurship: Now is the time to reach out virtually to customers and clients. Find out what emerging problems they have: You may need to deliver in a different way. Be creative. Be open-minded and empathetic about this challenge. Doing so will help you re-think your business model to keep the ship afloat.

Kim Saxton, clinical professor of marketing: This is the time to rediscover your business model, to revamp what you’re doing and to think of creative ways to gain customers. Because of the uncertainty caused by COVID-19, there may be some customer resistance if there’s long-term buying involved. They don’t know what kind of funds they’re going to have. They don’t know when their people are going to be back. So look more closely at marketing tools you can use. For example, you can discount an item to buy now that you will deliver in the future. Get people to schedule appointments for when business opens back up. We’re seeing this approach from home improvement companies. They’re discounting orders placed now because they want to keep their business moving.

Be creative.

Kim Saxton: Small firms are more nimble. So some of these tactics are not difficult to implement. They’re more about being creative. I heard a really great idea for a coffee shop that was located close to a hospital. Nobody’s going into the coffee shop, but the hospital has lots of workers who are working overtime. The coffee shop could set up a group-buy mechanism and walk the coffee across the street to those workers who need it now. It’s thinking differently about where your customers are or what your customers need. Mexican restaurants have that figured out how to prepare margaritas to go. These are very creative ideas, and now’s the time to start thinking—not just how you’ve been doing things, but how will customers want you to do things in the future? Ensure your customers can buy gift cards. When the pandemic first started, I reached out to restaurants and local businesses we love, none had a way to buy gift cards online. I emailed all through their websites. Only one called me back. Small businesses have to find ways to make it easier for customers to support them.

Put yourself in your customers’ shoes.

Kim Saxton: Put yourself in your customer’s shoes: What do they want to hear from you?  What role do you play, and what role could you play? How can you help them? Think about different ways you can help them during this time. Students are still graduating, but they likely won’t get to “celebrate.” Imagine you’re a high school senior right now. This must be just gut-wrenching. How can you make it easier? What can you do to help them celebrate?

Think about popular culture. Our daughter lives in Washington, D.C., and she texted us the other day, “Some things are arriving.” She sent little treats the family would like, and they arrived as a surprise on our doorstop! Those are moments a business can create, too. It’s time to be a hero for your customers.

Deploy staff in other ways.

Kim Saxton: One of the strategies I encourage for small businesses, particularly if your business has staff who can’t be doing their usual jobs (waiting on customers, for example): Which employees have talents in other places? Have them look into digital marketing. Pay them to figure out how to optimize your website for search engines, to add on electronic transactions, to find the best gift cards or to offer electronic return services. Anything that will make your business more online is beneficial. Pay them to build such skills for the current and future benefit of your organization! Small business owners think that adding these skills means paying a third party marketing services agency. And, that sounds expensive. Yes, there are advantages to get help from  these marketing services agencies. But right now, start slow! Just innovate within your own operation.

Reach out to customers.

Kim Saxton:  Another strategy for your organization is to reach out to customers: Tell them what your problems are and see if they want to help you. Often, the most innovative ideas come from your “lead users,” the people who use your product all the time. Now’s a good time to check in with them and ask them what they want. They’re sitting at home watching their email, these days.

Take time to do some housekeeping

Todd Saxton: Also, if you’re an owner or founder of a small business, take time to do house cleaning tasks you haven’t done yet. You may not be ready to go digital today or even tomorrow. But you now have employees who can be re-deployed to help put together a customer database, organize information and create social media accounts that you have been meaning to get to for the last two years and just haven’t quite pulled off. Plan your virtual re-opening so you have a focal event to look forward to. Create some positive moments you can use in the coming weeks or months. Consider how you can stimulate a whole new era in terms of your relationship with your key stakeholders – your employees, owners, investors (if you’re an investor-funded start-up) and, certainly, customers.

Look at new marketing activities.

Kim Saxton: Many marketing activities take more time than money, such as obtaining customer testimonials, creating white papers, social media posts and planning a editorial calendar for content marketing. People want to hear from you. So be interactive. Write a whitepaper. Write a blog. Write your blogs for a month. Get Buffer or Hoot Suite and plan out your social media calendar. These are tactics you don’t have time to do when you’re busy running a business, but now you do. Plan ahead so you’re ready when you eventually re-open.

Look to the future; plan for different scenarios.

Todd Saxton: I recommend a book by Steven Johnson called Farsighted: How We Make the Decisions That Matter the Most. In times of uncertainty, try to think through the immediate tactical necessities, but also what’s down the road. Do scenario planning: Think through the best case, worst case and middle ground scenarios. What are some avenues your business could take with each of these? Work with your employees, your advisors and your customers to talk about these different scenarios. How long might this last? What will be the long-lasting effect? Is there a “crossing the chasm” moment that we need to be sensitive to or an opportunity there? We’re seeing  a stabilization in China with a decrease of new cases and a gradual opening up of supply chains. That gives us some knowledge of how long this might last, and those would be some of the metrics to look for.

Embrace a new normal.

Todd Saxton: For some industries, there is going to be a new normal. For example, some local food companies that do home delivery, like Tyner Pond Farm and Green Bean, are swamped with orders. We’re seeing a possible resurgence of Blue Apron, which was all but on its final gasp, Now it’s seeing a resurgence in orders. Think about telemedicine and virtual meetings. They penetrated the market to some degree but have largely stabilized or weren’t seeing dramatic growth. Maybe 10 to 20 percent of the market as a whole used these products or services. Now we have this chasm crossing moment that enables virtual interaction. There’s going to be, I believe, a whole new normal. E-sports is another example because live sporting events and entertainment have gone away for now.

Watch for quality fade.

Todd Saxton: A big challenge we see when there’s a supply chain interruption is what’s called a quality fade. So often, small companies have to shift to a newer, unknown source for their materials, and that source might not have the same quality or might not work as well with existing products and processes. Be very cautious with new suppliers and materials and how you integrate them into your products. This is will take months to sort through. Be patient with that process. Plus be early in the queue so you are among the first to get those new supplies. There’s going to be incredible, pent-up demand for all of this, and it’s going to come back online slowly.

Seek out resources.

Todd Saxton: Don’t sit back and wait for that check to arrive: Be proactive about reaching out. The Indy Chamber, for example, has some virtual resources and an open line to answer questions. The Kelley School of Business is supporting that effort with management advice. It’s not all on you to keep your employees afloat, for example. There are lots of steps being taken to protect individuals who are disadvantaged by this situation economically. You need to parse your resources toward keeping the ship afloat and ensuring you can keep your doors open virtually. Be sensitive to other resources that are being provided. Now is the time to get help if you need. Your number one job as a business owner is to survive. There’s no harm in figuring out how to thrive in the future, too.

Posted by: Teresa Mackin, tmackin@iu.edu