What can business learn from previous disasters
[su_quote cite=”John D. Rockefeller “]I always tried to turn every disaster into an opportunity. [/su_quote]
A disaster for an individual business does not necessarily have to be linked to a natural disaster. One debtor going out of business owing money or loss of a major customer can lead to a disaster for a business. A disaster is a disaster. What really matters is how you respond.
Research from the United States estimates that over 25% of small businesses that reopen
following a disaster will close within 2 years. While this statistic may not be inspiring, there
are lessons that can be learnt from businesses who survived past disasters such as Hurricane
Katrina, the BP oil spill and 9/11. Lessons to make your business thrive and not just survive
Lesson 1: Change is the only constant
Be ready for change. You will want everything to return to normal, however you will need
to understand that it’s a new environment and business will no longer be the same. To succeed
after a disaster your business must change to respond to the effects caused by the disaster. The
lives of your customers, employees, suppliers and community may have changed. It is no longer business as usual. How you choose to deal with these changes may be the difference between thriving and barely surviving.
For example, the airline industry after 9/11. Some airlines did not or could not change their business strategy to accommodate the changes to the industry and subsequently did not survive.
Change can be a ‘window of opportunity’. This can be an opportunity to change your business and make it more productive. To redesign systems or processes that were ineffective in the past but you didn’t have the time or resources to change.
Change can also bring new opportunities for products, services or markets. As a small business owner you have greater flexibility and are closer to the community to tap into these opportunities.
Lesson 2: Be innovative
Survival requires innovation. In some instances reopening your business will be like starting your business all over again. Generally, a start-up business will have very limited resources and will be required to be innovative with those resources to survive. As the business owner you are the one who needs to be innovative and to inspire our employees to be innovative as well.
Robert Sheldon had a very informative article (I can no longer find the link) on innovation to survive a downturn called Innovation: A Survival Handbook.
Sheldon outlines 3 strategies of innovation for a business:
1. Throw out what you don’t need.
2. Convert what you have into something more valuable.
3. Optimize your use of resources.
Lesson 3: Develop a recovery plan immediately
Don’t wait for assistance from the government or insurers. Develop a recovery plan immediately if you don’t already have one. A well prepared recovery plan will last longer and have a better return on investment.
When preparing a recovery plan consider the following:
• Use a phased approach. Experience from past disaster recoveries revealed that a
phased approach worked best for small business.
• Customised for your business. The recovery plan needs to be customised to your specific situation. Your recovery will depend on a number of factors that are
unique to your business such as damage assessment, insurance coverage, your financial position, etc.
• Keep it simple. Have a one page summary that is easily understood. During a stressful time such as this you don’t want a complex plan to follow.
• Ensure employees know the plan. If you are not available then the employees need to know the plan. Employees should also have input into the making of the plan.
• Adjust the plan as necessary. Measure the outcomes of the plan and adjust the plan as necessary.
• Evaluate your financial position. Take the time to evaluate your financial position now and your projected position in a few months time. Remember that cash is king and it’s your best indicator of the health of your business.
Lesson 4: Communication is critical
Ensure direct communication with customers, suppliers and other stakeholders. Especially keep close contact with customers as other competitors in a better position will try to win their business. All communication should be clear and honest.
Develop sources of factual information. Make decisions based on accurate information and not on rumour. Social media can be very informative during a disaster but it is also a source of misinformation. Develop measures to collect reliable information about the current environment, customers, demand and cash flow.
Lesson 5: Seek advice
Small business owners should seek advice from outside advisors to help assess the situation and provide objective feedback. Disasters can result in stress and psychological trauma to the business owner. This will affect their decision-making ability and may lead to being resistant to change which is necessary to survive.
Without the ability to form cross functional teams to deal with the crisis, small business needs to seek help from outside advisors. Ensure to get a range of advice from various fields of expertise.