How can SMEs build resilient business model amidst global challenges.
13/12/2024
If there’s anything more consistent than a successful entrepreneur, it’s ‘change’. It is the driving force behind the ever evolving, flash-paced business world which makes any company’s need to be agile, efficient and resilient inevitable. External changes necessitate internal organizational adjustments, enabling businesses to navigate and flourish in turbulent markets. This ability to be prepared and responsive is known as organizational resilience. Organizational resilience refers to the characteristics that allow some organizations to respond faster or recover quicker than other organizations. In the context of SMEs organizational resilience is judged on two spectrums:
1) The ability to respond to crisis
2) The ability to sustain and bounce back from the crisis in long term
SMEs are more agile in terms of responding to the crisis and this organizational resilience is linked with innovation as it enables them to adapt amidst change. However, research has shown that SMEs deal relatively well with the first response to crises, in the long run, their growth and innovation are at risk unless they work on their business models. So the question arises; how SMEs with international growth strategies innovate their business models to increase their organizational resilience? This article explores the key strategies SMEs can employ to create resilient business models, ensuring long-term success despite the uncertainties of the global market. According to a report by the World Economic Forum, businesses with resilient models were 50% more likely to survive the pandemic than those without .
There are 5 main drivers or strategies that SMEs can implement to build resilient business models for international growth or sustaining their international growth in turbulent times.
Embracing digitalization and bring innovation
Innovation is a cornerstone of resilience. SMEs that prioritize innovation are better equipped to respond to global challenges by adapting their products and services. For example in published study 3 case companies were discussed to explain how adding digital elements to existing products and services can help enable companies to provide higher value and enable international growth. Company Alpha introduced sensors to their fixtures, enabling data collection and integration into customer processes. Gamma began utilizing data from their existing equipment base to create new services. These companies were in the process of digitalization and therefore it was better for them to innovate their data gathering process and then create new and unique products and services for their customers. This not only helped them understand their consumers but also tap into new customer bases in new markets in new regions. Research from McKinsey suggests that companies investing in innovation during economic downturns outperformed their peers by 30% in the long run.
Strategic collaboration with people in the industry
Developing partnerships and alliances to access new resources and markets. Building strategic partnerships and networks is another key strategy for enhancing resilience. SMEs that collaborate with other businesses, industry associations, and government bodies can access new markets, share resources, and mitigate risks. For example, participating in trade associations can provide SMEs with valuable insights into market trends, regulatory updates, and best practices in international trade. A study by Deloitte found that SMEs with strong networks were 40% more likely to succeed in international markets than those without . Collaborations can also happen at product and service level. For example, if you have created a service platform for your customer, are you open to extend it’s service to your competitors as well? Another example is exclusive collaboration with an exclusive supplier to produce a special edition product.
Customer intimacy
Understanding your customer, connecting with them and delivering satisfaction is what helps you gain their trust. How do you do that? By leveraging technology, identify buying patterns, consumer behavior, your ideal customer profile and deliver exactly what the market needs. The firms that have developed closer relationships with customers, integrating their data-based services into customers' processes led to more continuous contact and value delivery, replacing project-based relationships. This helps organizations gain customer loyalty in times when the organization cannot deliver for any external reason, or due to supply chain hurdles the customer doesn’t receive the product on time. Build a relationship that makes it harder for customers to replace you.
Agile use of resources:
The agile use of resources is a critical factor in enhancing a company's resilience, especially for SMEs. In the face of unpredictable challenges, the ability to rapidly allocate and reallocate resources—whether financial, human, or technological—can determine the success or failure of a business. SMEs that leverage agile resource management are better positioned to respond to market shifts, optimize their operations, and seize new opportunities as they arise. This agility allows them to maintain operational efficiency, reduce costs, and increase their capacity to innovate, ultimately contributing to a more resilient and sustainable business model. By cultivating a culture of agility, SMEs can ensure that their resources are utilized in the most effective way possible, enabling them to adapt quickly and thrive in an ever-changing global landscape.
An improved Revenue model
An improved revenue model is a cornerstone of resilience for SMEs, especially in the face of global challenges. Adapting or enhancing the revenue model allows businesses to diversify their income streams, mitigate risks, and capitalize on new market opportunities. For SMEs, this might involve exploring new pricing strategies, introducing subscription-based services, or expanding into untapped markets. By refining their revenue models, SMEs can ensure a more consistent and predictable cash flow, which is crucial for maintaining operations during periods of uncertainty. Additionally, a well-structured revenue model provides the financial flexibility needed to invest in innovation, scale operations, and respond swiftly to market changes. This adaptability not only secures immediate financial stability but also positions SMEs for long-term growth and resilience.
Managerial implication you need to evaluate before building a resilient business model
Fostering Digital Capabilities
The digitalization of services has emerged as a key driver of resilience for SMEs, particularly those aiming for international growth. Our study highlights the importance of building digital capabilities within SMEs, as these capabilities enable businesses to adapt quickly and efficiently to global challenges. Many SMEs recognize the potential of digitalization but often require external support to fully understand and implement these technologies. This is where accelerator programs play a crucial role, offering the necessary guidance and resources to help SMEs enhance their digital capabilities. By integrating support for digitalization into international accelerator programs, SMEs can better position themselves to build organizational resilience in an increasingly digital world.
Strategic Network Thinking
In addition to digitalization, strategic network thinking is essential for fostering resilience in SMEs. Two of the five key drivers of resilience—strategic collaboration and proximity to customers—necessitate a company’s willingness to open up and share information with external partners. However, this often requires a significant cultural shift within the organization, including a departure from previous cooperation arrangements. Without a deliberate investment in strategic network thinking, SMEs may struggle to realize these radical changes. By embracing a mindset that values strategic partnerships and close customer relationships, SMEs can enhance their ability to navigate market uncertainties and build a more resilient business model.
Wrapping up - Our final thoughts.
In today’s ever-changing global market, building resilient business models is essential for SMEs in international trade. The ability to adapt, innovate, and manage resources strategically is key to thriving amidst uncertainty. By embracing digitalization, fostering strategic collaborations, understanding customer needs, and refining revenue models, SMEs can develop the resilience needed to navigate challenges and achieve long-term success. Investing in digital capabilities and adopting strategic network thinking are also crucial. These approaches ensure that SMEs remain proactive, agile, and well-prepared for future disruptions. In an interconnected economy, resilience isn’t just about survival—it’s about turning challenges into opportunities for growth and expansion. By implementing these strategies, SMEs can secure a stronger, more sustainable position in the global market.
Silk Road Heritage is a boutique financial and business consulting firm based in the vibrant city of Dubai with branches in Italy and Switzerland.
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