Small- and medium-sized enterprises (SMEs), in particular, have been bearing the brunt of the economic impact of this crisis. As SMEs represent the backbone of every economy, drive innovation and generate 60% of all employement (ONS, 2019), it is unsurprising, that having the SMEs sector in jeopardy has generated increasing concerns. Understanding how SMEs can best manage and survive the crisis has, therefore, become of paramount importance, resulting in renewed interest on behalf of academics and business practitioners regarding the practices and strategic behaviours that SMEs should employ to navigate this crisis.

SMEs typically employ fewer than 250 employees, are resource-poor and suffer from a ‘liability of smallness’ (Freeman et al., 1983), whereby their small size increases their vulnerability to internal and external shocks. This is due, at least in part, to their typically limited reserves of cash, which negatively affect their ability to survive when severe disruptions to cashflow occur. SMEs also tend to be less structured and routinised than larger businesses, and are often driven by urgency instead of strategic planning, where the limited human and financial resources are devoted to urgent problem resolution instead of medium-to-long-term firm development. Collectively, these factors have rendered the entire SME sector extremely vulnerable during the current Covid-19 crisis. Unfortunately, given the unprecedented, sudden and ongoing nature of the pandemic, investigations and insights into its nature and the exact implications for SMEs are scarce, rendering it difficult to identify an appropriate strategic response for SMEs. Nevertheless, we can draw upon a growing literature on SME crisis management to gain a better understanding of some of the strategic tools and practices that might help SMEs to navigate these difficult circumstances.

It is known that SMEs possess characteristics that can position them to rapidly respond to changing market conditions and seize profitable opportunities arising from their disruption. Indeed, despite SMEs’ increased financial vulnerability compared to their larger counterparts, their smaller size and less routinised nature increase their structural flexibility and responsiveness to emerging opportunities and threats. SMEs also tend to benefit from closer relationships with their customers compared to larger organisations (Eggers et al., 2012), providing them with access to valuable real-time market data (Eggers, 2020) that can inform firm behaviour and signal the presence of imminent threats and opportunities. Despite this, the vast majority of SMEs tend to be unprepared in the face of crises (Vargo and Seville, 2011), as they primarily recognise and focus on crises that they have experience of, and underestimate the risks of unfamiliar crises (Spillan and Hough, 2003). I suggest that, to increase their preparedness to sudden crises and fully leverage their structural flexibility, SMEs should employ an Entrepreneurial and Market orientation, develop dynamic capabilities and, critically, embrace innovation and change.

Entrepreneurial Orientation (EO) and Market Orientation (MO) reflect an opportunity-based orientation and the need for organisations to be proactive, innovative and risk-taking to ensure that the organisation is able to rapidly respond to emerging market opportunities, ahead of market rivals. EO and MO increase firm leanness and flexibility in their marketing efforts (Eggers et al., 2011; Morris and Jones, 2020), as they force SMEs to be alert to market changes and newly available market knowledge and, therefore, enable them to continuously inform their strategic direction. SMEs can, then, enact their rapid response to market disruption and emerging opportunities through the development and deployment of dynamic capabilities, reflecting the processes and routines that facilitate a firm’s response to changing environmental conditions, hypercompetition and market dynamism (Teece et al., 1997). Dynamic capabilities include the ability to sense emerging opportunities through heightened real-time market knowledge acquisition and assimilation; to seize the opportunities through continuous product, service and/or process innovation to deliver value to customers; and to transform current internal practices and routines to increase the firm’s adaptability to market changes. The development of dynamic capabilities should be an ongoing effort for all SMEs to ensure an increased internal flexibility and responsiveness to external changes. Finally, SMEs should fully embrace innovation and change. Indeed, as the market environment continues to drastically change, SME leaders must be willing to innovate and adapt to it to survive. The products, services and processes that addressed a market gap and added value prior to the Covid-19 pandemic, may now no longer do so. Leaders must therefore promptly revisit their business models, customer needs, products, services, and even methods of delivery to ensure that the strategic direction of the business is evolving, and continues to evolve, as the crisis and its implications unfold.

Dr. Lisa Messina is a Lecturer in Management at Queen's University Belfast, Queen's Management School. Her research interests are in the fields of Entrepreneurship, International Business and Innovation. In particular, her research focuses on the Born Global phenomenon in the context of University Spin-Out companies, examined through the theoretical lenses of Entrepreneurial Orientation and Social Capital.Lisa was awarded a PhD in Management from Queen's University Belfast in 2019. Lisa also holds an MSc in International Business (Distinction) and a BSc in International Business with French (First Class Honours) from Queen's University Belfast, and a Diploma di Esame di Stato from the Liceo Scientifico 'Bertrand Russell', Garbagnate Milanese (Milan, Italy).

Join our free webinar "The Covid-19 Crisis and Strategic Management' with Lisa on 11^th August at 11.30 GMT. Open to all.

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