In an economic crisis, business resilience will get stress tested. Every business will face an elevator moment so to speak. Is your business going up or down? Does the crisis make you sink or swim? For many enterprises, crises have the effect of putting your business in an express elevator going down to the basement level or worse.
At a macro-level, this is the harsh reality of an economic recession or depression – an aggregate, sustained decline in the gross domestic product of a country.
But at a micro-level, on the level of individual businesses, the effects of economic crises can vary widely.
If you are a business owner or CEO, you face a second elevator moment. Does COVID-19 push the “pause and resume” button on your business? Or does it push the “stop and reset button”? These are two fundamentally different options.
Clearly, COVID-19 is a stop and reset moment for many service industries (travel/hospitality, retail, restaurants). Even if a treatment or vaccine is found, the virus will likely change the delivery or business model for the service industry going forward.
But for other sectors this could be more akin to a temporary pause rather than a hard reset, recoding and rebooting of the business.
Pushing the pause button means that you preserve cash and optimize your business in the interim until demand returns. Even if demand dips in the longer run, the pandemic doesn’t fundamentally alter your margin structure or attractiveness of your business.
Naturally, this raises a set of questions that should interest investors and owners. What are the characteristic features of certain businesses that make them so resilient? How can I identify them? What are the relevant opportunities for my own business?
Some might argue that the luxury industry is one of those resilient businesses. But is it really? I’ll gather my thoughts on that issue in a future post and show why this pandemic has shown that it is also susceptible to a different kind of potential crisis.