The economic turmoil unleashed by Covid-19 continues to impact businesses globally negatively.
The most affected are micro, small and medium enterprises (MSMEs) which were already under enormous strain even before the pandemic struck.
A survey conducted in April by the International Trade Centre, covering 1,200 businesses in 109 countries showed 67 per cent of small businesses were “strongly affected” by the Covid-19 crisis compared to 42 per cent for large companies.
A more worrying statistic is that one in four MSMEs are likely to close permanently.
A similar survey in Uganda by the Economic Policy Research Centre revealed that MSMEs have suffered a bigger decline in business activity, with some even shutting down due to government instituted lockdowns and other measures to tame Covid-19.
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In Kenya, research by the SME Support Centre, an advisory firm, found that half of the small firms polled had recorded a decline in sales with the onset of Covid-19.
Such drastic outcomes for small businesses underscore the urgent need to boost MSMEs’ resilience to the health and economic impacts of the pandemic, with innovation as the key driver of long-term sustainability.
Innovation is primarily about instilling a culture of creativity in the business. As the renowned author Vijay Govindarajan argues, innovation is not so much a technical issue but a state of mind, propelling individuals and organisations towards new ways of doing things.
This implies that businesses need to look beyond new products and technologies as the primary yardstick of innovation to something bigger.
As such, an innovation mindset is one focused on meeting the emerging needs of consumers and the market by harnessing existing or new assets, including people, technology, financing and knowledge.
Various studies have shown that small businesses have an advantage over their larger competitors in that they are more agile and thus able to respond faster to changing market conditions through innovation.
From the trends above, a paradox emerges where small firms are better equipped to quickly cope with market adversity but are also prone to the worst outcomes of disruptive events.
On innovation, MSMEs will need to focus on two key fronts as they adapt to the “new normal” that will define business going forward. First, they will have to navigate the health impact of Covid-19. This means operating safely and delivering value to customers without compromising their health or that of employees.
For example, the owner of a restaurant should focus on innovative ways of maintaining social distance and adhering to hygiene protocols. But the more important strategic goal here is increasing the number of guests who are convinced it is a safe place where one can regularly dine during this time.
Also, businesses that relied on customers visiting their premises will have to find ways of engaging clients who are now spending more time at home.
This will certainly require innovative digital platforms that enable clients to order and pay for goods and services online.
When all is said and done, MSMEs should prioritise innovation as a key survival, recovery and growth strategy since Covid-19 will be around for a while.
- The writer is the CEO of Faulu Microfinance Bank.