Resilience has taken on new importance for small and midsized businesses in recent quarters. While big businesses have largely weathered the ill effects of the COVID-19 pandemic, many SMBs struggled to survive the lockdowns that crimped in-person customer spending.
SMBs that stayed afloat can teach other businesses valuable lessons about navigating disruption and uncertainty, says a team of McKinsey researchers in a recent Harvard Business Review article. The team found that successful companies applied a unique blend of SMB innovation—accelerating digital transformation, employing flexible work modes, and prioritizing operational efficiency.
Another key: embracing business agility and quick product innovation, something 60 percent of SMBs plan to do in the near future, according to the McKinsey survey. Unfortunately, SMB innovation is easy to appreciate but often hard to achieve.
Timing SMB Innovation Just Right
Two companies that were facing disruption in recent years used a combination of workforce savvy and tech-driven insight to forge new and profitable business paths.
In the past decade and a half, the newspaper industry has suffered a major reduction in readership and revenue. Circulation has dropped to its lowest rate on record, and advertising revenue in 2018 was less than half what it was in 2008, according to the Pew Research Center.
Some outlets have embraced innovation to survive and thrive. Among them is the Star Tribune Media Company in Minneapolis, publisher of the region’s largest newspaper. While other publications folded, the Star Tribune tapped into a geographic information system (GIS) and expanded services to advertisers by helping them identify new markets and overlooked customer opportunities.
Through GIS analysis of demographic and psychographic data, the Tribune team advised the owner of a furniture store chain on where to focus advertising to reach target buyers, creating a smart map of new or undeveloped markets. As WhereNext explained in a recent article:
[The map] tells an organization the location and interests of customers and identifies which advertising channels are likely to be most effective. This location intelligence gives a prospective advertiser confidence in the Star Tribune’s solutions and, in turn, helps the Star Tribune hit the ground running if the company decides to advertise.
Transforming Main Street with SMB Innovation and Location Tech
The number of people who listed paper checks as their preferred method of paying bills declined 23 percent from 2015 to 2018, according to a study by the Federal Reserve Bank of Atlanta. Sensing that trend, Alabama-based check printer Main Street Inc. prepared for disruption. Even as the company’s printing business remained strong, executives sought innovative ways to broaden the company’s services.
Trading on many years of industry experience and the location intelligence produced by GIS, the company began to advise banks and credit unions on how and where to reach more customers and succeed in new markets.
Using analysis from GIS-based smart maps, the Main Street Inc. team advised a Texas credit union on a strategic expansion covering four counties. GIS technology revealed that the underbanked—people who rely on alternate financial services such as check-cashing services and payday lenders—comprised a substantial untapped market. The credit union implemented an advertising plan to reach that audience, resulting in a 50 percent increase in new members from the company’s target demographic and underscoring the value of SMB innovation for companies facing disruption
Prepare for Future Risk
The experiences of the Star Tribune and Main Street Inc. show how location intelligence plays a key role in SMB innovation, whether that takes the form of discovering new markets or diversifying business models to overcome disruption.
McKinsey’s report found that digitization translated into revenue-generating innovation for many SMBs in the COVID-19 crisis. During good and bad economic times, market-leading companies have repeatedly proven that a strong digital foundation, savvy use of location intelligence, and a team dedicated to SMB innovation improve a business’s chance of long-term success.