How to adapt your business to economic changes
The ability to predict and adapt to economic changes is something business owners must consider before and during a business venture.
The volatility of the business market is borderline unpredictable – from a total economic shutdown due to a global pandemic or a drastic shift in how people work and consume because of technological advancements.
When business owners know how to adapt, they eliminate many potential weaknesses and threats that can affect business operations in cases of economic downturns.
Economic changes in the 21st Century
The world has seen drastic economic changes year by year, but the 21st century has probably given the most unpredictable, devastating, and technologically advanced of them all.
Digitalization
Digitalization has pushed economies, nations, and businesses into a speedy bullet train. Technological advancements have continuously made people’s lives more accessible. Businesses that fail to keep up with the trends risk losing customers who place comfort and ease in using technology as a primary consideration when purchasing a product or service.
Employment demands
In an era where work trends like quiet quitting have become a noise on social media, millennials, Gen Z, and many modern employees have strongly voiced their opinions on constant employer-employee imbalance and the adverse effects of working in a prolonged crisis.
This phenomenon has brought about a loud majority of the young workforce to be assertive of their demands, rights, and values as an employee to be fairly compensated, given proper work benefits, belong in an inclusive work culture, and be allowed to grow.
According to Mark Pierce, CEO of Cloud Peak Law Group, “While the term quiet quitting implies negative connotations, these reflect more on the employer than the employees themselves. Employers should start asking themselves if they are fairly compensating and valuing the worth of their employees, especially in terms of salaries and employment benefits like insurance and PTOs.”
Constant market volatility
The economic and financial market is never at a standstill. Forbes describes market volatility as the frequency and magnitude of product prices going up and down, especially when frequent, drastic changes are experienced over the course of a few months.
Drastic market volatility drives up raw product prices, thereby increasing production costs and borrowing interest rates due to the instability of the financial market, causing a substantial financial burden to small businesses.
Why do businesses need to adapt?
Why is it so important that businesses are able to adapt to economic changes? Here are some reasons to consider.
To maintain business operations
Maintaining business operations is one of the core reasons why businesses must continuously adapt and innovate with the modern world.
Take, for example, Kodak, which was once the most famous name in the photography industry. According to the American Journal of Humanities and Social Sciences Research, the company declared its bankruptcy in 2012 for several reasons, with one core problem—it failed to keep up. Instead of embracing digital photography, Eastman Kodak executives insisted on their film-centric approach, eventually leading to their demise.
To remain profitability
For a business to survive, it needs to remain profitable. No one wants a losing game, and staying profitable means business owners must embrace things that would increase their sales and revenue and reduce costs.
Most businesses that fail to foresee economic changes and market movements get into huge debt due to increasing interest rates. As they need to keep a business alive, they need to borrow money. But without a proper game plan to maintain profitability and cash flow, these businesses get buried in debt and bankruptcy.
To meet customer demands
As the economy changes, so do the consumers. Economic events like rapid technological advancement and changes in work environments and processes allow consumers to make transactions seamless and hassle-free.
Businesses need to meet eye to eye with their consumers and be where their market is, plot customer journey maps and adapt processes and business methods that would increase customer loyalty and patronage.
How do you adapt your business to economic changes?
Now you know why adapting to economic changes is so vital, how can you go about it? Here are some ideas.
Adapt digital transformation
Digitalization has been booming for the past couple of years. Still, it wasn’t until the COVID-19 pandemic hit that everyone realized how digitalization and adapting to digital transformation is possible and necessary to sustain businesses and livelihood despite a no-contact economy.
According to a study published in Frontiers, the COVID-19 pandemic saw increased demand in the digital industry and improved people’s preference for digital enhancements in business operations like distance learning, artificial intelligence, computers, electronic manufacturing, and information transmission services.
In this modern day and age, being a digital-first organization and embracing digital transformation is not an option but a need. Digitalization helps make consumers’ lives more accessible by bringing them closer to information at the tip of their fingers or through a screen. Businesses, on the other hand, must keep up with the times by implementing digital transformation processes like the following:
- Contactless delivery
- Cashless/cardless payments
- Use of mobile banking and cash apps
- Leveraging AI for customer service
- Voice ordering
- Visual deliveries
- Virtual consultations
- Use of social media for marketing
Volodymyr Shchegel, VP of Engineering at Clario, says, “What we thought was impossible many years ago is made possible now, and this is a testament to how digital transformation can change how we do business. Marketing, in particular, benefitted digital advancements the most as we can now do product launches and be at the forefront of our customer’s door at the tap of a finger.”
Consider hybrid work
A study published in Stanford University’s Institute for Economic Policy Research showed that post-COVID (2022 and beyond), 31.7% percent of respondents answered that they would like to work from home five days a week, while 20.8% never want to work at home.
Given these results, it can be inferred that employees have mixed opinions on working from home. To meet halfway, businesses must adapt to allowing their employees to do hybrid work or remote work and on location, depending on the situation. Companies must also continue to regularly assess the failures and successes of hybrid work, and adapt and adjust whenever necessary.
According to Tom Golubovich, Head of Marketing & Media Relations at Ninja Transfers, “Rapid digital advancements have made it possible for employees to manage the work-life balance in the comfort of their homes as long as productivity and deadlines are managed and met.
What hybrid work means for businesses is that they can:
- Increase employee creativity
- Improve employee productivity
- Have access to a greater pool of talent worldwide through a remote workforce.
- Save costs on rent and utilities
- Improve employer-employee relationships
- Improved mental health for employees
Give your employees an opportunity to grow
It is the responsibility of the employer to give its employees opportunities for growth and improvement. When career stagnation hits, employees often find themselves unmotivated and unenergized—eventually leading to losing interest in their work and leaving.
Jerry Han, CMO at PrizeRebel, says, “Many employers often overlook how vital exploring people’s potential and career growth opportunities is for employees and see it as a cost rather than an investment, eventually affecting overall employee retention.
Giving employees avenues to improve and hone their skills through continuous learning, taking certifications, seminars, or promotions, will help improve their trust and confidence with the employer. During troubled times, employees are likely to stick around when they know they have been valued and given opportunities to grow.
Diversify your business model
Being a flexible organization means that you can foresee and prepare for economic changes that will deal with less possible damage to the company.
According to Jonathan Elster, CEO of EcomHalo, “Companies should diversify their business models and target market to be prepared to pivot in case of an unforeseen catastrophic event.
“While you can never fully prepare for unprecedented economic changes, the COVID-19 pandemic has taught us that businesses should provide a cushion for financial emergencies, expand their platforms, and reassess growth opportunities for the business even in the middle of an economic crisis.”
Examples of diversifying your business model are:
- Introducing diverse products that target a broad market base
- Tap into e-commerce transactions
- Leverage social media marketing
- Invest in digital technology that makes business processes and customer service easier.
Economic changes are a constant, and businesses need to adapt
There is no definite and fool-proof solution to eliminate the risks involved in changes in the market. Risks are inherent, and while you cannot avoid them, being prepared can reduce the damage.
Economic changes are a constant, and businesses should be prepared to adapt continuously to such changes by being open to new approaches and not being afraid to embrace change and development in business operations and internal processes.
