Businesses that 'embrace' innovation more likely to survive pandemic, studies show
Photo / Maureen Milliken
Businesses that innovated and found ways to stay open are the ones that are most optimistic about the future, a survey by USM found.
There's reason for optimism in the state's small business economy, but also a lot of work to be done before the economy will recover from the pandemic, according to economic experts who have studied and surveyed the state's small businesses.
That was the upshot of a Maine Center for Business and Economic Research study and a University of Southern Maine Business School survey of small businesses that were discussed at webinar sponsored by the state's Small Business Development Centers last week. Those on the panel, though, said the ongoing pandemic could change things, and the webinar was held just before the state's COVID-19 caseload began to rise at record rates.
The pandemic has emphasized the importance of innovation, and those that embrace it are more likely to survive in the future, said both Richard Arend, a professor of strategic management at USM, who oversaw the business survey, and Ryan Wallace, director of the Maine Center for Business and Economic Research at USM, who conducted a study of trends related to the pandemic.
Unpredictability, innovation
The biggest negative is the unpredictability of the pandemic, and temporary business closures "are devastating to performance and hope," said Arend.
The unpredictability "means that can't just address it with standard operating procedures or placing intelligent bets on how things are going to work out," he said. Rather, "they see it as unplannable."
Arend said most of those that answered the survey planned to keep innovations they'd added during the pandemic, which he said bodes well for their future. That's true, too, of businesses that have sought collaborations. "They tend to be more innovative and survive," he said.
Wallace said that the pandemic has brought to light the importance of digital literacy and innovation. "Even in households," he said. "Everybody's innovating right now, in the broadest sense of the word."
He said that the importance of investing in broadband connectivity has also been underlined by the crisis.
Mark DeLisle, state director of the Maine SBDC, said that when the pandemic began, the organization wanted to understand what the impact on small businesses would be, as well as what the larger economic issues would be both in the state and across the country. The information from the study and survey "are critical to all of us," Delisle said.
Job losses, hard-hit industries
Wallace said that the midcoast and southern Maine have suffered the biggest hits from the COVID-19 pandemic business losses, and low-wage workers, particularly women, have been the hardest-hit individuals, according to a USM study.
Leisure and hospitality, by far, had the largest job losses, with close to 40,000, the study showed. About two-thirds of those have come back. Service and retail followed.
He said while job losses to manufacturing were fewer — less than 10,000 — "those jobs, once they're lost, are a bit more difficult to pull back." But he said there have also been some investments in manufacturing in the state that make him confident. "It's a potential turning point for Maine," he said.
The survey, which had 499 usable results from small business owners, that 54.5% closed at some point during the pandemic and 65.5% of those that closed did because it was mandated.
"That's a large impact when half of the small businesses in your state have had to close due to COVID," said Arend. He said that the businesses that had to close for business reasons, rather than the government mandate "are the ones we have to worry about it terms of their recovery."
Business owners survey takeaways
Takeaways from the survey of business owners are:
The biggest factors that led to business closings during the pandemic were:
- Located in a low-population county;
- Tourism-dependent
- Retail (rather than wholesale) focus
- Low internet integration
- Family business
- Owner has lower level of formal education.
There was no significant correlation to being open or closed, Arend said, for things like businesses getting a Paycheck Protection Program loan, sole proprietorship, being a minority-owned business, the age of the owner or having a contingency plan.
Of all the businesses surveyed, 92% expected to survive into next year; 68% of those that don't think they'll survive had to close during the pandemic. Factors for the businesses that said they were likely to fail were that they are service, tourism or retail, or have low internet integration.
Arend said that minority businesses owners were largely optimistic about the future of their business.
Of responsive actions businesses said they would or are taking, closing was the least likely. Businesses are largely reducing fixed or overhead costs, followed by, in order, getting new financing, reducing variable costs, increasing their revenues and changing their business model.
New delivery options was the biggest innovative step businesses said they had taken, followed by physical change to location, then adding new products or services, adding e-commerce, new collaborations with other businesses, working from home, and making their own personal protective equipment.
Other takeaways from the survey are:
- 36% overall had a reduction in monthly revenues; 48% of those that had to temporarily close had a reduction in monthly revenues;
- 44% overall reduced labor in some form; 56% of those that had to temporarily close did;
- 82% plan to keep some of their pandemic innovations; and
- 77% said the unpredictability of the pandemic makes it more than risky.
Most Recent
Most Recent
0 Comments