Resilience is an essential quality in a business, particularly over the past 20 years, which have seen us go from recession to Pandemic, war to political upheaval and into a peculiar post-apocalyptic economic malaise that's not a recession, but that's an awfully long way from thriving as well.
Around the world, energy prices have affected the cost of living, making it harder for businesses to flourish as well. The USA is no exception, and while Deloitte's Q3 2023 forecast is optimistic for the global superpower, it's tentatively so. With that in mind, how can SMEs flourish in the North American market now and going forward?
Understanding the North American Market in 2024
Following historically high stock valuations indicating investors' bullish outlook on the US economy, the outlook is tentatively promising as far as the economy goes. However, there's a general feeling that favourable trends in consumer spending, financial liquidity and fiscal policy could recede next year, and investors should remain cautious.
Deloitte has said there are "signs of a 'soft landing' for the US economy. But risks are still anticipated to be relatively high; the full impact of the Fed's tightening may not have been felt, leaving us to put the chances of recession at around 20%."
Morgan Stanley said: "In this optimistic scenario, market pricing suggests the Fed will cut interest rates by at least 125 basis points in 2024 while corporate profit growth reaccelerates. In other words, equity investors are not anticipating a recession or an earnings slump – just a new bull market."
However, they also identified three risks to the US economy in 2024:
- Robust consumer spending may decline because many households built up sizeable cash piles during the Pandemic thanks in part to government stimulus, but those reserves are dwindling.
- Cash could be in short supply because as the US Treasury restocks its cash reserves, it is likely to issue as much as $1 trillion in debt by the end of 2023's third quarter.
- Fiscal spending could decelerate because major government spending programmes are currently heavily front-loaded.
Challenges for SMEs
Challenges for SMEs are similar to usual, but the recent and current climate heightens them. Perhaps the biggest challenge is funding, as cautious banks make it hard to facilitate cash flow and make it harder to take advantage of opportunities as they come up.
However, this is often where challenger banks and niche finance asset funders can play a significant role. High inflation, labour shortages, trade barriers and socio-political tensions can make it difficult for SMEs to execute a business expansion strategy effectively, especially when entering a new market.
Other challenges to SMEs, identified by research on MDPI said:
- Demand and supply risks
- Shortage of financial reserves
- Border restrictions
- Lack of staff
- Extreme weather conditions
- Difficulty connecting with existing and potential customers
- The need to speed up online and IT capabilities
Challenges for SMEs when entering North America
There are particular challenges regarding SMEs entering North America due to the nation's scale and competitive nature. It might be the land of opportunity, but you need to know what you're doing if you're going to have a laser-sharp focus on success.
Across the 27 Member States of the European Union, a survey showed that just over a quarter (26%) of all European SMEs have exported their goods or services, but only 4% exported to North America.
North America is a beast of a market where businesses can get gobbled up if unfamiliar. Particular challenges for SMEs entering the space include:
- A shortage of working capital to finance exports.
- Meeting local regulatory and compliance requirements.
- The ultra-competitive nature of the market.
- Understanding regional cultural nuances and the ability to target consumers with the proper localised marketing.
- Language barriers and understanding local business etiquette and culture.
Despite the challenges of international market expansion, a briefing from the European Parliament Policy Department for External Relations said:
"Once the initial obstacles are overcome, increased levels of internationalisation are associated with higher performance, especially for SMEs operating in high-growth, global industries (Mudambi and Zahra 2007). This effect is magnified during an economic crisis, when companies can exploit their operations in foreign markets to succeed and further develop their competitive advantage (European Central Bank, 2015). Moreover, it has also been shown that despite the increased liabilities of newness and smallness, inter-nationalisation overall provides opportunities that increase the chance of survival in the long run (Lee et al., 2012)."
The impact of global events
There has been a raft of global events in recent years that have not only impacted markets short-term but are no doubt continuing to have an impact in ways that we're yet to understand fully. The Pandemic and the war in Ukraine alone resulted in severe income reduction, increased unemployment, and disruptions in transportation services, manufacturing, and supply chains.
However, these events have also changed our collective mindset and, in some ways, have opened opportunities for business expansion.
For example, The Independent wrote:
"When the Pandemic hit, we witnessed rapid growth in e-commerce as consumers were forced to stay indoors and shop from home. Businesses without a digital presence had to adapt swiftly to cope, and this sudden boom in e-commerce not only helped them stay afloat but revealed growth opportunities outside of domestic markets. As a result, we saw a significant upturn in international trade, which now exceeds pre-pandemic levels despite the global challenges of the past two years."
This is, of course, both a blessing and a challenge - there's more willingness, acceptance and opportunity for market expansion but also more competition. However, despite details that varied from one business to the next, research indicates that the general mood amongst SMEs has been a heightened sense of resilience resulting from surviving these various challenges.
A review from MDPI said: "The majority of businesses were confident that their business would survive and grow or remain stable."
The resilience mindset
Resilience has been a hot topic and a desirable characteristic in businesses and business leaders in recent years. It continues to define organisations that thrive against inclement environmental forecasts.
McKinsey & Company wrote: "Resilient organisations don't just bounce back from misfortune or change; they bounce forward. They absorb the shocks and turn them into opportunities to capture sustainable, inclusive growth."
They identified key features of resilient organisations as:
- Those with faster, federated, data-informed decision-making and 'good enough' outcomes.
- Self-sufficient teams that, when held accountable and given ownership of outcomes, feel empowered to carry out strategic plans.
- Adaptable leaders who don't just react to challenges but take the time to coach team members through the change.
- Those that invest in talent and culture—now and for the future.
Importance of a resilient mindset for SME leaders
These critical points identified by McKinsey show the foundations on which resilience is built in an organisation, namely a shift in mindset. This sets the tone from the top down in organisations, creating a company culture that sees stressors as fuel for growth rather than hindering progress, enabling organisations to make the steps towards a strategy and implementable actions to improve resilience.
The International Labour Organisation wrote: "Covid has been an eye-opener and highlighted the importance of building resilience at all levels – at the workplace level, enterprise level, sector level and the business ecosystem level. For SME owners, a resilience strategy is no longer a 'nice-to-have' but increasingly a 'must-have.'"
However, they also noted that most organisations need access to resilience training and tools and that a strategy alone no longer proves sufficient.
Real-world examples of business resilience in the face of adversity
One of the most famous businesses in the world, Amazon is arguably the best example of a resilient business. Perpetually reinventing itself, the 'world's largest bookstore' took charge in the Pandemic. Initially caught off guard by an influx of orders, they quickly adapted their operations. They hired additional staff (more than 175,000 new warehouse and delivery workers between March and mid-April 2020), increased stock levels, and introduced features like contactless delivery. They moved their fulfilment operations almost entirely in-house, made significant upskilling investments, and boosted domestic capital investments by 75% to nearly $34 billion in e-commerce, broadband and tech industries. By May 2021, profits had soared 220%.
On a smaller scale, The Neighbourhood Group, a locally owned group of restaurants in Guelph, Ontario, joined forces to help cover employee salaries and create a force for good practices during the Pandemic instead of furloughing and letting their employees go. According to NR Digital Branding, they achieved financial success, focused on supporting other local businesses, and rallied the community together.
NR Digital Branding also noted InkSmith, an education technology company, which opened a new facility and utilised its 3D printing and laser-cutting technology to manufacture PPE face shields when the Pandemic hit, receiving approval from Health Canada, and producing around 50,000 face shields per day for hospitals and educators.
Strategies for resilience
A resilience strategy is a starting point for businesses that want to thrive in difficult climates and challenging environments, but it has to be followed with tangible actions. It begins with the mindset and company culture, underpinned by a set of actions and approaches designed to help organisations navigate business disruption and preferably not just survive but thrive. The goal is to build resilience in all aspects of the organisation.
The International Labour Organisation says: "SME leaders must involve their staff in the development of the strategy and ensure that the strategy becomes a living document that is understood and regularly updated across the organisation. Even the best business resilience strategy is worthless if staff don't buy into it."
Strategies and best practices for SMEs to enhance their resilience
In reality, the best ways to build resilience in your business will depend on the specifics of your organisation. However, in broad terms, critical areas for developing best practices in SMEs to enhance resilience are as follows. Together, they form the basis of a flexible ecosystem that predicts and adapts to the changing environment:
- Establishing good corporate governance, incorporating multiple viewpoints in decision-making processes.
- Opening a dialogue between business leaders and relevant parties to acknowledge global stresses and feelings around them and to empower colleagues to provide their views on common purpose and risk.
- Using targeted initiatives to promote connectivity and cohesion internally amongst your team as well as externally.
- Protecting and having the capacity to pivot supply chains is a priority area for operational resilience.
- Ensuring access to relevant talent to move forward with agility.
- Keeping your technology and data practices up to date, including knowing your vulnerabilities and predicting what your capability requirements are or are going to be.
- Having multiple funding lines available.
- Having crisis protocols in place and remaining aware of geopolitical changes.
Adaptive marketing and innovation
Marketing is a central feature of a resilient business, driving leads and sales. Adaptive marketing and innovation are rooted in the ongoing ability to evolve, an approach that enables brands to create more personalised and authentic relationships with their customers based on the feedback coming from various data points. It allows marketers to adapt their messaging and the product and services.
Role of adaptive marketing and innovation in maintaining a competitive edge
This flexibility in marketing ties into the core understanding that marketing is an intrinsic part of your market development strategy. Informed by data and connected to a well-defined plan, it uses shifting trends to retain your organisation's competitive edge whilst staying true to your core values. Importantly, by producing and delivering marketing based on what you know about your target audience and where your potential consumers are in the sales funnel, you can always find and speak to relevant markets.
Talent and workforce resilience
As mentioned, your team is fundamental to the success of your organisation, and one of the biggest challenges facing businesses today is the need for more staff. This is where a strategy for accessing a top talent pool at all times is essential, and the increasing shift towards freelancing has proven highly effective for many SMEs.
By having a network of top talent you work with, you can scale skillsets as needed without having them permanently on staff. Having a clear strategy for this will allow you to understand what you need on your permanent team and where you are best placed for finding the best consultant, fractional and freelance partnerships for rapid scalability.
Workforce-related strategies
Your workforce-related strategy and planning should consider your areas of potential company growth and have a clear insight into inefficiencies within the organisation and areas of weakness. You should be clear on where productivity and quality output need improvement and where you can best drive value. Through a partnership with an organisation like gigCMO, you gain access to a network of top talent in different spaces that can be scaled according to your needs at different times.
Importance of employee well-being and a resilient organisational culture
With the cost of recruitment at a record high and the challenge of finding not just people but good people to support your business, looking after the well-being of your team is imperative. That accounts for staff wellbeing strategies and a positive workplace culture. Taking care of employee wellbeing has increased loyalty, improved organisational culture, reduced absences and improved productivity.
Local partnerships and networking
Partnerships can be a powerful way to improve organisational resilience. For example, you can leverage those relationships to launch into new markets with increased authority through a trusted name and have an established platform to build sales or gain insights into regional markets.
Benefits of forming partnerships with local businesses and industry associations
Whether you're forming a partnership with a local business or an industry association like a local Chamber of Commerce, the benefits are much like any friendship - they form the basis of an introduction and a better understanding of an otherwise unknown area. In short, you increase your knowledge and spread your risk.
For example, benefits include:
- Exchange ideas, insights, and expertise.
- Learn from each other's experiences.
- Discuss best practices.
- Gain valuable knowledge about the local market.
- Mutual growth and innovation.
- Better understanding of customer needs
- Networking and introductions
Tips on effective networking for SMEs in North America
As with any nation worldwide, when you're exploring market expansion, one of the fundamental aspects is to seek to understand the local culture, from language to humour, as well as the practicalities of currency and ways of operating. Partnerships are a great way to gain that understanding, but networking must be done sensitively.
Tips for business networking in America include:
- Adjust to US working culture: American networking is typically swift and to the point.
- Sharpen your American business etiquette: Americans like good manners and fast, intentional interactions, direct questions and are not afraid of talking numbers.
- Choose the right State for your industry: America is a vast country with different specialisms in each area. For example, Boston, Massachusetts, has a thriving medical and life sciences industry, while Philadelphia, Pennsylvania, is strong in manufacturing.
- Ensure you have something to offer: Understand who you're talking to, what you want from them and what you can offer them in return.
Technology and digital transformation
Unsurprisingly, technology and digital transformation have been the cornerstones of some of the most successful and resilient businesses of the last five years, especially in market expansion. Technology has been the gateway to accessing new markets and gaining the data and insights necessary to build business growth strategies rooted in tangible information.
Technology adoption and digital transformation importance
The value of technology adoption and digital transformation apply to all aspects of a business, from the customer experience to the data insights, security to daily operations and efficiencies. However, some of the top-line business benefits of digitisation include:
- Cost savings by reducing manual labour.
- Streamlining processes.
- Improving productivity.
- Better data and analytics.
- Digital access to new markets.
Ready to thrive in North America? Discover your resilience strategy today with gigCMO.
