Crisis Management Framework In Startups: Not Too Soon To Begin

The spirit of entrepreneurship means having the courage to face unplanned events and face unfathomable outcomes – collectively and loosely known as ‘disruptions’ – commonly known as ‘crisis’.

In the past decade or so, Indian entrepreneurs are always perceived to be living amidst disruption – living in ‘crisis mode’.

In the Indian startup scene, market disruption is the norm. Even then, no one could have imagined that a life-threatening (literally) disruption could put things off track for the whole country.

The maximum impact would have been on those who may not have achieved a large scale or adequate funding that would keep them afloat while business activity is low or zero.

If one looks at the current crisis with the lens of an entrepreneur who thrives on disruption – one would look at the opportunity that is presented in the ‘new normal’. To get to the new normal, a business would have to respond to this crisis, sustain, reinvent and reincarnate in no time.

Crisis Response

A crisis leader, a crisis team and a crisis plan are the three main ingredients for good crisis response. Much like being in a ‘war room’ while launching a new category, or ‘go live’ of a business model during normal times. In current times – retaining key customers, managing stakeholders and safeguarding assets, preserving liquidity, protecting capital, take priority over all other things.

While startups tend to be lean on resources with limited teams taking on many varied roles, investing in a crisis framework early on can build resiliency that can attract serious interest from many and add a dash of credibility to efforts for ensuring safety of investments of stakeholders.

Building Trust In The Ecosystem

Unlike large traditional corporations, who would be integrated upwards, downwards, horizontally, startups rely on their ecosystem (their environment), consisting of other startups, gig workers and the likes. Authentic, fact-based and empathetic communication with all stakeholders and efforts to further strengthen the ecosystem would create a trustworthy and sustainable ecosystem conducive to the growth of the organisation post the crisis.

Building Trust With Customers

Customers watch brands they like closely, therefore building trust with customers and reinventing its business models to solve a customer’s problems are absolutely critical during a crisis. This could bring out new revenue streams, new business models, new supply chains completely transforming businesses as we know now.

Scenario Planning And Modelling

Irrespective of the alphabet that denotes the shape of recovery post the crisis – ‘U’, ‘V’, ‘W’, or something else – startups should be armed with business models, simulated with a myriad different scenario for the cyclical economy, relapse in the pandemic, availability of vaccines, etc. Planning for the unknown may not always be able to prevent a crisis, it only lends a level of clarity and confidence, that would otherwise be missing taking crisis response into a downward spiral worsening it for all.

Liquidity

Conserving cash to be able to jump-start when the crisis subsides will be the key. Whether the business needs to cut costs, trim its workforce, slow/halt ‘cash burn’, a well thought of strategy, consistently applied would be necessary to keep confusion and anxiety of employees and external stakeholders in check.

Raising Capital

For those entrepreneurs who would be witnessing such an economic crisis for the first time, it may take time to get used to the new environment of investments. A sharp focus on the short term/long term capital requirements as per simulations and modelling exercises carried out would be critical so that one is not caught at the crossroads of deal optimisation and speed in closing deals.

Employee Welfare

Majority of the start-ups in India are technology-driven. Technology-driven companies would be leaner than traditional brick and mortar companies, but as the size of the workforce reduces, the criticality of resources tends to be higher. Care of employees and concerns of their health and wellbeing has become more important than ever.

As the workforce returns to work gradually, actions taken to safeguard the health of employees and care about their support systems will become a prerequisite aspect in keeping motivation levels high and retention of key talent.

Emerging Stronger

What business does during a crisis, in all respects, shapes how it would emerge from a crisis and whether it would grow to become stronger or see itself getting disrupted in the long run.

A guide to what actions needs to be taken now is to visualise how would a startup like see itself coming out of the crisis and get everyone to work backwards for it. The lens with which one needs to distil reality would be that of the changed customer behaviour.

In Conclusion

In the distant future, one may not be able to identify when did the crisis end and the world return to normal. History would be blurred by the presence of new businesses who would have emerged from the crisis as ‘phoenix’ rises from ashes in an accelerated future.

Those who are able to adapt and reinvent to the future that just arrived, will go down in history as an organisation who truly turned a crisis into an opportunity.

[This article was written by Gagan Puri- Partner, Leader Forensic services, PwC India and Vishal Narula- Executive Director, Leader Crisis Management at PwC India]