Crisis mode: Why some businesses thrive in times of trouble

Research led by The University of Queensland has explained why some businesses not only survive crises like recessions, pandemics or natural disasters, but thrive, with periods of extreme growth.

Associate Professor Frederik von Briel from UQ’s Business School said some of the world’s most successful companies rose from obscurity to market leader during times of major societal instability.

“Crises are when normal societal functions often deteriorate,” Dr von Briel said.  

“For most businesses this can mean financial struggles with higher costs and falling demand, but remarkably there are others that become what we call ‘extreme growth outliers’.

“Certain crises create unique opportunities for a select few companies by improving market demand, supply conditions, public attention and acceptance all at the same time.

“Crises that begin suddenly, have widespread impacts and last for a considerable period of time create the perfect storm for such extraordinary growth opportunities.”

The researchers looked at historical cases to try to explain how and why crises enable some businesses to defy otherwise universally adverse conditions.

“We found many examples over the past 100 years,” Dr von Briel said.

“Disney emerged as a powerhouse during the Great Depression as cinema offered temporary relief from hardship; the 1970s oil crisis triggered demand for Honda and Toyota’s smaller fuel-efficient cars; the Global Financial Crisis shifted consumer spending to budget-friendly options like Groupon and Airbnb; while COVID-19 pandemic lockdowns gave rise to Zoom and Uber Eats.

“Many success stories like these share common traits that made it possible for them to capitalise on these growth opportunities - flexible, expansible and distributable resources that allowed them to scale up.”
 

Flexibility

The researchers said organisations that thrived in crises found substitutes for resources or assets they could no longer access, or alternately repurposed and mobilised resources that were now cheaper or more available.

“During the COVID-19 pandemic, Uber successfully reallocated workforce resources from its ride-hailing business to its Uber Eats arm,” Dr von Briel said.

“It also expanded beyond restaurant deliveries by opening the platform to grocers and other third parties that had trouble reaching customers during lockdowns.

“This allowed Uber to record a 54 per cent year-over-year order growth.”
 

Expansibility

“This is being able to replicate what a business does at low cost and with minimal effort,” Dr von Briel said.

“A case in point is Alibaba, a business-to-business online platform that could directly link procurement teams from abroad with Chinese goods manufacturers when the SARS crisis hit and travel was restricted.

“At the SARS peak, Alibaba added 4,000 new members and between 9,000 and 12,000 new listings daily.”
 

Distributability

“We found companies that thrived during crises were able to easily reach customers with their offerings and/or absorb new supply regardless of where they were,” Dr von Briel said.

“Standardised manufacturing processes, digital services and information goods are all examples of how organisations can foster distributability.

“During World War II, Birdseye Frozen Foods leveraged its patented quick-freezing process, low-temperature display units and insulated railroad cars to take advantage of a surge in demand for easy-to-prepare meals across the USA.”  
 

The researchers said societal crises could be viewed as opportunity for organisations positioned to take advantage of them.

“We tend to think in business that crises mean doom and gloom, but paradoxically they can enable organisations to make major leaps forward,” Dr von Briel said.

“By shifting the mindset from ‘how do we survive this’ to ‘how can we turn this moment into an opportunity’, business leaders could better position their organisation to rise from the ashes of a major crisis.”

The study also involved researchers from Jönköping International Business School, University of Hamburg and QUT.

The research is published in Academy of Management Review.
 

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