What should businesses invest in during the time of a crisis?

I recently participated in the event "The (In)visible Board: What is its role in crisis management?" at my Alma Mater, ISM University of Management and Economics.  Lithuanian businessman Antanas Danys' description of how decision-makers behave in times of crisis stuck in particular: everyone sits at a large table, one speaks, and the others nod. Antanas called it "collective prayer". 

Currently, macroeconomics specialists do not agree on which formulas should be used to assess the near future. We can only imagine how difficult it is for business decision makers to decide what steps to take. In such cases, I use a simple exercise to look back and notice business elements that have already been tested and proved amid the challenging times.

I deem the article reaches its purpose if at least one company avoids such a collective prayer and instead generates a lively discussion in search of the best way for a business to survive a troubling phase.

Not to beat around the bush, it is the Internet and digitization that usually helped businesses overcome the most recent challenges, including those stemming from the pandemic and the war.

For many years, e-trade was compared in parallel with physical trade. For example, an online channel would generate the same turnover as the largest chain store somewhere in a capital city. The energy crisis has prompted a rethinking of such a trading strategy – now, the math has changed a bit. In fact, when we calculate energy prices and rising wages for the entire commercial space, e-trade is increasingly becoming not just an additional source of revenue, but, more importantly, a key element in managing business risks.

The term "e-commerce" was understood for many years simply as just another name for an online store. Now it’s used much more widely, referring to electronic ticketing, self-service systems and many other software that allow transactions to be carried out remotely. Over the years, such digital channels have already proven their resistance to external factors. To see that, it is enough to look at the recent past: pigu.lt (220.lv) opened in the midst of the 2008 crisis and offered its visitors the opportunity to buy cheaper and more conveniently. Indeed, there were some questions about the shopping experience, but the start was very much in time.

In the wake of COVID, e-commerce  again showed its strength. Physical stores had to close and many large businesses were forced to rely solely on digital channels. Scientists, by the way, maintain that COVID is one of the few viruses that human civilization will have to overcome to the very end. We can expect more virus attacks in the future, so physical trade still cannot completely forget about the threat.

Besides, with the tense geopolitical situation, we cannot afford any relaxation. When thinking about the future trade trends in the Baltics, one should always keep in mind alternatives to physical trade, if our aggressive neighbours ever decide to test us as well.

It would seem that e-ecommerce sounds like an antidote to all ills, but it's not that simple. It must be remembered that digital processes have a completely different DNA that needs to be understood in order to be successful here. 

First, it requires constant development, support and innovation. The competitive environment does not stand still and it works at an increased speed on the Internet. Without investing in new functionalities and development, one can quickly find himself/herself outside the margins. The market is fierce:  if you are late, your competitors are lurking out there.

The Internet has no borders and such global market leaders as, for example, Zalando or About You are taking huge steps into the Baltic market by offering a better customer experience, thus putting pressure on local players.

There will only be more cases like this in the future, and if you don't move forward, you'll just become a part of someone else's pie. We have already seen quite a few cases like this. For example, grocery delivery service Zzz.lt in Lithuania. Competitors simply invest more, and as the legendary band ABBA sang: “The winner takes it all.”

Secondly, in e-commerce you need to reconcile with a state of "good enough". On the Internet, we will always find better working, more functional, more efficient projects. Often, representatives of this field feel in the role of the chaser.  In the long run, trying to create a perfect project can become an exhausting and almost impossible task. Keeping up the pace in this race requires tenacity, patience and a broad approach. Creativity also becomes a huge advantage here. 

Finally, everything is calculated in digital. We are rarely able to count how many minutes a visitor spends on average shopping at a physical outlet. It is also difficult to measure which shelves customers looked at more often that day. All that kind data is available in e-commerce channels, so knowledge of analytics and their proper use become a great advantage both over other e-vendors and over competitors overall.

In a word, those who adapt - win. Darwin's theory of evolution works well not only in the animal world, but also in business. It is not the strongest or the fastest who survive, but those who know how to readjust to the changing environment.

A large part of business in the Baltics is built, to say illustratively, by its own hands. That’s respectable, but I think two different skills collide when it comes to long-term sustainable business. Building it from scratch is one thing, but being able to constantly innovate and stay ahead of the competition is quite another. Today, without digitization, it is practically impossible to implement the second half, no matter what field we work in and what times are ahead of us. Just like in the 2008 economic collapse or the first wave of COVID, the coming economic challenges can be an opportunity to take a delayed step towards digitization or significantly strengthen the efforts made there. The rising costs of physical trade will hit many businesses hard, and those that will adapt the fastest will remain in the market.