Exploring business model innovation in response to exogenous crises – a multiple case study of small and medium sized manufacturers in KwaZulu Natal, South Africa

Abstract

Small and medium-sized enterprises (SMEs) form the backbone of the South African economy. Their survival is essential to protect the livelihoods of the people they employ, and the customers and communities they serve. In an era, where the threat of disruptive exogenous crisis events are a constant reality, SMEs need to be able to respond fast and effectively in order to survive and even grow. When disruptive events prevent SMEs from trading according to their traditional business models, they can respond to such crises by applying business model innovation. Business model innovation is a proactive response to crisis and enables SMEs to introduce new ways to either create, deliver, or capture value in current or new markets. This empirical qualitative study explores how business model innovation is adopted as a response to crises by SMEs using a multiple case study approach. It focuses on six SMEs trading within highly competitive sub-sectors within the manufacturing sector in KwaZulu-Natal (KZN), South Africa. Since the severe impact of the Covid- 19 pandemic, KZN has also been subjected to multiple exogenous crises that severely impacted the South African economy. All six case study SMEs were exposed to crisis events that caused major disruption to their traditional business models. This led them to resort to dynamic capabilities to sense and seize opportunities to transform their business models in an attempt to survive and then grow, following the crises they experienced. This study therefore explored those dynamic capabilities that were antecedents for the success of their business model innovations. This study contributes to the limited literature available on crisis management and business model innovation for SMEs. It connects the capabilities of a proactive crisis management strategy with the dynamic capabilities for innovation of SMEs. It identifies 12 dynamic capabilities that were most prevalent in enabling business model innovations that helped SMEs to survive and/or subsequently grow their businesses in response to crises. This study consequently presents a proposed dynamic capabilities framework for business model innovation in response to crises.