Some panic too early. Some will ignore a real situation until its too late.
So let’s define what a real crisis is.
When you look up the definition of crisis in a dictionary you find definitions like “a time of intense difficulty or danger” or “a situation in which something or someone is affected by one or more very serious problems”, etc. Now, in my opinion, that is insufficient. When it comes to business it is much more specific than that.
Every crisis is different. But any time there is a proper crisis it feels like something bad is happening, something that is out of your control, something that turns things to the worse. I am sure you can recall a few times when you felt like that. This is how a crisis feels like, but it does not fully define a crisis.
Also, when people feel uncertain about the future, they may panic. When it happens they have the tendency of wanting to solve something on an immediate basis. They can not think about anything else, they keep arguing about what to do, take desperate actions on their own without coordinating, etc. The situation might have a big smoke around it, but this smoke defines the panic, not the crisis. There might be a proper crisis behind the smoke, so you have to be able to see what is smoking? Where is the fire?
I have managed through a few crisis situations of different nature, and this is how I recognise a real crisis:
Definition: A real crisis for a business would be any circumstance that is forcing your income below your expenses for an extended period.
It is not a temporary sag, where something went wrong, but you fix it real quick and the income does bounce back up.
A crisis is where something has fundamentally changed and your usual way of operation does not work anymore. Your income has dropped below your outgo and if you simply continue on as usual the business will predictably crash land.
Examples:
- During this Coronavirus pandemic I have observed several good examples, including the crisis my own company was facing. I would like to note here that the crisis was NOT the pandemic. People were forced to stay home, stop travelling, therefore the income of hotels and restaurants have suffered badly. Now, the crisis was caused by the “stay home” propaganda and legislation, not the disease. (Please note that the same thing caused, for example, home delivery companies to boom, because people were not going out, they needed meals, groceries and other things delivered to their homes.)
- Another kind of of crisis that keeps happening is black propaganda, usually by the competitor who is playing nasty. It is easy to influence the opinion of the market by well targeted false news, or malicious rumours. Unfortunately, sales tend to drop steeply when one is under such attack, and that is why black propaganda can cause a crisis. (But the good news is that sales tend to go back up to even higher than before when you prove it was malicious black propaganda and prove who did it.)
- Less often, but it has happened in the past, raw material shortages can also cause a crisis. Sales are all right, but you can not deliver, subsequently you do not get paid, which can lead to a crisis if the situation persists for an extended period.
You get the idea?
Again, a real crisis for a business would be any circumstance that is forcing your income below your expenses for an extended period.
