key: cord-0064546-yq7bunpe
authors: Klein, Vinícius Barreto; Todesco, José Leomar
title: COVID‐19 crisis and SMEs responses: The role of digital transformation
date: 2021-03-10
journal: nan
DOI: 10.1002/kpm.1660
sha: 2ca3798254fc9cdefe66bfa22e411a524ab853cc
doc_id: 64546
cord_uid: yq7bunpe

In addition to causing dramatic damage to people's health, the coronavirus has affected also the financial health of companies worldwide. Among them, SMEs (small and medium‐sized enterprises) tend to be more vulnerable. Characteristics such as scarcity of financial resources and lack of specialized knowledge make their situation even harder. This pandemic has resulted in increased digital transformation, changes in customer behavior and the managerial and technological knowledge gap to address them. Therefore, this article discusses the general weaknesses, strengths, challenges and opportunities for SMEs to face this pandemic, and how the field of knowledge management (KM) can help. Based on the concepts of organizational resilience, we drafted a conceptual model to illustrate how their first responses were and how they could become more adapted. First, we conducted a literature search to investigate how SMEs responded to this scenario. We found responses to the financial impacts in the form of mass layoffs, temporary and permanent closures, bootstrapping of digitalization and strategic alliances. In the discussions section, we raise some key questions to demonstrate how knowledge can improve the role of digital transformation. We approach how a KM strategy could start from organizational resilience concepts to assist SMEs to seize digital transformation opportunities. As practical implications, our research raises awareness of digital transformation's role as a set of tools to adapt during and after the pandemic, along with resilience engineering and knowledge management principles. Future researchers can use this report as a conceptual guide to start their own response and adaptation plans.

In addition to causing dramatic damage to people's health, the coronavirus has affected also the financial health of companies worldwide. Among them, SMEs (small and medium-sized enterprises) tend to be more vulnerable. Characteristics such as scarcity of financial resources and lack of specialized knowledge make their situation even harder. This pandemic has resulted in increased digital transformation, changes in customer behavior and the managerial and technological knowledge gap to address them. Therefore, this article discusses the general weaknesses, strengths, challenges and opportunities for SMEs to face this pandemic, and how the field of knowledge management (KM) can help. Based on the concepts of organizational resilience, we drafted a conceptual model to illustrate how their first responses were and how they could become more adapted. First, we conducted a literature search to investigate how SMEs responded to this scenario. We found responses to the financial impacts in the form of mass layoffs, temporary and permanent closures, bootstrapping of digitalization and strategic alliances. In the discussions section, we raise some key questions to demonstrate how knowledge can improve the role of digital transformation.

We approach how a KM strategy could start from organizational resilience concepts to assist SMEs to seize digital transformation opportunities. As practical implications, our research raises awareness of digital transformation's role as a set of tools to adapt during and after the pandemic, along with resilience engineering and knowledge management principles. Future researchers can use this report as a conceptual guide to start their own response and adaptation plans.

The current pandemic of coronavirus-associated acute respiratory disease, called coronavirus disease 19 (COVID-19; Gorbalenya, Baker, Baric, de Groot, & Drosten, 2020) , has dramatically taken away many lives all over the world. As a side effect, many economies were strongly impacted. The impacts of lockdowns are causing a global recession, from the top economies to developing countries (Globaldata, 2020; OECD, 2020) . Between the affected companies, the SMEs (small and medium-sized enterprises), SBs (small businesses; Bartik et al., 2020) or SMBs (small and medium businesses; Beley & Bhatarkar, 2013) have attributes that make them more vulnerable to the current pandemic crisis. Their scarcity of financial resources and gaps in specialized knowledge make it difficult for them to respond to the challenges posed by the COVID-19 crisis. Specific characteristics of SMEs in comparison with large firms certainly make difficult SMEs' responses to this crisis: lack of human resources, limited managerial capacity (procedures, techniques and tools), limited capital resources and no knowledge management (only tacit knowledge, nothing is formalized; Garengo, Biazzo, & Bititci, 2005) . Furthermore, according to Eggers (2020) , SMEs face a liability of smallness (Freeman, Carroll, & Hannan, 1983) , which simply means that the smaller the firm, the more vulnerable it is to internal and external events (Eggers, 2020) . Some also face a liability of newness, meaning that the youngest companies tend to be more vulnerable than older ones (Freeman et al., 1983; Stinchcombe, 1965 ). In addition, government financial aid measures, together with changes in the supply chain, strongly influence SMEs' operations and survival.

On the other hand, opportunities may come from this disruption.

The current situation triggers changes in customer behavior, market balance and supply chains (Carvalho, Bonzo, & Zenaide, 2020; Ceylan, Ozkan, & Mulazimogullari, 2020) , and digital technologies can help them to take advantage of this window of opportunity. Even though it is probably out of necessity in most cases, it is no coincidence that this crisis has accelerated the adoption of digital technologies by approximately 5 years in 8 weeks (Baig, Hall, Jenkins, Lamarre, & McCarthy, 2020) . Butt (2020) states that this pandemic has highlighted DT (digital transformation) in such a way that organizations now feel the adversities of not having embraced it earlier.

Along with the increase in digitalization attempts, another element can be highlighted: the absence of knowledge. Knowledge, or the lack of it, plays a pivotal role in overcoming the current pandemic. For instance, according to Cunningham, Goh, and Koh (2020) , the absence of knowledge to develop a definitive treatment, in the form of a vaccine or specific antiviral drugs to treat critically ill patients, is what increased the global challenges. In a similar way, SME managers may suffer from the lack of knowledge to deal with the economic effects caused by the pandemic. Knowledge is necessary to understand the new consumption patterns, the new supply-demand relationship, how to approach them with knowledge extraction tools, which digital technology products or services to invest and, last but not least, how to use it. Therefore, knowledge management research could provide SMEs with the needed knowledge to face such crisis. An overview of strategies adopted by SMEs, and the unique challenges faced by them in their different sectors and regions around the globe, could better equip small businesses to develop a benchmark approach to deal with such pandemics (Ravindran & Boh, 2020) . Besides, understanding the new behavior of customers, during and possibly after the pandemic, is a concern that KM together with DT studies can help shed light on. New knowledge models can help us to understand how SMEs can adapt and respond to the new society's demands, how to use digital technologies to rethink their operations and business models (Arkan, 2016; Erbert & Duarte, 2018; Mahraz, Benabbou, & Berrado, 2019) and to be better prepared for eventual new crises (Ravindran & Boh, 2020) .

Considering this context, we raised three research questions: how are SMEs responding to COVID-19 crisis? What are the general weakness, strengths, opportunities and challenges that can be tracked from their responses? How can the KM assist SMEs through this acceleration of DT, which is also known as the fourth industrial revolution or Society 5.0? In order to answer those questions, first, we analyze the current context for SMEs through their responses in articles found in academic literature and entrepreneurship ecosystem, worldwide and especially in Brazil. Then, we discuss the role of DT and the need for both a KM approach and a resilient behavior, which will better prepare SMEs for the "new normal society." As practical implications, our article starts with a conceptual draft that uses organizational resilience to guide SMEs to learn, adapt, monitor and anticipate the new challenges presented by society's new demands. Finally, we mark DT as a major instrumental challenge, which requires a strong focus on KM for companies to succeed.

We analyze the results of studies conducted at the global and Brazilian level. The main materials were returned through a systematic review, which is a type of secondary research that focuses on reviewing the literature through rigorous, explicit and reproducible procedures, oriented to answer a relevant research question (Green, Johnson, & Adams, 2006; Kitchenham & Charters, 2007) . In this sense, we describe our procedures in Table 1 . We used a varied combination of keywords applied to different databases and search engines. The keywords were searched in the title and abstract of the "SMEs"; "COVID-19"; "response"; "opportunities"; "challenges"; "digital transformation"; "strengths"; "weaknesses"; "threats" Banks offer tighter credit conditions for SMEs, due to their liability of smallness and newness. However, several authors find positive performance effects of innovative postures in SMEs in times of crisis in SMEs. Beyond that, small businesses with higher EO (strategic orientation) have better chances of surviving than those that were started out of necessity Kuckertz et al. (2020) To analyze how innovative startups (in Germany) are being affected: Their reaction to the crisis and opinion on the measures put in place to mitigate its economic effect Startups (a special type of SME) have increased difficulties as well, because the "economic climate" is currently unfavorable for investments in innovation. Their response is to adapt their processes to the current needs, in a resilient posture (2020) To look into the dynamics of digital maturity, its impact on digital innovation, and its effect on organizational survival and success in times of extreme adversity (COVID-19 and SMEs as a "natural experiment") in Netherlands Their central argument is as follows: Different from previous crisis, like the 2008 financial crisis, the lockdown imposes digital disruption. Therefore, the more digitally mature an organization was before the lockdown, the less radical (digital) changes it needs and the more chances of its surviving

The work is still under development, but their hypotheses add a great contribution: There are two opposing behavior patterns triggered in response to extreme (economic) adversity: failure-induced change (FIC), and threat-rigidity response (TRR) theory, which combined with different digital maturity indexes and different types of leadership will result in failure or success of an SME OECD (2020) To discuss how SMEs are affected by the current COVID-19 pandemic and provide an inventory of government responses to foster SME resilience Difficulties and creative entrepreneurships initiatives found across many sectors and countries Note: Results found by the time the paper was written.

First we present the responses of SMEs to the financial impacts they have had (Table 2 ). Next, we describe the reactions during the pandemic, to understand their attempts to survive. Then, we structure the review of papers in the form of a SWOT analysis. We discuss the general weaknesses, strengthens, threats and opportunities of SMEs facing COVID-19 and DT, as summarized in Figure 1 , and explain them in detail in that sequence.

During the pandemic, the scarcity of financial resources of SMEs was exacerbated for different reasons. In summary, there were barriers to access government help, changes in customer behavior, decrease in cash flow and reduction of supply of resources (Humphries et al., 2020; OECD, 2020; Sandberg et al., 2020 Senado, 2020a) , and changes in the regulations of work are being defined, which will structure the rules for remote working, anticipation of vacation and the creation of specific rules for health professionals (Do Senado, 2020b). However, some difficulties in accessing aid were also reported (Martins, 2020; Nascimento, 2020) . Bartik et al. (2020) also report mass layoffs in the United States as a response to this crisis and difficulties related to accessing government aid: the U.S. CARES (Coronavirus Aid, Relief, and Economic Security).

Forty-three percent of businesses are temporarily closed, and, on average, they have reduced their employee counts by 40% relative to January; three-quarters of small businesses stated that they have enough cash to cover maybe 2 months (Bartik et al., 2020) . As a governmental response, the U.S. CARES act provided 350 billion dollars to fund the Paycheck Protection Program (PPP) to assist small businesses (Humphries et al., 2020) . However, there were challenges related to information access, since the smallest businesses had the least awareness of government assistance programs (Humphries et al., 2020) . In addition, even after the CARES Act, recession is still highly jeopardizing small businesses. Layoffs continue, and 80% of small businesses stare at the possibility that their business would close permanently or would declare bankruptcy in the next 6 months (Humphries et al., 2020) .

Difficulties to access private funds were also reported. In addition to the scarcity of resources, SMEs face a specific challenge: banks see them as presenting a higher risk during crisis and usually offer tighter credit conditions (Eggers, 2020) . Those conditions mainly derive from their liability of smallness (Freeman et al., 1983) , and some of them are due to their liability of newness (Stinchcombe, 1965) . Liability of smallness means that smaller firms have less power to influence external changes, which makes them more vulnerable to internal and external events, such as key employees resigning to join big companies, less financing options, new competitors entering the market and major crises like the current one (Eggers, 2020) . Liability of newness affect the youngest companies, because they rarely have wellestablished business models, processes and legitimacy (Eggers, 2020) . Kuckertz et al. (2020) corroborate the financial difficulties of startups (considered a type of SME) during the COVID-19 crisis in Germany. Government measures included taxation support, state support for short-hour working, loans and special programs (Kuckertz et al., 2020) . However, as startups are usually considered as investments for the future, they are suffering because the "economic climate" is currently unfavorable for investments, since investors are also being affected by the pandemic (Kuckertz et al., 2020) . However, some entrepreneur opportunities can also be seen as a response to this crisis, as we demonstrate in the following sections. Sales were promoted directly on social networks (e.g., Instagram, Facebook, WhatsApp), payments transactions were made through applications provided by their banks and some SMEs paid for the first time for online advertisements (SEBRAE, 2020). These actions are detailed at Table 5 .

Responses in the form of collaboration (strategic alliances) and resizing of supply chains were also found in Brazil. Of the interviewed, 3.1% started to create partnerships for joint deliveries of products; 2.6% of SMEs began selling directly to the customers, without needing any intermediary; and 2.1% started to buy directly from suppliers, excluding sales representatives from the supply chain (SEBRAE, 2020). These changes may affect severely the chain in the future by replacing or reintroducing industry intermediaries ("middleman"), through the intermediation/disintermediation/re-intermediation cycle (Chircu & Kauffman, 1999 In Germany, SMEs also reacted through fast adaption and by identifying opportunities through collaboration and improved flexibility. Startups responded by asking for goodwill from partners, exchanging information on policy measures, sharing expertise in different disciplines, and promoting quick responses to maintain cash flow (Kuckertz et al., 2020) . Concomitantly, new opportunities were pursued. They used government subsidies to implement short-term work, acquired more knowledge about crisis responses, reallocated resources and processes to meet new customer demands, and started to sell through new channels (Kuckertz et al., 2020) .

In summary, small digital actions have been a key response in various forms. Along with government support, SMEs' entrepreneurial and digital abilities have been applied to adapt more substantial parts of their process, while creativity was pursued. For example, virtual fashion showrooms linked supply and demand in fashion sector; small firms and schools started to move their content online, and several countries launched hackathon competitions to potentialize creativity and entrepreneur solutions to the crisis (OECD, 2020). Digital divide was also a concern, and there were government programs to support students to buy internet infrastructure to participate in online classes, which can increase digital inclusion in emerging economies and boost local economies (IFC, 2020). Nevertheless, the lack of skills is an important concern. In SMEs, teleworking (remote work) is more difficult to adopt because they are often far behind big companies in terms of digital infrastructure and digital skills, even in top economies (Brussevich, Dabla-Norris, & Khalid, 2020) .

As mentioned earlier, we have structured the insights derived from the review of the papers in the form of a SWOT analysis. The general weaknesses, strengthens, threats, and opportunities (SWOT) of SMEs for facing COVID-19 and DT are summarized in Figure 1 , and counter-pointed and explained in detail below:

• can pose a serious trouble for SMEs. In the worst case scenario, the loss of a key employee can put the SME's survival at risk (Durst & Wilhelm, 2011) .

• Accessing aid funding: Difficulties in accessing government financial help was hampered by both bureaucratic and information barriers during the pandemic (Bartik et al., 2020; Humphries et al., 2020; Kuckertz et al., 2020) . Smaller companies were less aware of government assistance programs (Humphries et al., 2020) and, often before the pandemic, private financing used to offer more restrictive credit conditions due to the greater risk that SMEs present (Eggers, 2020) .

• Liability of smallness (Freeman et al., 1983) : The smaller the company, the more vulnerable it is to external (and internal) events (Eggers, 2020) . Some of them still can be vulnerable through a liability of newness (Stinchcombe, 1965 Despite the weaknesses and threats mentioned above, some general strengths can be linked to SMEs to embrace this accelerated DT. To structure them, we have used some specificities of SMEs (centralized management, low specialization, short-term strategy, informal communication; Julien, 1990; Torrès & Julien, 2005) :

• Centralized Leadership and Local Market/Management: SMEs' management styles have an increased centralization and fewer intermediaries between owner/managers, employees, customers, and suppliers, which can be described as hierarchical proximity (Torres, 2004) . Therefore, as the stakeholders are closer (Eggers, 2020) , it may be easier and faster to collect, understand, and respond to customer-specific demands. In addition, SMEs often prefer more informal communication media and have a direct contact with their local market (known as proximity information systems; Torres, 2004) . Thus, their simpler organizational structure, together with a more personal style of management, implies in less bureaucracy and better fluidity in communication, which may help them to implement changes quickly (Leone, 1999) . As some SMEs have a culture of fast adaptation (instead of anticipation; Leone, 1999) , if this feature is combined with the potential for personalizing the user experience that digital technologies provide, they could produce very rich and customized new products/services to their local market.

• Resilience and Flexibility: SMEs may have greater flexibility, resilience, and adaptability (Eggers, 2020; Kuckertz et al., 2020; Smallbone, Deakins, Battisti, & Kitching, 2012) . According to Kuckertz et al. (2020) , small and medium firms may have a good chance to excel in response to the COVID-19 pandemic since they have already showed great resilience and a high level of adaptability and flexibility in response to major economic downturns (Smallbone et al., 2012) . However, not every SME has the same profile. Some of them are most likely to have innovation in their DNA because they were born from market opportunities, while others were born from necessity (necessity-driven entrepreneurship): for example, individuals who were unemployed before starting the business (Fairlie & Fossen, 2018) . For that reason, SMEs with higher strategic orientation have better chances of surviving than those that were started out of necessity (Eggers, 2020) .

Even so, SMEs tend to have more flexible and generalist professionals, instead of a rigid and highly specialized staff (Torres, 2004) .

Where resources are scarce, a flexible and change-oriented team within the company can be crucial (Borch & Madsen, 2007) .

Therefore, SMEs with flexible employees can find inspiration and support for new business concepts and find the link between their dynamic capabilities and innovative strategies (Borch & Madsen, 2007) . In addition, SMEs have experience with short-term strategy (Moeuf et al., 2016; Torres, 2004) , which can help them to respond quickly to new opportunities and short-term government lines of credit, for example (Kuckertz et al., 2020) .

• Dynamic Capabilities: Teece, Pisano, and Shuen (1997) define dynamic capability (DC) as the firm's ability to build or reconfigure internal and external competences to address rapidly changing environments. DC is a strength to seek in every type of company.

Nevertheless, small firms may have a better chance to develop this strength because of their flexibility and low level of labor specialization (Torres, 2004) . More generalist professionals may be more easily relocated to new tasks and deliver new products/services.

However, in a long-term perspective, low levels of digitalization can be a problem. DCs are boosted by the adoption of an integrated information systems (IIS) (e.g., CRM × ERP) by improving the IT infrastructure and by aligning the business strategy and IT knowledge to increase the responsiveness of the market, learning capacity, and resource coordination and reallocation (Wang & Shi, 2009 ). In addition, since internationalization sometimes may not be a matter only of size but of entrepreneur behavior (Calof, 1994) , SMEs can aim to achieve global value chains through a dynamic DT process. The potential of SMEs for internationalization can grow with use of their information systems, social capital, and dynamic capabilities to seize international opportunities (Carlos, 2011) .

• Ambidexterity: An ambidextrous organization is one that manages to implement both incremental and revolutionary changes in order to remain successful over both long periods and major changes in the market (Tushman & O'Reilly III, 1996) . Thus, ambidextrous organizations are able to balance organizational learning through exploration of new knowledge (e.g., experimentation, flexibility) and the exploitation of their current intellectual capital (e.g., refinement, efficiency; March, 1991 and Tushman, 2008) . Thus, an appropriate balance between exploration and exploitation is an important factor for survival and prosperity (March, 1991) but extremely difficult to implement (Tushman & O'Reilly III, 1996) , particularly for SMEs (Voss & Voss, 2013) . However, it is possible that SMEs perform well in this regard, which may not be a matter of size but sometimes related to the sector and context in which they operate (Cegarra-Navarro & Dewhurst, 2007) . According to the above authors, ambidexterity is a variable that changes according to both market dynamism and its lack of a knowledge base. In summary, managers need to foster an ambidextrous context, because the alignment of knowledge exploitation and exploration may help them to increase customer capital (Cegarra-Navarro & Dewhurst, 2007) . (Colombo, Piva, & Rossi-Lamastra, 2014) . Indeed, innovation in SMEs usually has an interorganizational component (Brunswicker & Vanhaverbeke, 2015) , which can make it easier for SMEs to adapt and collaborate with each other. However, data exchange between suppliers and salespeople is not a consensus, due, for example, to competition between different traders or customers (Choi & Sethi, 2010) .

• Socialization (SECI Model): One of SMEs' strengths is that they tend to have the dominance of the socialization activity of the SECI cycle (Desouza & Awazu, 2006) . SMEs may present a high level of both informal and formal socialization methods of knowledge-sharing, such as weekly meetings or informal conversations on a daily basis (Desouza & Awazu, 2006) . In SMEs, it is common to exist a closer contact between employees and owners, which can help share and preserve their knowledge (Desouza & Awazu, 2006) and engage workers for new business concepts (Torres, 2004) . The lack of explicit knowledge repositories (e.g., ontologies, intranet) and the consequent loss of knowledge sometimes is minimized by informal socialization methods between owners/managers and employees (Desouza & Awazu, 2006) .

• Communities of Practice (CoPs): These are a strong point to nurture in SMEs, which can be a natural fit due to their potential for inter-and intra-organizational socialization. CoPs are informal groups of people that have the same passion on a topic and are bound together to share their knowledge in their field of expertise (Wenger & Snyder, 2000) . The organic interorganizational discussions and practices in such groups can bring value to organizations since their members can think on new lines of business, solve new problems quickly, transfer best practices, and develop professional skills, while recruiting and retaining talent (Wenger & Snyder, 2000) . In the following section we propose a KM strategy based on the SWOT elements presented above.

To discuss the results, first we present this article's practical implications and then its future directions and limitations.

As practical implications, our research does both raising the awareness of the role of DT as a set of tools to react during and after this pandemic and presenting insights for a knowledge-based strategy for

SMEs to cope with current situation and future uncertainties. To enrich our practical implications, we detail below a conceptual draft, which demonstrates how SMEs could start their own knowledge approaches from now on.

This study showed the ways SMEs have been responding to this crisis, which enables a benchmark approach for small firms to generate their own insights and to develop reaction plans. Therefore, we searched for additional constructs of knowledge to enrich possible strategies for SMEs, as we address below. It is firmly based on KM and on the concept of organizational resilience (Hollnagel, 2010) , as we explain below.

First, it is necessary to discuss the society's possible new reality and customer's new demands. The COVID-19 pandemic and the various lockdowns in world economies have added up to accelerate an already existing change caused by the pervasiveness of digital technologies. DT is a broader process that has been changing paradigms in our society since the popularization of computer science technologies, back in the 1980s (Legner et al., 2017) . Their application in different sectors of society has led to considerable changes in the way we live, work, communicate, and produce value.

DT is also referred to as "Society 5.0" in Japan (Pereira, Lima, & Charrua-Santos, 2020) , as "Industrie 4.0" in Germany (Hermann, Pentek, & Otto, 2016) , or as the fourth industrial revolution (Hirschi, 2018; Morrar, Arman, & Mousa, 2017) . The most recent wave inside DT technologies is a convergence of digital and physical technologies, such as information services, big data, augmented reality, and 3D printers, which transforms products and services along the chain of value, resulting in a heterogeneous convergence between emerging technologies (Erbert & Duarte, 2018; Maynard, 2015) . (Gorender, 1997) . In addition, reports show that new generations will probably prefer online experiences than physical stores (Ram, 2017) . New generations are increasingly using their devices to meet many of their needs, whether it is an information need, or others like socialization, consumption or leisure, for example (Berman & Bell, 2011) . In other words, even without the current pandemic, and even considering that different sectors are affected differently, organizations still should transform their processes, organizational culture, and business models. A full DT would keep up with the implications of new digital technologies and the new demands of customers (Arkan, 2016; Berman & Bell, 2011; Erbert & Duarte, 2018; Mahraz et al., 2019; Tarutė, Duobienė, Klovienė, Vitkauskaitė, & Varani utė, 2018) . Hence, to develop a DT plan, we adopted the concept of organizational resilience of Hollnagel (2010), as we explain below.

The term "resilience" is multidisciplinary and has some variations in its definitions (Fraga, 2019) . According to Pinheiro (2004) , the original Latin term "resiliens" means to jump back, to return, to spring back, to retreat, or to shrink. In the English language, it refers to the idea of elasticity and rapid recovery capacity (Pinheiro, 2004) .

According to McAslan (2010) , the modulus of resilience forms part of the design concepts of civil and mechanical engineers and naval architects, defined as "the ability of a material to absorb and release energy, within the elastic range" (Gere & Goodman, 2009, p. 146) . With a similar meaning, in the field of psychology, a resilient individual is "one who has the ability to recognize pain, perceive its meaning, and tolerate it until resolving conflicts constructively" (Pinheiro, 2004) .

According to Fraga (2019) , the historical evolution of the term can be highlighted in four moments: in 1807, with Young, who introduced the concept of elasticity in physics, referring to the resistance capacity of materials; in 1966, with Flatch, who applied the term to describe the psychological forces needed by individuals to overcome adversity and changes in life; in the 1970s, when Holling applied the concept in the field of ecology, referring to the ability of a system to face the risks in its environment; and in 1998, when Mallak explains organizational resilience, which is a positive reinforcement mindset with reward for desired behaviors (Fraga, 2019) . Tavares (2001) states that a resilient organization creates a resilient environment, where people have empathy intelligence to adapt to changes (Pinheiro, 2004) .

Since the elaboration of those initial concepts, organizational resilience has embraced new ideas. In this article, we use Hollnagel's concept of organizational resilience, or as the author calls it, "resilience engineering" (RE), as follows: "Resilience is the intrinsic ability of a system or an organization to adjust its functioning prior to, during, or following changes and disturbances, so that it can sustain required operations under both expected and unexpected conditions."

Thus, resilience in social systems is more than an adaptive capacity, because it embraces the human ability of forward-looking or anticipatory behavior (Holling & Walker, 2003) . Indeed, "adaptation" in RE is defined as a successful condition: "the ability of organizations, groups and individuals to recognize and adapt to unexpected change and surprising developments" (Madni & Jackson, 2009) . Even more, in RE, there are two types of resilience: reaction and adaptation. Reaction implies "immediate or short-term action, while adaptation implies long-term learning" (Madni & Jackson, 2009) , which consequently changes the way organizations adapt to external demands, which in turn requires anticipation through monitoring external changes (Hollnagel, 2010) .

Therefore, organizational resilience can guide in developing a knowledge strategy. It can describe behavioral patterns that any organization must incorporate in order to be better prepared and respond to the uncertainties of a near digital future. According to Hollnagel (2010) , RE is a proactive approach to enable organizations to adapt to changes by monitoring, anticipating, learning, and responding to them (Hollnagel, 2010) . Its goal is to enhance the ability of organizations to create processes that are robust yet flexible to monitor and revise risk models and to use resources proactively in the face of disruptions (Dekker, Hollnagel, Woods, & Cook, 2008) . It is the capacity of complex socio-technical systems to sustain the production of essential services in the face of social, technological, and environmental change or disruption (Van Der Merwe, Biggs, & Preiser, 2018).

Nevertheless, organizational resilience is not merely about being able to just restore its normal operations, but it is both a function of adapting to chronic situations (adaptive resilience) and of planning for future crisis (planned resilience; Barasa, Mbau, & Gilson, 2018) .

Considering the organizational resilience constructs (Barasa et al., 2018; Fraga, 2019; Hollnagel, 2010) , we have drafted a conceptual schema to assist in how SMEs may develop their knowledge strategies in the current and future context (Figure 2 ). We understand that organizational resilience is a multidisciplinary concept that addresses the processes of adaptation and response of individuals, groups, and organizations to changes in its surroundings (Fraga, 2019) . Therefore, when combining KM with organizational resilience, some questions can be raised (Fraga, 2019) : how to identify the knowledge resources needed to contribute to the potential for organizational resilience, and how to assess the criticality of this knowledge and, thus, prioritize KM actions to increase resilience capacities (Fraga, 2019) . Beyond those, we add: what knowledge constructs are necessary to be monitored and learned (internalize, socialize) to later generate more accurate responses and future projections (externalize, combine).

F I G U R E 2 A conceptual model drawn to try to guide the start of a knowledge management approach to assist SMEs to respond to the current crisis. It is based on resilience engineering concepts and digital transformation instruments [Colour figure can be viewed at wileyonlinelibrary.com] According to Hollnagel (2010) , in order to be resilient, an organization must have four basic abilities: to respond (addressing the actual), to monitor (addressing the critical), to anticipate (addressing the potential), and to learn (addressing the factual). Those abilities must be explored by a KM project that aims to assist in DT. Therefore, we address those four abilities of organizational resilience by structuring them within the unified model of knowledge management (Nonaka & Takeuchi, 1991 , 1995 Nonaka, Toyama, & Konno, 2000) .

For Nonaka et al. (2000) , in a world where technologies, markets, and societies change rapidly, continuous innovation as well as the knowledge that enables such innovation constitutes a vital competitive advantage. They view organizations as entities that interact with and reshape its environment and itself through the process of knowledge creation, for example, by launching a new product or service (Nonaka et al., 2000) .

Since DT has been changing intensively society as we know, the lack of knowledge to understand both its new mechanisms for value creation and new society's demands is not a trivial challenge for SMEs to face. Therefore, a key question must be raised: how SMES can develop their own knowledge strategies, to face DT, and to follow its new demands. For Nonaka et al. (2000) , knowledge is the source for continuous innovation and it can be created, maintained, and exploited under a dialectical flow. It has three key elements: (a) the SECI (socialization, externalization combination, internalization) process of knowledge conversion (Nonaka & Takeuchi, 1991; Nonaka & Takeuchi, 1995) ; (b) "ba," which is a shared context for new knowledge creation (different from CoPs); and (c) knowledge assets: inputs and outputs of knowledge creation (e.g., explicit knowledge in products or database, tacit knowledge expressed through skills and organizational culture).

According to Nonaka et al. (2000) , in the SECI process, knowledge (e.g., mental models about customers' needs, new concepts for products) is created by individuals through a dialectal way of working ( Figure 3 ) within four modes of knowledge conversion, with interactions between explicit (which can be shared in the form of data) and tacit (highly personal and cognitive) knowledge, as we illustrate below:

• Socialization (from tacit to tacit): (Bratianu & Bejinaru, 2019) and is capable of implementing a more transformational organizational mindset change.

• Externalization (from tacit to explicit):

Managers facilitate creative thinking and essential dialogue to articulate their tacit knowledge and develop new products (a form of explicit knowledge) through teamwork.

• Combination (from explicit to explicit) is the process of converting explicit knowledge into more complex sets of explicit knowledge:

Acquisition and integration: Managers collect data from inside and outside the organization and combine them to acquire new explicit knowledge. For instance, internal sales report of their newest products can be connected with external data from market trends, analyzed by managers, and used to create new forecasts. More complex digital tools can be used at this phase, such as machine learning and big data.

Synthesis and dissemination: managers create manuals, documents (e.g., hypertext), and databases (information systems) to store their explicit knowledge, and disseminate it through presentations. Simple digitals tools for presentation and more sophisticated information systems to store product/services data are key tools.

• Internalization (explicit to tacit) is the process of embodying explicit knowledge.

Through "learning by doing," managers teach their new prod- (Hollnagel, 2010) . In situations of high instability and poor predictability, the ability to learn must be considered prior to the other three (anticipating, responding, monitoring; Fraga, 2019, p. 90) . We recommend this because learn first indicates a mindset that looks ahead and recognizes the need for knowledge to face DT:

• What external knowledge must our organization's employees internalize, so they can socialize it, externalize it, and then combine it to increase our competitive advantage (knowledge assets)? 

This research is limited by the number of publications on the responses of SMEs to the COVID-19 crisis, which is hampered by the fact that the pandemic still affects the routine of many researchers and universities. We could also access only open publications. The conceptual model we presented in this paper is still under development, so it has its own limitations. We based our development strongly on the widely accepted paradigm of knowledge creation by Nonaka and Takeuchi (1991) . Therefore, we are inheriting both its cornerstone mechanisms and (debatable) limitations, since it could be a model more suitable for Japanese companies according Bratianu and Bejinaru (2019), which implies that the activity of sharing knowledge is maybe less used according to the culture. Therefore, future works must consider the dynamics between rational, emotional, and spiritual knowledge and the resonance phenomenon (Bratianu & Bejinaru, 2019) , which may help shed light on how to engage workers for more transformational cultural changes. In near future, we will evolve this model to propose a very practical framework to guide Brazilian SMEs in the textile sector on their journey of DT.

In this paper, we presented how SMEs are responding to the COVID-19 crisis and analyzed their reactions through their general weakness and strengths. We also highlighted their financial challenges and opportunities born from the acceleration of DT. We note that their disintegrated digital actions were thrown to keep surviving, but there is a bigger potential in digital technologies to be unlocked. Therefore, we argue that KM is needed so that digital technologies' potential can be both explored and exploited, while organizational resilience can be combined to create a virtuous cycle of learning, anticipation, and adaptation, based on knowledge creation and application, to innovate continuously. We highlight that competitive advantage (knowledge creation) starts at the individual level and expands as it moves through communities of interaction that transcend sectional, departmental, divisional, and even organizational boundaries (Nonaka et al., 2000) .

Before the lockdowns, DT had already been imposing some specific challenges to small organizations. DT and DC need expansive and sophisticated IT improvements to help increase market responsiveness, learning capability, and resources reorganizations and coordination (Wang & Shi, 2009 ). Even so, SMEs higher proximity with stakeholders and more fluid communication are strengths that can help them to catch opportunities coming from their customers' new needs and preferences (Torres, 2004) .

Therefore, we drafted a conceptual model by raising an initial set of necessary knowledge demands for the DT era. It should assist them to initially respond and adapt to new society's demands, using organizational resilience knowledge constructs, a data-driven culture, and customer-centric vision. The current pandemic has accelerated the race for DT, also known as "Industrie 4.0" or "Society 5.0," which changes the structures of how organizations can create value by digitally obtaining insights from their customers' behavior and by restructuring supply chains. DT was already an ongoing paradigm shift in our society before the pandemic, where organizations started to migrate from analog-based processes of production to a digital-based process of value creation, based on a data culture and C2B data stream. In this scenario, a change in organizational culture is necessary to constantly incorporate enabling digital technologies and their prerequisite knowledge. DT is a conditional process, which highly depends on organizational learning. DT happens only if the required knowledge is continuously incorporated and applied for innovation.

Therefore, DT's instrumentals are the ability to manage knowledge to unlock digital technologies' full potential; the leadership and business expertise to generate new business models and culture; and acquiring knowledge about customers' new demands, to be continually internalized, socialized, externalized, and combined to create new knowledge.

Within a data-driven culture, this will assist the virtuous cycle of organizational learning, monitoring, anticipating, and responding to new demands, based on the incorporated knowledge. In others words, DT requires company leaders to enhance organizational learning and resilient behavior to change organizational culture, process, and technologies, under both a data-driven culture and a customer-centric vision DT, which confirms that "in an economy where uncertainty is the only certainty, the only sure source of lasting competitive advantage is knowledge" (Nonaka & Takeuchi, 1991) .

Vinícius Barreto Klein https://orcid.org/0000-0001-5894-0431

José Leomar Todesco https://orcid.org/0000-0003-4934-9820

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How to cite this article: Klein VB, Todesco JL. COVID-19 crisis and SMEs responses: The role of digital transformation