Organizational change and best practices in service startups: what happened during the COVID-19 crisis?

Abstract

Brazil is the largest country in terms of startups in Latin America. Minas Gerais state occupies the third position in the number of startups and Uberlandia is the second largest city in Minas Gerais, behind only the capital. Regarding the size of Brazilian startups, around 90% are small and medium-sized companies. Considering that the service sector is the second largest among small businesses, this study aimed to analyze whether there have been changes caused by the pandemic in small and medium-sized service startups located in Uberlândia city. Specific objectives were: to verify whether there have been changes in the business structure and practical activities of early-stage service startups in the face of the economic crisis caused by the pandemic; and to identify and describe best practices of the companies studied in order to propose improvements and assist in the decision-making of other organizations. We developed a qualitative descriptive multiple case study with nine technology-based service startups in Uberlandia. We used structured interviews with the companies’ founders and analyzed data using content analysis. This study contributes to the academic field by identifying seven categories related to the changes caused by the pandemic in small and medium-sized service startups. This data provides areas and themes for future research in the sector. In addition, the study proposes a synthesis of managers’ experiences in relation to the best practices carried out in their companies and their relationship with decision-making.

Keywords:

• New normal
• changes
• best practices
• startups
• Brazil

Reviewing editor:

• Eric Liguori, Florida State University, United States

SUBJECT:

• Entrepreneurship and Small Business Management
• Marketing
• Strategic
• Management
• Business
• Management and Accounting

1. Introduction

Brazil is the leader in the ranking of Latin American countries with the largest number of startups (Startupi, 2023). The country occupies this position due to the 62.9% representation of these companies, which corresponds to approximately 12,040 ventures, followed by Mexico (11.7%), Argentina (7.1%), Colombia (6.2%) and Chile (5.1%) (Cortex Intelligence, 2023; Startupi, 2023).

The report presented at the Startup Summit (2023) shows the Southeast region of Brazil as the leader in terms of the number of these companies, with around 3,509 of them, followed by the South with 2,209. Over the last ten years, more than seven thousand startups have been opened in Brazil and most of them are micro-enterprises, corresponding to 45% of the total with up to three employees, and those with between four and 50 employees represent 31% (Cortex Intelligence, 2023).

This data is corroborated by the number of small businesses in the country: the Southeast region has the three Brazilian states with the highest number of small businesses in the country, accounting for 48.5% of these enterprises. Uberlandia, a countryside city located in Southeast region, is among the 20 municipalities that stand out in terms of the concentration of small businesses. According to the Brazilian Statistics Institute [Instituto Brasileiro de Geografia e Estatística] (IBGE. Brazilian Statistics Institute, 2021), Uberlandia is the 29th most populous city in Brazil, and the second largest in Minas Gerais state, with an estimated population of over 706,000 inhabitants.

The Brazilian Support Service for Micro and Small Enterprises [Serviço Brasileiro de Apoio às Micro e Pequenas Empresas – Sebrae] points out that 74% of businesses felt that the pandemic negatively affected their monthly turnover, with companies in the Southeast being the most affected, with an estimated 38% drop in turnover (Sebrae. Serviço Brasileiro de Apoio às Micro e Pequenas Empresas [Brazilian Support Service for Micro and Small Enterprises], 2020).

Fear of failure is considered a widespread problem for new business creation, according to the Global Entrepreneurship Monitor (2023), especially after the COVID-19 pandemic when there was a need to adapt to the ‘new normal’. In 37 of the 49 countries participating in the report, more than 40% of respondents agree that good local opportunities to start a new business have been discouraged by fear of failure. The report states that finding ways to overcome this fear, for example by reducing costs, could be a solution to stimulating the opening of new companies and startups in many economies (Global Entrepreneurship Monitor, 2023).

The services sector accounts for 38.5% of Brazilian micro-enterprises and 33% of small businesses, ranking second in Brazil in both cases (IBGE. Brazilian Statistics Institute, 2020). In the case of Startups, among the economic segments, the ones with the largest number of companies in this model are Information Technology (IT) and services.

The services sector accounts for more than 70% of Brazil’s GDP, which fell by 1.6% in the first quarter of 2020, after being affected by the start of the COVID-19 pandemic and social distancing (IBGE. Brazilian Statistics Institute, 2020).

According to Miles (2008), the term ‘service’ is used for several different definitions, which makes discussions about service activities often confusing. The author emphasizes that intangibility and interactivity are inherent to service products (Miles, 2008). Grönroos (2016) strengthens this assertion by claiming that the word ‘service’ has different meanings, from personal service to service as a product or offer and is therefore a complicated phenomenon. Authors in general note that many definitions found in the literature consider the variables ‘intangibility’ and ‘simultaneous consumption’ to characterize the provision of services (Fitzsimmons & Fitzsimmons, 2011).

The research question of this study is: What were the changes and best practices adopted by small and medium-sized service startups during the COVID-19 pandemic crisis? Therefore, the general objective is to analyze whether there have been changes caused by the pandemic in small and medium-sized service startups located in Uberlândia city. The specific objectives were twofold: firstly, to verify whether there have been changes in the business structure and practical activities of early-stage service startups in the face of the economic crisis caused by the pandemic; and secondly, to identify and describe best practices of the companies studied in order to propose improvements and assist in the decision-making of other organizations.

In this sense, by identifying possible transformations and changes in service startups, the study aims to contribute to understanding the impact of disruptive global events on the business environment, especially in emerging companies. This contributes to providing insights into organizational resilience, adaptation strategies and innovations.

In addition, by seeking to understand the changes in business structure, as well as identifying the best practices experienced with the aim of proposing improvements and assisting in decision-making, the study also brings practical and strategic guidelines for other organizations facing similar challenges.

This study includes this introduction revealing the subject matter and the objectives of the research, then brings theoretical aspects that involve the subject studied, the methodology used to carry out the study, the presentation of the data and the discussion of the results, and finally, the final considerations of this study.

2. Literature review

2.1. Strategy, business models, stage of company growth and organizations impacts

For Chandler (1966), strategy is the act of planning, by defining long-term purposes and objectives; and executing, by applying the relevant procedures and conducts and distributing the capital employed. For the author, the combination of several simple strategies produces more complex structures. For Porter (2004), the combination of the objectives the company wishes to achieve - i.e. the ends - and the tactics or means used to achieve these goals is called competitive strategy. Competitive advantage is proposed by Porter (1989) as a characteristic of the company that differentiates itself from its competitors, allowing customers to prefer one organization to another.

When looking at organizational strategy in startups, its distinctive nature should be even more evident since these emerging companies have unique characteristics that require adapted approaches (Rocha et al., 2020).

We can consider uncertainty and high risks as a characteristic that influences the adoption of strategies in startups, since these companies operate in environments with significant risks of change and development of new products or services, entry into new competitive markets, adoption of innovative production approaches, among others. Another characteristic is the focus on disruptive innovations that could fundamentally alter market dynamics. In addition, it must be considered that startups generally operate with limited resources, whether in time, talent or financial capital, which makes them adopt lean methodologies and agile approaches, emphasizing iterative development and continuous learning for a rapid response to changes and efficient iteration of products and services (Araújo & Yamanaka, 2023; Sartori et al., 2022).

Chesbrough and Rosenbloom (2002) suggest that the initial business model resembles a portrait of the preliminary strategy, or an assumption, of how to make the customer perceive value in the company and is not a completely defined outline. The authors propose that the business model is related to the production of value for the consumer. It cannot be fully anticipated in advance, given the imprecision, whether technical or market-related, involved in the model. According to them, the model is the result of a process of continuous adaptation.

Teece (2010) integrates the concepts of business strategy, innovation management and economic theory to verify the relevance of business models. Corroborating Chesbrough and Rosenbloom (2002), the author suggests that the basic foundation of the business model is associated with the customers’ perception of value in relation to the company and the conversion of this into profit.

Like Teece (2010) and Chesbrough and Rosenbloom (2002), the model proposed by Osterwalder and Pigneur (2011), called the Business Model Canvas, is also directly related to understanding customer value. One of the sections of the model is dedicated to understanding and communicating how a company intends to deliver value to its customers. This section serves to capture the perception of value that customers will have in relation to the products or services offered. In addition to this section, the Business Model Canvas has other sections that seek to give structure and guidance to companies, whether new or already consolidated in the market, working on concepts such as partnerships and key resources, sales channels, market segments, cost structure, sources of revenue, among others.

The development of a successful business model alone is not enough to ensure competitive advantage since its processes and resources are generally reproducible. A company’s business model must be focused on managing the structures available to meet the specific desires of customers, and thus be able to generate revenue from those needs. In addition, the reproduction of the model by competitors must be made difficult, either because of its complexity or because it destabilizes relationships with customers and suppliers (Teece, 2010).

Contrary to Teece’s (2010) assumptions that reproducing business models is not feasible, Köche et al. (2023) analyzed how the business model of fintechs can be used to gain competitive advantage. The authors found that the main value propositions of fintechs are ease and transparency. They also identified the following as essential elements of the business model: the diversity of revenue sources; the role of people as one of the key resources; and partnerships with other startups and fintechs (Köche et al., 2023).

Magalhães et al. (2022) discuss fintechs developing financial services, explaining that the transfer of technology developed between fintechs and financial system agents in the Brazilian scenario requires open innovation environments, the co-creation of more sophisticated and innovative financial products and services, and the immersion of new entrepreneurial entrants in the development of these new products or services.

Cernev et al. (2021) describe the need to change the business strategy of a startup driven by the negative effects of the COVID-19 pandemic on the Brazilian education sector. Actions such as maintaining a complete CRM (customer relationship management) that covers all aspects of the customer present some disadvantages or challenges in maintaining the system’s offer, such as limited sales reach, difficulty in implementing a more robust system, high cost of ownership, among others. On the other hand, offering software services (SaaS) that prioritize the fractioning of services has advantages such as reaching new customers in unserved segments, speed in contracting, support in the self-service model, among others.

Koryak et al. (2015) explore the areas of consensus related to the substantive capabilities of growth, leadership, and dynamic capabilities. The evidence found by the authors suggests that company performance and growth are supported when organizations successfully carry out key processes such as innovation. The evidence suggests that leaders of small and medium-sized companies could assess their organization’s capabilities according to best practices and allocate resources to their development.

Scott and Bruce (1987) describe five stages of small business growth: start-up, survival, growth, expansion and maturity. The authors propose that anticipating the crisis points that precede the change of stage, and managing the changes successfully, ensures that the growth of small businesses is maintained.

Muhos et al. (2017) reviewed the literature on the growth stages of service-based companies. Through an overview of previous empirical models, the authors synthesized nine main themes: focus, power, structure, decision-making systems (decisions), strategic planning, service development and delivery (methods), marketing, human resources, and growth. These nine themes form the theoretical basis for this study. This theoretical framework offers a holistic view of the phenomena under analysis, helping to parameterize the findings.

Through a literature review, Muhos et al. (2010) identified that most studies on business growth models mention quantitative measures of growth, such as sales and the number of employees. For Artifon et al. (2020), entrepreneurial orientation is indispensable within organizations, especially when it comes to micro and small enterprises (MSEs). Thus, in order to gain a competitive advantage, company managers must attain and apply knowledge to generate growth opportunities and leverage new ideas (Artifon et al., 2020).

Considering the COVID-19 pandemic and the economic crisis generated by it, major impacts have been noticed on companies. Kuah (2023) highlights the importance of Small and Medium-sized Enterprises (SMEs) adjusting to global economic trends and the need to develop sustainable mechanisms to protect this sector of companies, considered to be the backbone of the economy. The study also highlights the impact of COVID-19 on the economy since the pandemic has resulted in a slowdown in SME growth due to global restrictions and a decrease in the demand for and supply of goods and services. It also links this to lockdown restrictions and social distancing (Kuah, 2023).

So, with the economic crisis experienced in recent years, mainly boosted by the pandemic from 2020 onwards, organizational environments have undergone major changes in the face of advances in technological innovation in industrial sectors. Observing this context, technology startups have been using increasingly technological and digital resources to deliver services and/or products with low or zero impact on the environment (Noronha et al., 2022).

According to Noronha et al. (2022), organizational agility modifies the positioning of managers and founders of technology startups, to amplify the scenario of diffusion of innovation and technology in the organization, reverberating in new positions in the market and modifying organizational structures. Kuah (2023) also presents the need to adapt, innovate and implement sustainable strategies to face global economic changes and future challenges.

McGee and Terry (2022) discuss the role of COVID-19 as an external facilitator for entrepreneurship, highlighting the interaction between entrepreneurial self-efficacy and entrepreneurial orientation and examining how these elements can explain why some companies manage to exploit challenging environmental changes. The study points out that entrepreneurial self-efficacy alone may be insufficient to mitigate the negative consequences perceived by the pandemic, and that adopting an entrepreneurial orientation is appropriate to face economic challenges and uncertainties.

The study by Sharma et al. (2022) also reflects the importance of rethinking existing assumptions and the need for new strategies in the field of entrepreneurship in the face of economic crises, such as the COVID-19 pandemic and the Russia and Ukraine war. For the authors, it is important to study the geopolitical, social and economic effects of natural disasters in order to determine new assumptions and identify new sources of research in the field.

Sharma et al. (2022) reflect that it is now important to propose and study post-crisis recovery in three phases: business recovery, the impact of the crisis and future changes. These three phases can occur at different times or even in parallel, as they are influenced by environmental and sectoral conditions. These findings, once again, corroborate the problem and objectives of this study by reaffirming the importance of understanding the impacts and future adaptations/modifications.

Like Sharma et al. (2022), Hölttä-Otto et al. (2023) also discuss the need for adaptations and changes in various areas, especially the development of new products, in a scenario of extreme uncertainty such as the beginning of the COVID-19 pandemic.

Hölttä-Otto et al. (2023) portray something important that should be considered among the research in the field, that some companies, even belonging to the same sector, had different reactions to the start of the pandemic, not following common or clear patterns. In general, it was observed that companies made significant adaptations to the level of innovation, development processes and obtaining resources, but that these adaptations were diverse and not uniform. This finding reinforces the importance and need for varied studies on the impacts caused by the crisis arising from the COVID-19 pandemic and for identifying the best practices adopted.

Therefore, it is possible to see what strategies, business models and organizational changes in companies, and especially in startup models, need to be observed in the face of new organizational trends.

2.2. Startups in Brazil, small businesses, and the studied region

According to Bardazzi (2020), startups can be described as innovative entrepreneurial activities driven by high-tech value solutions, capable of growing rapidly, and attracting capital investors in exchange for shares. According to Dornelas (2001), the spread of entrepreneurship in Brazil was strengthened by the movement to create ‘dot com’ companies in 1999 and 2000. This one-off event led to the emergence of Internet startups founded by young entrepreneurs and became known as the Internet bubble (Dornelas, 2001).

Despite already being widely used in the United States, the term startups only came into use in Brazil after the ‘internet bubble’ (Gitahy, 2016). Large companies can seek to diversify their innovation strategies by keeping updated with technological market trends through startup promotion programs. Companies at an early stage of growth act as a source of ideas, inspiration, and new business (Varrichio, 2016). Regarding the type of management tool most used by startups at the beginning of their activities, Alves and Duarte (2016) found that 76.1% of Brazilian startups use the Business Model Canvas, a model proposed by Osterwalder and Pigneur (2011).

The Business Model Canvas is presented as a visual tool consisting of nine main blocks, each presenting an essential component of a business model. These are: customer segments, value proposition, channels, customer relationships, revenue sources, key resources, key activities, key partnerships and cost structure (Osterwalder & Pigneur, 2011).

According to the Brazilian Startups Association (Abstartups, 2021), a startup is a company that is born from an agile and lean business model, capable of generating value for its client by solving a real problem in the real world. It offers a scalable solution for the market and, to do so, uses technology as its main tool’.

In terms of size, 45% of Brazilian startups are considered micro-enterprises, while 24% are small, 20% are medium-sized and 11% are large. According to the Brazilian General Law on Micro-enterprises and Small Businesses, a Micro-enterprise is one whose annual gross revenue does not exceed R$ 360,000.00 (three hundred and sixty thousand Brazilian reais) and a Small Business is one whose annual gross revenue varies between R$ 360,000.00 (three hundred and sixty thousand reais) and R$ 4,800,000.00 (four million, eight hundred thousand reais) (Brasil, 2006).

However, despite the important role of MSEs in a country’s economy, small businesses have fewer financial resources and greater difficulties in implementing sophisticated management processes (Barbosa & Santos, 2019). The management process is understood to include three major activities: planning, control, and aiding the decision-making process (Martins & Iudicibus, 2019). This process is important, as it is seen as a critical factor for companies to be successful in achieving their objectives, and the absence of this process is seen as one of the main causes of company mortality in Brazil (Sebrae. Serviço Brasileiro de Apoio às Micro e Pequenas Empresas [Brazilian Support Service for Micro and Small Enterprises], 2014, 2016).

According to Sebrae. Serviço Brasileiro de Apoio às Micro e Pequenas Empresas [Brazilian Support Service for Micro and Small Enterprises] (2020), the participation of MSEs in the Brazilian economy has grown over the last thirty years, which reinforces the findings of Almeida et al. (2016) on the importance of these companies to the national economy. In addition, it is important to note that these figures are maintained even in the face of the legal requirements for the business framework and the high rates of mortality or bankruptcy in the first few years (Freitas et al., 2022; Vannucci et al., 2023). Then it is possible to say that small businesses are a significant part of the national economy, representing a large percentage of the Gross Domestic Product (GDP).

Global Entrepreneurship Monitor (2023) reveals that entrepreneurs’ fear of their business not working out is one of the reasons that prevents them from trying. Although a high proportion of people believe that Brazil offers good opportunities and that entrepreneurs have the skills to create a new business, around 50% of them say that fear of failure prevents them from acting. Thus, studies that seek to bring people closer to their realities and expose successful alternatives and processes can have a positive impact on the growth of startups and small businesses.

Data Sebare (n.d.) reveals that, according to the Federal Revenue Service, in August 2023, there were around 22,840,335 establishments in Brazil, including headquarters and branches. Of these, around 20,644,577 are registered as MSEs. The Southeast is the region with the largest number of MSEs, with around 11,912,064 establishments. Minas Gerais is the second largest state in terms of the number of MSEs, with 2,220,023 companies, second only to São Paulo, which has 5,864,920 MSEs.

Regional development is relevant in several ways. Firstly, it brings economic development and improved income. Secondly, it is a source of innovation that can bring new technologies or ways of delivering products and services. Finally, regional development is one of the main ways of generating employment. The companies that contribute most to regional development on an ongoing basis are MSEs, with significant effects on job creation and innovation (Lima, 2020).

Empirical research on regional development is still limited in the literature, especially at the national level (Iglesias et al., 2021), but these studies have gained prominence, mainly due to the benefits they offer in various areas (Lima, 2020). França et al. (2012) stress the importance of understanding regional aspects in order to implement strategies that promote integrated development.

Santos et al. (2023) reinforce the importance of understanding the regional contexts of companies in order to boost their development. The authors classified startups located in Manaus, in the state of Amazonas, into four stages of development: from the beginning of the entrepreneurial journey, called Ideation, to the final stage, called Operation. The preliminary results revealed that the majority (85%) of the startups analyzed are concentrated in the first stage, indicating a predominance in the Ideation phase. These initial insights suggest the need for understanding and specific support for startups in the early stages of development.

The study by Silva et al. (2022) also points to the importance of knowing the variables that make up the startup ecosystem in São Luís, in the state of Maranhão (Brazil). The study identified that these business models have some characteristics: difficulty due to lack of investment; private initiative as the main incentive body; the use of software by monthly fee is the most used; there is no incentive to participate in acceleration programs, among others.

The agribusiness sector has experienced a significant pace of technological evolution. Silveira et al. (2023) point out that the emergence of AgTechs, technology companies that have emerged from agribusiness, have been essential in strengthening and expanding the transformation in the field of Brazilian agribusiness. The state of São Paulo stands out since the São Paulo ecosystem holds 26% of Brazilian AgTechs.

With this, it is possible to say that regionality has a direct impact on the performance of management processes (Borim-De-Souza et al., 2015). Kon (2009) investigates the role of service activities as a catalyst for socio-economic development, considering the regional effects of productive restructuring, which in turn manifest themselves through new forms of regionalization.

Among Latin American countries, Brazil is the leader in the number of startups, accounting for 62.9% of them in the entire region. According to Startupi (2023), Brazil has always been ahead of other markets in the region in terms of the number of active startups, followed by Mexico (11.7% of the total number of startups), and Argentina in third with 7.1% of the total.

In terms of Brazilian startups, Minas Gerais ranks third among Brazilian states in terms of the number of startups and Uberlândia is the second largest city with this enterprise kind, behind only the capital of Minas Gerais, Belo Horizonte (Diário do Comércio, 2022).

Uberlândia, considered an entrepreneurial and innovative city (Silvestre et al., 2022), has Uberhub, Startups and Innovation Ecosystem, which works as an incentive program bringing together the entire chain with companies, service providers, and public bodies to foster interaction between sectors and contribute to the growth and opening of new startups.

The business model here studied is service startups, specifically technology-based startups, which are at an early stage of growth, with fewer than 50 employees and less than 10 years of operations. For this reason, the next section deals a little more with service companies.

2.3. Service companies

In their review of the service production sector, Kutscher and Mark (1983) suggest that the sector is defined in three ways, from the broadest definition to the narrowest: the first definition proposes that the service sector is made up of all industries except those producing goods. A variation of this definition also excludes government activities at all levels (second one). The third one includes only private personal and commercial services (Kutscher & Mark, 1983). Grönroos (2016) points to three basic and moderately generic characteristics for services in general: (i) the service is made up of a sequence of activities; (ii) to some extent it is produced and consumed simultaneously; (iii) the customer is a co-producer in the production process. Corroborating these, for Fitzsimmons and Fitzsimmons (2011, p.26), ‘a service is a perishable, intangible experience developed for a consumer who plays the role of co-producer’.

Intangibility is related to the fact that even if services produce a physical element, they mostly promote transformations in the state of products, people, or data. It is these transformations and adaptations of the physical environment that make up the largest fraction of the product’s overall cost. Interactivity refers to the need for more intimate interaction between the customer and the service provider than is usual for mass-produced goods (Miles, 2008).

Muhos et al. (2017) defined the four initial stages of service companies as: Start-up, Take-off, Resource Maturity, and Diversification. The authors propose that by using the self-assessment framework, the special characteristics of growth in service industry sectors and in diverse cultural and geographical contexts can be analyzed. To establish such a framework, the authors proposed nine main themes for managing growth: Focus, Power, Structure, Decisions, Strategic Planning, Methods, Marketing, Human Resources, and Growth.

Thomas (1978) discusses the difference in the strategic management of service companies when compared to product companies, pointing out a still current difficulty in describing the service business. The author mentions as an example a speech by G. Lynn Shostack about banks, that usually have a ‘new product development’ department. Compared to product companies, the author points out how service companies can build entry barriers to competition through economies of scale, proprietary technology, service differentiation, cutting costs, value engineering, and diversification of the service provided.

If the seller is committed to adapting their product solution to meet the customer’s more detailed demands, any physical product can be converted into a service. A company can turn any good into a service for its customers by adopting a service logic (Grönroos, 2016).

Some recent definitions, which will be adopted in this research, include that the service generates value for the customer. As Lovelock and Patterson (2015) propose: (i) any act, performance, or experience that one party can offer to another, which is intangible in essence and does not result in the possession of something, but which creates value for the recipient is a service; (ii) services are resources (economic activities) that provide time, place, problem-solving or value in the recipient’s experience.

The service sector has been occupying more and more space in countries’ economies, justifying its relevance in scientific research. Lovelock and Patterson (2015) point out that in developed and developing countries, manufacturing continues to be replaced by service industries. The service sector accounts for 40% to 93% of countries’ GDP and 50% to 90% of the new jobs generated in many economies (Lovelock & Patterson, 2015).

In 2020, considering the accumulated value from January to December, the volume of services fell by 7.8% in Brazil, compared to the same period in the previous year. Figure 1 shows the historical series of the accumulated volume of services in Brazil, with the largest drop ever recorded since the beginning of the historical series in 2012. This drop may be related to the effects of the pandemic on the sector’s activities (IBGE. Brazilian Statistics Institute, 2020).

Figure 1. Services volume 2012 to 2020.

Source: IBGE. Brazilian Statistics Institute (2020) – Monthly Service Data.

Note: Accumulated variation in the year (same period of the previous year).

These values were exceeded in 2021, which saw a growth of 9.2% when compared to 2020, as shown in Figure 2 (IBGE. Brazilian Statistics Institute, 2021). IBGE experts believe that this post-pandemic upturn is linked to the fact that the services sector is heavily anchored in household consumption and dependent on economic growth (Agência de Notícias, 2023).

Figure 2. Services volume in 2021.

Source: IBGE. Brazilian Statistics Institute (2021) – Monthly Service Data.

Note: Accumulated variation per month comparing to thyye previous month and seasonal adjust.

In 2023, the services sector ended the first half of the year with an increase of 4.7% in its economic activity, according to the IBGE’s Monthly Services Data. The volume of services provided in the country reached a level 12.1% higher in June/2023 than in February/2020, the reference for pre-pandemic economic activity (Agência de Notícias, 2023).

Considering the potential of the service sector, it is interesting to understand how inter-organizational relationships can contribute to innovation in this sector. Motivations for engaging in a strategic alliance, partner selection, practices adopted for sharing complementary resources, including knowledge, collaboration and learning, have been identified as factors that favor the creation of an innovation environment with potential results for service companies (Sartori et al., 2022).

In the agri-food sector, information and communication technologies (ICT) are driving the generation of new companies, most of which are service start-ups. Mikhailov et al. (2022) identified that the phenomena of agricultural servitization, comprising the growing importance of services as a key input for agricultural production, and agricultural manufacturing, which deals with increasing control over production factors in agriculture, are factors that will help improve processes in these companies in the long term.

In the agri-food sector, these technologies are created by different generations of companies, most of which are startups. Thus, the use of ICT generates cost reduction and rapid decision-making in service startups as the most important benefits (Mikhailov et al., 2022).

3. Methodological aspects

This is a qualitative study, as it aims to study social interactions under real-world conditions, in which the phenomenon is described as experienced by the population (Yin, 2015). Qualitative research helps to explore the interaction between phenomena in different settings. In addition, it allows us to explore in depth the different circumstances in which the research problem is experienced (Ritchie et al., 2013).

As for the research objective, it can be classified as descriptive, since the general objective is to analyze whether there have been changes caused by the pandemic in small and medium-sized service startups located in Uberlândia city. As proposed by Gil (1989), the main objective of descriptive research is to highlight the attributes of a particular group or phenomenon, allowing relationships between variables to be established. A characteristic of this study is the standardized application of data collection techniques.

As a research procedure, a multiple case study was carried out in service companies at an early stage of growth in the city of Uberlandia. According to Yin (2001), this method can be applied when the objective of the study is linked to contemporary phenomena that are appropriate to the object of research, in a real-life context.

The case study technique can be used for single or multiple cases. The use of multiple cases ensures evidence in different contexts, allowing in-depth analysis and higher-quality research (Gil, 2002).

The criteria for including cases were micro or small service companies, based on Sebrae’s assessment (Sebrae. Serviço Brasileiro de Apoio às Micro e Pequenas Empresas [Brazilian Support Service for Micro and Small Enterprises], 2011) for the Trade and Services sectors located in Uberlandia, Minas Gerais State, with a focus on innovation and technology, and which are at an early stage of development, with less than ten years of operation. Companies that are not located in the city or whose main activity is not focused on services were excluded from this study, as were companies that are at an advanced stage of development and/or have been operating for more than ten years.

In multiple case studies, the number of cases is defined by gradually adding new cases to the analysis, until the increase in cases does not lead to a significant increase in the information collected, known as ‘theoretical saturation’ (Gil, 2002). Theoretical saturation is a parameter to define when to end data collection, as different cases are only analyzed until the incorporation of new ones does not add new observations (Bauer & Gaskell, 2017). According to Fontanella et al. (2011), the first interviews allow the interviewer to be calibrated, enabling them to gradually qualify their ability to explore the interviewees in order to reach theoretical saturation.

The technique used in this study to collect data is the structured interview. This interview model consists of pre-formulated questions (Richardson, 1999). The researcher must maintain scripted conduct and behavior, using a formal questionnaire with the questions, adopting similar behavior during all the interviews, and behaving like an interviewer (Yin, 2015).

The multiple case study was carried out in nine companies, which are shown in Table 1. The technique used to select and contact the companies was snowballing. In this sampling technique, the research begins with an initial sample of subjects, who act as intermediaries, in which the sampling is done through network connections: the intermediaries indicate the first wave, and this indicates the second wave (Heckathorn & Cameron, 2017).

Table 1. Summary of the studied cases.

	Activity	Business Description	Year of Foundation
E1	Corporate Finance	A platform for companies to automate accounting and reimbursement of employee expenses	2016
E2	Digital Transformation	Development of digital transformation projects for companies, in the open scope model	2019
E3	Educational	EdTech – company focused on education, oriented to continuous education for educational institutions and companies	2014
E4	Corporate Communication	Mobile engagement platform that develops personalized communication for companies	2016
E5	Psychology	Digital management service and system for psychologists and psychology clinics	2015
E6	Digital Media	Performance management platform for online media and digital channels for companies	2018
E7	Digital Transformation	Development of digital services for companies, such as web servers, front-end and back-end systems, and websites	2019
E8	Digital Traffic Management	Online traffic management of digital platforms for companies	2020
E9	Agribusiness	Data and equipment management platform for agribusiness companies	2015

Source: The authors.

The data collected was transcribed and examined using content analysis. As proposed by Bardin (2016), this technique can be divided into three phases: (1) pre-analysis, (2) exploration of the material and (3) treatment of the results, inference and interpretation. During the first phase we listened to the interviews, transcribed them and while doing so begin to identify some patterns in the material that had been collected. The second phase occurred after transcribing the interviews, reading all the material in its entirety and starting to group the data according to the themes we were addressing. Finally, during the third phase, after grouping the data, the categories were refined and defined.

Richardson (1999) points out three coinciding methodological characteristics of the various definitions of content analysis. Objectivity ensures that decisions made by the researcher are based on norms and not on the subjectivity of their analysis. Systematization implies the application of consistent and systematic rules for inserting or excluding content or categories from the text. Finally, inference is an intermediate procedure that allows a proposition to be accepted as true, given its relationship with other propositions already accepted as true.

During the phases of analysis and content categorization in this study, the definitions of objectivity, systematization and inference were used to categorize the results in a non-subjective way: similar words and synonyms were placed in the same categories, the whole content was planned, and in the case of more subjective parts in an interview, they were included in categories already well established by the other interviews, considering content proximity (Richardson, 1999).

In content analysis, it is necessary to think of objects or events as message units. Important standards for good measurement include reliability, validity, accuracy, and precision (Neuendorf, 2017). When analyzing the content during the second phase it was important to unite the information into units (categories) in order to reach the third phase.

This research was authorized by the Research Ethics Committee of the Federal University of Uberlândia (CAAE: 39072120.8.0000.5152). The interviewees signed an informed consent according to the ethics committee’s approval. Data gathered from the interviews are not publicly available due to restrictions to protect the privacy of research participants.

4. Data presentation and discussion of results

This section presents the data collected during the survey and discusses the results in order to meet the study’s specific objectives. Firstly, it highlights the changes in the structures of service startups, pointed out by the interviewees, caused by the COVID-19 pandemic. Secondly, it highlights best practices based on the theoretical framework proposed by Muhos et al. (2017).

4.1. Changes in business structure caused by the COVID-19 pandemic

At the beginning of 2020, Brazil and the world were affected by the COVID-19 pandemic. When seeking to detail in more depth how entrepreneurs were affected by the crisis caused by the Coronavirus, Ratten (2021) proposes that for companies to continue operating during a time of crisis, it may be necessary for them to make specific adjustments to their business. The author explains that, although entrepreneurs are naturally resilient, the magnitude and duration of the pandemic led to specific challenges. Companies must look for ways to take advantage of changes that can increase their overall efficiency and productivity.

Nassif et al. (2020) corroborate these ideas by proposing that businesses needed to adapt and look for ways to meet the new conditions imposed by the market in the face of changes in that context and changes in consumption patterns.

The influence of COVID-19 on company performance is related to the importance of adaptation, innovation and a favorable organizational structure to face external challenges, whether due to the need to develop sustainable mechanisms (Kuah, 2023), the interaction between entrepreneurial self-efficacy and entrepreneurial orientation (McGee & Terry, 2022), the implications of the pandemic and geopolitical events on entrepreneurial activities (Sharma et al., 2022), the need for adaptations in the development of products and services (Hölttä-Otto et al., 2023), among others.

Since the beginning of COVID-19 pandemic occurred about four years ago, what is considered recent for organizational impacts, we can say that the long-term repercussions on Brazilian companies are little known. Seeking to understand whether the business structure in the country was affected by the pandemic, excerpts from the interviews carried out were grouped by similarity. Seven categories were established and are presented below.

As proposed by Bardin (2016), we developed the content analysis into the stages of pre-analysis, exploration of the material and treatment of the results, inference and interpretation. The pre-analysis of the data took place simultaneously with the transcription of each of the interviews. After transcription, all the content was read in full, and the creation of possible categories for grouping the data began. Finally, after reading the material, the answers were grouped by similarity of content into categories.

It is important to note that the seven categories were identified on the basis of the questionnaire used and are shown in Table 2, in descending order of occurrence. The breakdown of the categories is presented at the end of this section. It is important to note that, as proposed by Fontanella et al. (2011), the number of occurrences does not matter per se. This criterion was used in this article exclusively to define the order in which the categories were presented.

Table 2. Categories of analysis defined based on the data collected.

	Categories	Number of Occurrences
1	Social Distancing	9
2	Customers	6
3	Market Focus	6
4	Culture	3
5	Costs Reduction	2
6	Digital Tools	2
7	Quality	1

Source: The authors.

4.1.1. Social Distancing

Social isolation was one of the major impacts on human relationships as one of the ways to contain the pandemic (Kuah, 2023). Many organizations needed to adapt to remote work, and this category – which appeared in all interviews – addresses changes felt in this new format by the interviewees (Hölttä-Otto et al., 2023).

What we want to change a little is the hybrid work. We left the in-person way to go 100% remote, and now we are going to take what is good about remote, what is good about face-to-face and try to combine the two. I think this is the main change, it will be more internal than external (E9).

From this statement we can see that – despite the largely negative aspects of a health crisis – the pandemic has also brought a new perspective to companies based on the needed adaptations; changes that probably would not have been observed so soon by the organizations otherwise (Hölttä-Otto et al., 2023). The idea of maintaining a semi-presential system is seen as a positive fruit of the pandemic for some companies and corroborates the idea of changes and adaptations proposed by Kuah (2023), focusing on survival and sustainability strategies.

In addition to adapting the face-to-face and remote work options, the points observed by companies during the interviews were:

1. The lack of close contact between leaders among themselves and with the team, making decision-making, team integration, and brainstorming difficult. The pandemic brought the need for distancing, which was considered a negative change as it impacted the quality of communication in human interaction (Hölttä-Otto et al., 2023). Some companies commented that they intend to resume the hybrid or in-person model as soon as the pandemic is under control:

One thing we do today, specifically, we avoid going to the office, we miss human interaction a little. Sometimes decision-making gets a little more bureaucratic (…) we’ll come back later. Not for 100% face-to-face, for the hybrid model where we can have a face-to-face meeting, if necessary, but everyone will have the freedom to work wherever they want (E1).

We were a company like that, every 15 days we had Happy Hour. We lost that, there are people I haven’t seen in a year. I think this was the most negative (E3).

Negative? The biggest difficulty is engaging people, especially at the beginning. Maintain concentration at home. I don’t believe in working from home. This remote work is really bad, actually (E4).

This reduces barriers, for example, in the development of a person who does not have as much knowledge. To answer a quick question, you don’t need to generate a call link, which will generate an internet program, which will turn into that business that would be resolved in five minutes if you had the same office and takes you half an hour, in the remote work scenario. So, it’s something that we might consider, thinking about people being more physically present (E8).

1. Adaptations to the physical space were mentioned by some companies. Some managers commented that they are temporarily without an office, as they are working entirely in a remote format:

We closed the office, and exactly at that time we were doubling the room, we had signed a rental contract for another room, to double the size of our room… and that came to a standstill. So, the changes were: everyone (…) went to work from home (E2).

We went 100% to remote work and we don’t intend to go back (E3).

We ended up closing the office. There’s still the physical space, but I’m not even going there anymore (E4).

We really enjoyed working this side online, but we are going to work a more hybrid model: some people work one day, in person, others work the other day, in person. So we also don’t have to invest so much in structure. At the company, we don’t need so much structure anymore, because most of it will be online (E5).

Not that we’re going to stop working from home, but I think we’re going to have a lot more contact. My partners and I, for example, have been there for over a year. It must have been a year and a half since we had almost no contact. And it is very likely that after the pandemic and everything else is over, we will have at least a much greater face-to-face interaction again (E6).

The need to adapt the physical space reflects the importance of the organizational structure and how it can impact the smooth running of the company (McGee & Terry, 2022). In addition, it has led companies to seek guidance to adapt to the restrictions and changes in the business environment (Kuah, 2023).

1. The need to study the market, and find materials and companies that were references on remote work:

We had to, first, do a study on remote work and then we used as a reference a company called GitLab, which is a company… if I’m not mistaken, it’s American, but it’s the largest remote company in the world (…). And then, I personally went to study, I saw the material… they released material like this because of the pandemic, both material

for employees and material for managers, managing remote work and so on (E2).

However, not all adaptations related to the physical distancing were considered negative. Some aspects were considered positive since it helped companies adapt to global economic changes and the need for more sustainable and reformulated mechanisms (Kuah, 2023). For example, remote working allows us to connect and partner with people who are physically far away and also to save or reuse resources needed to accommodate employees in-person at the company for other purposes.

1. The possibility of hiring team members outside of Uberlandia:

We started hiring people not only in Uberlandia, because before it was only Uberlandia, there were no remote work positions. We started hiring at a national level. This completely changed the profile of E2, like the positions we open today, we hardly hire anyone in Uberlândia… (E2).

Also, on the issue of remote work and such, bringing people into the world of work is extremely geographically unlimited. Today, for example, I can hire someone from Goiania. One of the boys who is in the final phase of the selection process is from Goiania and I don’t see any problem in hiring him. Obviously, it would be better to have someone in Uberlandia who, if you needed to have a personal conversation at a given moment, such as… sometimes coming to the office for more direct contact, it would be better to have that person here, but it is not a limitation. So, this is positive post-pandemic case. I can hire people from outside (E8).

1. Other benefits observed by the team:

The benefits matrix has changed, because now we have the benefit of helping people pay their energy bills, internet, things like that… (E2).

We used this money from the office [rent and basic bills] to hire management consultants that we didn’t do either (E3).

And the pandemic came and everyone started working online. So, we saw that we needed to have an online service tool within our own tool. So, we worked together with another company, creating our own service platform. And it was super valid (E5).

So, I think this will be a win. This issue of the hybrid work model. Because, like it or not, it had many advantages for the boys. There was an employee who stopped spending R$400.00 per month on gasoline to come to the office. Instead of coming, now he only wakes up close to starting time, gets in and is already at the company. This was a positive point and we intend to maintain it (E7).

4.1.2. Customers

This category addresses the impacts felt on customer-related businesses. It is possible to see that, depending on the market in which they operate, companies were impacted in different ways (Chesbrough & Rosenbloom, 2002; Kuah, 2023; Osterwalder & Pigneur, 2011; Teece, 2010). Some companies did not lose many customers, others lost them at the beginning of the pandemic and felt an increase in demand afterward.

I think what was positive was that we lost very few customers. We managed to deliver value even in this context, and we continued to generate cash, thus making the company sustainable (E3).

We were breaking all goals and records in 2020, the beginning of January and February. In March the pandemic came and we were very worried about all this. We had some cancellations that month (…), but with people’s increased isolation in the face of the pandemic, people began to suffer emotional damage and many people began to seek out psychologists. Then, the demand for psychologists started to increase a lot. And then, it ended up that we were positively impacted by this aspect, by the demand for people to manage patients better (E5).

Some interviewees also talked about attracting customers. Adapting sales to the digital format was necessary, but there was difficulty in accessing customers, who were initially cautious.

I don’t believe in the remote work. This remote work is really bad, actually (…) mainly, not being able to visit a company to sell is really bad (E4).

I think it’s a matter of limiting the growth of things (…), some big advertisers, especially companies that invest a lot of money in TV ads… We could talk to these companies, but most of them, we weren’t able to have much contact, due to the difficulties in relation to that moment. (…) Back in the beginning, especially, we had almost no contact at all, we couldn’t have contact with this public, because they were very closed. Everyone was unsure about what was going to happen, so we didn’t have much space to talk to anyone (E6).

We intend to maintain all forms of doing business digitally, and we are even accelerating it. We were forced to sell digitally and we liked it and it worked (E9).

As a way of overcoming these obstacles that customers can experience in the face of an increasingly online service, Teece (2010), Chesbrough and Rosenbloom (2002) and Osterwalder and Pigneur (2011) mention the need to identify the value that that product or service has for the customer and then work towards delivering it.

4.1.3. Market focus

Among the adaptations cited by the managers of the companies interviewed, the need to define (or redefine) the market focus was commented as one of the results of the pandemic. Considering that some markets were hit harder than others, companies needed to adapt their services, products and sales to specific markets (Hölttä-Otto et al., 2023; Kuah, 2023; McGee & Terry, 2022; Sharma et al., 2022). Furthermore, some companies also commented that, with the pandemic, the mistakes related to market focus that were being made became more evident.

Specify a little more markets, then… focus on markets that are performing better and expand the operations of our product, which at the beginning of the pandemic was 100% focused on corporate travel. (…) But if we look at the end result of this pandemic, of these two years of pandemic that we are going to face, diversifying the market saved us in the beginning but now if we don’t focus on the market, we won’t be able to get out of the place (E1).

The pandemic made it very evident that everything we had done back then was going wrong, and that we would not be able to grow… Mainly because the market, in a large part of what we were operating in, was more in the recession scenario (E6).

One thing we did, which I don’t regret, was to increase the price of all services provided to try to filter the customers we serve a little more. So, we went from serving 140 small customers (…) to serving end-of-month customers (…). So, in short, we tried to segment the customer niche (E7).

In addition to the adaptation needs related to the market focus, interviewees also noticed the growth in demand for companies with a digital focus.

Imagining if we existed three years ago, when there wasn’t a pandemic yet, I’m sure it wouldn’t be as easy to prospect customers as it is now, due to the pandemic that created a need in the market for the service we’re providing. So, it made it a lot easier for us (E8).

Because the producer became more digital, he looked for E9, more people found E9. Agriculture exploded with good things: the dollar rose, the commodity rose, the producer capitalized. The producer made a lot of money from customers, he capitalized a lot. He started looking, trying to innovate more (…). We, in fact, were one of the businesses that the pandemic helped to accelerate, we accelerated a lot (E9).

Another point related to the core objective of the business was the focus on the market and the diversification of services. With the pandemic, companies realized what their weak points were, and then they were able to re-evaluate their processes in search of something more focused on what they needed to offer.

So pivoting, changing the market, changing the value proposition, taking a few steps back so that we could then evolve was the best thing… it was a major point of change that was positive for us (E6).

4.1.4. Culture

This category addresses the impact of the pandemic on company culture. Respondents indicated that remote work presented difficulties in transmitting culture to the entire team.

I think it’s the difficulty of transmitting culture, and continuing to strengthen culture, I think that’s the negative point of remote work, but at the same time that this makes the issue of culture a little more difficult, it also creates a new culture for the company to be remote. And to advocate this remote way of life. So this also ends up strengthening you, you know?! Because today it is a concern for most professionals, who do not want to work in a company that cannot be remote (…) This creates a culture around this and I think it is very similar to us, it is very similar to who we are (E2).

I think what had the biggest impact was changes in the company’s culture and people’s daily lives. Now, the business itself, the impact was super positive (E9).

According to McGee and Terry (2022), the difficulty in transmitting culture and maintaining efficient communication can be reduced by adopting an entrepreneurial orientation (EO), since EO is appropriate for facing economic and cultural challenges in a scenario of uncertainty. Companies with an entrepreneurial orientation demonstrate greater flexibility to adapt to restrictions and changes in business environments (McGee & Terry, 2022).

4.1.5. Costs reduction

The reduction in company costs and reinvestment of money appeared as positive adaptations caused by the pandemic. With the reduction in costs, one of the interviewees mentioned that it was possible to invest in management consultancy, showing that even in challenging scenarios it is possible to invest in the company and in improving the team.

First, we canceled the office [rent] after a year and realized that no one on our team wanted to return to the office. Second, we went to the 100% digital model and we don’t intend to go back. We used this money from [renting] the office [space] to hire management consultants that we didn’t do either. So, these are the two big changes that have revolutionized our company (E3).

[Considering the new demands and the adaptations that were made, what I see as positive during the pandemic is] Cost reduction (E4).

Through the necessary cost reductions, the crisis has provided opportunities for companies to learn, experiment and innovate. These actions stem from responses to changes in the business environment (Sharma et al., 2022).

4.1.6. Digital Tools

This category presents the adjustments made to the company’s digital tools (Hölttä-Otto et al., 2023; Sharma et al., 2022). In addition to the need to change software capable of meeting the demands of remote work, some features of the old tools offered by companies are no longer useful or need to be adapted for the new market.

We started hiring people not only in Uberlandia because before it was only Uberlandia, there were no remote positions (…). This changed the software we used for communication. We left Slack and went to BaseCamp, which is software for remote communication… (E2).

So we saw that we needed to have an online service tool within our own tool. So we worked with another company to create our own customer service platform. And it was super worthwhile. The staff really liked it (E5).

I think it changed more in the technological structure, because, as I said, as we saw that our product didn’t work for anything, we needed to make a change in our product. Kind of leaving it aside and having to analyze how we could take parts of this technology and make the most out of it (E6).

Business models that incorporate disruptive and other emerging technologies have the potential to increase companies’ competitive advantage (Sharma et al., 2022). Flexibility and the ability to adapt to change are also important characteristics aimed at developing creative survival mechanisms for companies and building intercultural knowledge (Kuah, 2023).

4.1.7. Quality

This category addresses the quality of the final service (Hölttä-Otto et al., 2023). As adaptations made due to the pandemic, the interviewee mentioned that by defining market segmentation it was possible to focus on the quality of delivery and improve profitability in the business, even without increasing the number of customers.

Better delivery quality has brought us better profitability because the customers who value this are the customers who pay the best. And it also greatly reduced the number of small demands that consume a lot, demand a lot, but don’t bring much return (E7).

In short, it was possible to see that companies needed to adapt after the pandemic. The changes observed are related to the seven proposed categories: Social Distancing, Customers, Market Focus, Culture, Cost Reduction, Digital Tools and Quality.

These results show that small and medium-sized service startups in Uberlândia, Minas Gerais (Brazil), faced with the economic crisis experienced in 2020, needed to adapt strategically and in their business models, based on the seven categories pointed out. This discovery enhances competitive innovation and strategic partnerships, generates investment opportunities, promotes sectoral learning, regional development and benchmarking, and promotes understanding of the local market, fostering adaptations and strategic and organizational changes for companies in this sector and this region to evolve rapidly (Araújo & Yamanaka, 2023; Cernev et al., 2021; Köche et al, 2023; Magalhães et al., 2022; Sartori et al., 2022).

The Business Model Canvas, proposed by Osterwalder and Pigneur (2011), is also a tool that contributes to understanding the changes highlighted by the companies in this study. Table 3 explores this relationship.

Table 3. Categories found in the study x Categories from Osterwalder and Pigneur’s Business Model Canvas (Osterwalder & Pigneur, 2011).

Categories found in the study	Categories from Business Model Canvas	Relationship
Social Distancing	Relationship with customers/Channels	Lack of close contact between leaders and teams; Impact of communication and decision-making.
	Key resources	Adaptation of physical space, such as the decision to close offices/companies.
	Key partnerships	Hiring teams from outside the original location.
Customers	Customers’ segments	Adapting sales to the digital format; Need to attract customers.
	Channels	Difficulty in accessing customers due to social distancing; Change in communication channels for online sales.
Market Focus	Customer segment	Redefining market focus; Diversification of services.
	Value proposition	Adaptation of the value proposition for specific markets; Segmentation of the customer niche.
Culture	Relationship with customers	Changes in organizational culture due to remote working.
	Key resources/Channels	Difficulty in transmitting the culture and maintaining efficient communication.
Costs Reduction	Costs’ structure	Reducing costs; reinvesting capital.
	Revenue sources	Adaptation of the company following cost reductions can impact on revenue sources.
Digital Tools	Channels	Changes to the company’s digital tools.
	Key activities	Adaptation of the company’s digital tools.
Quality	Value proposition	Improved delivery quality; Focus on customers who value this quality.
	Customer segment	Decision to segment the public to improve profitability.

Source: The authors.

4.2. Best practices of the companies studied

The study by Muhos et al. (2017) was chosen to guide the best practices of the companies studied, as it reveals through a literature review nine main topics – focus, power, structure, decision-making systems (decisions), strategic planning, development and service delivery (methods), marketing, human resources, and growth – about the growth stages of service-based companies. These topics form the theoretical framework of this study, since they can be related as an analytical lens that investigates and interprets the best practices demonstrated by the nine companies studied.

Thus, based on the multiple case studies, it was possible to prepare a synthesis of the managers’ experiences regarding positive and negative critical incidents related to each of the topics covered. In this way, it is understood how the context of technology-based service startups in Uberlandia relates to the nine themes proposed by Muhos et al. (2017), as shown in Table 4.

Table 4. Best practices of the companies studied based on Muhos et al. (2017).

Topics proposed by Muhos et al. (2017)	Practices that companies intend to maintain
Business core objectives	- Market focus - Service Diversification - Customer Focus - Attracting Customers - Technology - Company’s Reputation - Structuring the areas - Owners
Ownership and power	- Structuring the Areas - Owners - Experience - Diversity of Opinions - Knowledge - Team
Organizational structure	- Remote Work - Hybrid Work - Structuring the areas - Diversity of Opinions - Knowledge - Team - Team Sizing - Experience - Culture
Decision-making systems	- Data-driven - Customer Focus - Methodology Employed - Owners - Knowledge
Strategic management	- Objectives Management - Methodology Employed - Knowledge - Company’s Reputation - Financial Resources
Service development and delivery	- Online Service - Service Diversification - Customer Focus - Knowledge - Methodology Employed - Team - Company’s Reputation - Culture
Marketing	- Attracting Customers - Data-driven - Knowledge - Backoffice - Team Sizing
Human resources	- Team - Benefits Grid - Structuring the Areas - Processes Maturity - Feedback - Diversity of Opinions - Experience - Team Sizing - Knowledge
Growth management	- Financial Resources - Data-driven - Team Sizing - Processes Maturity - Structuring the Areas - Technology - Backoffice

Source: the authors.

Table 4 reveals some important points regarding the practices that companies want to maintain even after the pandemic, revealing those that are considered the best ones.

It is possible to see that the managers of the companies studied identify customers as a central part of the focus of the service business. They consider having a clear purpose, creating new services or products that meet the real needs of the market, attracting customers to validate their proposal, having fluid and intuitive tools, and delivering quality in the services provided as positive points. All of these examples are related to customer experience.

We managed to deliver value [to customers] even in this context [of the pandemic and distancing], and we managed to… keep generating cash, so leaving the company sustainable. And I think the company is on a very clear path as to where it has to go… What it has to do…. So, I think this was very positive (E1).

Some companies understood that the hybrid format would be ideal for their business, as they would maintain processes and reduce costs, transforming companies into more sustainable and flexible environments (Kuah, 2023).

Not maintaining - hopefully this will change, but it depends a lot on who we sell to - face-to-face sales. It can be/will be online, yes, but I really believe that it has to be face-to-face as well. Especially for large accounts. I intend to go back to normal next year (E4).

As much as I want to go back to the office, I think we’ll keep the hybrid model, just on specific days (like Monday, Wednesday and Friday at home; Tuesday and Thursday we do it in the office), to brainstorm, to exchange ideas about the company, to see how the work is progressing (E7).

We’re going to continue with the hybrid system after the pandemic (E9).

The structuring of areas was cited as something positive in terms of power as it helps speed decision-making, defining areas of authority, and establishing which leadership takes care of each business structure. The exclusive dedication and presence of the partners (owners) in the business is important in the growth phase and was cited as positive in cases where partners were present. Another point is the experience of the team. Bringing in mature people from the market, with experience in other companies, facilitates business operations, making them suitable for leadership. This can be seen in the fact that the company has started to hire people who live elsewhere.

We started hiring people not just in Uberlândia, because before it was just Uberlândia, there were no remote positions. We started hiring nationwide. This has completely changed the profile of the [company], like the positions we have today, we hardly hire anyone from Uberlândia, like, hardly anyone from Uberlândia passes the process and beats people from outside, and today we hire people… like there are people even in Amazonas, Manaus, Rio Grande do Sul, Fortaleza (E2).

Today, for example, I can hire someone from Goiânia. One of the boys who is in the final stages of the selection process is from Goiânia and I don’t see any problem in hiring him (E8).

Still in relation to ownership and power, the cases studied revealed the need for diversity of opinions within the company so that decisions are not biased by the owner. One of the companies mentioned that it left the CEO position open, and another pointed out as a positive point the entry of new partners, who added knowledge to the business.

As I’m a founder and, of course, companies always look up to their founders, I always left the position of CEO open, right? So, I always wanted to have a CEO, so that I could focus a bit more on the product and… this, this change in leadership that I’ve always proposed, to have someone, new thoughts so that the company really had… new ideas, right?! So as not to be stuck with the eyes of the founder, right? (E5).

In terms of leadership, I see the arrival of new partners and the knowledge they’ve brought to me as positive (E7).

It was possible to note that the lack of feedback among leadership was a negative incident, as it can generate separation and misalignment. Likewise, a lack of process maturity can lead to uncertainty in decision-making.

I think the lack of feedback is an important point. As we didn’t have a clear objective, we gave feedback, but it wasn’t clear. So I think that was really bad… Sometimes people did what they thought was right, and not what needed to be done, you know? (E3).

As for the organizational structure, it was possible to predict that by actually creating the structure of the organization, defining the organizational chart and functions of each area, it was possible to reduce the team’s dependence on the owner, execute efficiently and divide tasks, decentralizing decision making.

We didn’t have a well-designed organizational chart and so on, and we’ve created it now and in 2021. So it was through mentoring, we did some mentoring to talk about organizational structure, organizational chart, career plan… (E2).

In relation to decision-making systems, data orientation was cited as a positive incident, as it allows for better substantiation of hypotheses and understanding of data, preventing companies from inferring the best decision to be made without adequate justification. Knowledge refers to the support network, such as other startups and market players; mentors and investments in courses and training; and inspiration from models used by large companies. Joint decision-making between partners appears as an alignment between them, showing that this method can be more efficient than a separation by areas of activity.

And we use the XX product, which is for programming and source code management, and then, I particularly went to study… I saw the material, they launched material like this because of the pandemic, both material for employees and material for managers, managing such remote work. It required investment in legal advice for us to understand the nuances of remote work, right? (E1).

We left YY and went to AA, which is software for remote communication… (E1).

Regarding strategic management, management by objectives points out that the definition of goals and their deployment for the entire team, and not just for senior management, demonstrates the importance of creating clear goals for team motivation.

It was a positive thing to be able to see more clearly, let’s talk, let’s have a bit clearer goals, so that we can achieve them and to motivate us as a whole, as a company (E5).

Related to the service development and delivery category, interviewees highlighted the importance of listening to the customer from pre-sales to post-sales, to understand their needs and deliver the appropriate solution.

These therapeutic resources, therapeutic games, which we’re working on launching. It’s all based on this scenario. So, we had excellent growth during the pandemic, really caused by this isolation (E5).

We saw that our product didn’t work for anything, so we had to make a change to our product. We kind of put it aside and had to analyze how we could take parts of this technology and make use of it (E6).

The focus on the customer also led to the adoption of practices that enhanced the service provided. Quality in the delivery and development of products and services was seen as an advantage for organizations.

The better quality of delivery has brought us better profitability, because the customers who value this are the customers who pay better. And it has also greatly reduced the number of small demands that consume a lot, wear a lot, but don’t bring much return (E7).

Therefore, constant feedback and proximity to customers were aspects presented as positive. The absence of structured satisfaction and after-sales research were highlighted as negative incidents for business growth.

We could see from the feedback from users that we really needed to invest more in the product. So, the years went by, improving the tool, making strategic partnerships within the company, and always reinvesting in the company (E5).

The study of validated methodologies, through reading books and articles, market references, and case studies of other companies were considered valid experiences. Thus, studying the methodology employed contributes to the team’s gaining experience.

As for marketing, attracting customers explores the importance of referral: a company that uses the service, likes it, and ends up recommending it to other companies; active prospecting for new customers; participation in fairs and events; optimization of search engines on websites, and qualification of digital marketing; direct contact and exchange with customers; and finally, starting activities in an environment conducive to making sales.

Today, the marketing that exists at E2 is referral marketing. It’s a client who is already a client and who refers us, or our investor who refers us. We are interested in investing in marketing, but we don’t yet have the cash or the priority to do so (E2).

We’ve done very little marketing, very little. Our marketing is word of mouth. It’s our customers who really like it and go out and do it. (…) But marketing-wise we really like the PLG approach, which is Product-led Growth, the guy goes out there, uses the product and really likes it and it becomes a network effect of good referrals (E9).

The constant updating of the company’s processes and the use of specific tools for managing human resources were indicated as positive incidents for the business. The structuring of the Human Resources department, through the creation of talent recruitment and selection processes and the creation of monthly feedback processes and collection from the team, were important actions to strengthen the area.

It was certainly a matter of building a hiring process, which must already be in the fourth version of updating the process. So, this work of organizing both the retention of human resources and hiring them, the people… I think it was crucial in setting up the process. So for hiring, today there is a structured process (E2).

Finally, regarding growth management, financial resources, and data orientation were the most positive points. Respondents indicated that adequate management of the investments raised; maintaining part of the company’s revenue as a cash reserve; and the low cost of existence are positive incidents for growth. Regarding data orientation, the recording of all company transactions, greater traceability of expenses, and strict control of expenses were the most mentioned ones by interviewees.

The lack of a well-defined Business Plan meant that we made several decisions and took several positions that weren’t in line with our objective, but we couldn’t even assimilate that. It wasn’t clear (E2).

Growth management, we were going in the wrong direction (…). We were going in one direction, and then there were times when we were back in the same place. I was trying to think of a growth strategy, to be able to grow, but every time I lost focus, and went back to where we were. I think there was a lack of objectivity and planning. We knew where we wanted to go. I think it’s a point that is very complicated for the company to define, but it really is something that we failed in this management, in this strategy, in this growth (E5).

The graphical representation of Table 4 is shown in Figure 3.

Figure 3. Best practices of the companies studied based on the nine thematic management topics proposed by Muhos et al. (2017).

Source: the authors.

Figure 3 shows the nine themes proposed by Muhos et al. (2017). They are arranged in circles with colors determined as follows: Central customer objective (yellow); Ownership and power (green); Organizational structure (pink); Decision-making systems (purple); Strategic management (brown); Service development and delivery (grey); Marketing (red); Human resources (orange) and Growth management (blue).

From each of these we have the links to the practices we found and discussed in this study. The practices that are in squares without color tones are those that were only linked to the highlighted theme. They are: Market focus (Business core objective); Hybrid Work (Organizational structure); Remote work (Organizational structure); Objectives management (Strategic Management); Online services (Service development and delivery); Feedback (Human resources) and Benefits grid (Human resources).

On the other hand, those that are presented in multiple themes are identified in circles with no color tone and dashed lines. These are Technology; Service diversification; Financial resources; Focus on customer; Company’s reputation; Data driven; Owners; Methodology employed; Backoffice; Knowledge; Structuring the areas; Attracting customers; Processes maturity; Experience; Team Sizing; Culture; Team and Diversity of opinions.

Table 2 and Figure 3 present the detailed findings of the study based on the proposed theoretical framework. While the conceptual framework provided parameters for the study, it made a theoretical contribution to the field by seeking to fill gaps and offer new perspectives for studies in the area.

5. Conclusions

This study aimed to answer the following research question: What were the changes and best practices adopted by small and medium-sized service startups during the COVID-19 pandemic crisis? The first specific objective was to verify whether there were changes in the business structure and practical activities of early-stage service startups in the face of the economic crisis caused by the pandemic. This objective was met as it was possible to identify seven categories relating to the changes caused by the pandemic in business: Social Distancing, Customers, Market Focus, Culture, Cost Reduction, Digital Tools, and Quality.

Furthermore, the COVID-19 pandemic is still a reality in the world, and Brazilian companies need to adapt to the changes it caused. As pointed out by some authors (Hölttä-Otto et al., 2023; Kuah, 2023; Noronha et al., 2022; Sharma et al., 2022), the study of the impacts of the pandemic on companies still needs research, since the consequences of this scenario are still felt by different companies and in different ways, even if they belong to the same sector. Therefore, the seven categories proposed in this study can serve as support for managers of organizations with the profile studied.

The second specific objective was to identify and describe best practices of the companies studied in order to propose improvements and assist in the decision-making of other organizations. It was also met as we identified several practices considered positive and important for the growth of companies across the nine thematic management topics proposed by Muhos et al. (2017): Core Business Objective, Ownership and Power, Organizational Structure, Decision-Making Systems, Strategic Management, Service Development and Delivery, Marketing, Human Resources, and Growth Management.

Thus, the objective was also met and the research question was answered, having identified the seven categories relating to the changes caused by the pandemic in the companies studied, as well as best practices aimed at proposing improvements and assisting in decision-making in other organizations. Based on the multiple case study, it was also possible to learn about the reality and experiences of the managers of nine Micro and Small companies, using the technology-based Startup model, based in the city of Uberlandia, in Minas Gerais.

Therefore, the value contribution proposed by this study is evidenced to the extent and in the light of other studies (Cernev et al., 2021; Köche et al., 2023; Magalhães et al., 2022) by showing that companies with the same characteristics in the region can use the model to assess their stage of growth and prepare for the challenges that will arise in the next stages.

Thus, companies that have the same characteristics in the region can use the model to assess their stage of growth and prepare for the challenges that will arise in the next stages. Managers of companies from other regions and with different characteristics can also use the model as a basis, taking into account that some of the points may not be fully applicable to their realities.

As it is a multiple case study, it has limitations, as the results presented cannot be generalized, as they only reflect the reality of the organizations studied. Another limitation refers to the geographical issue, in which the companies studied only reflect the results from Uberlandia and cannot be extrapolated to the whole of Brazil without further consideration.

As a suggestion for future research, it is recommended that the study is applied in service companies with different models, and not just in startups, to check whether new categories can be identified, or whether the results found here can be generalized to the service sector. Furthermore, drawing comparative research on traditional versus technological companies, family businesses, and other regions of the country can add to the literature on micro and small companies in the service sector in Brazil and help understand the scenario more broadly.

Authors’ contributions

All authors made substantial contributions to the conception and design of the work (authors 3 and 4) or the acquisition (author 1), analysis (authors 1 and 2), and interpretation of data for the work (all authors); and drafting the work (authors 1 and 2) or reviewing it critically (authors 3 and 4). All authors approve this final version and agree to be accountable for all aspects of the work.

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

The data that support the findings of this study are available upon reasonable request from the corresponding author. The data are not publicly available due to restrictions to protect the privacy of research participants.

Additional information

Funding

The open access publication of this study was supported by Coordenação de Aperfeiçoamento de Pessoal de Nível Superior – CAPES.

Notes on contributors

Laura de Amorim Lana Dib

Laura de Amorim Lana Dib holds a Master’s degree in Organizational Management from the Federal University of Uberlândia (UFU). She has a degree in Biomedical Engineering, also from UFU. She is currently a business coordinator at a shopping mall in Brazil, working on strategic planning and performance of operations, as well as managing people in the commercial and financial areas of the company. She deals daily with large and small entrepreneurs, whether they are local, franchisees or large retail brands of national and international products and services. She is interested in retail and the growth strategies adopted by entrepreneurs.

Juliane Silvestre

Juliane Silvestre is a PhD candidate and holds a Master’s degree in Business and Management from the Federal University of Uberlândia (UFU). She has a Bachelor degree in Business, also from UFU. She is currently developing her Dissertation focusing on Sales Analysis and Development of a Sales Maturity Model for Micro and Small Companies. Her main research interests are related to entrepreneurship, marketing, micro, small and medium organizations.

Vérica Freitas

Vérica Freitas is an Associate Professor at the Federal University of Uberlândia (UFU), coordinating two research groups and the lab maker Espaço 4.0 – UFU. She received her PhD in Science from the Engineering School at Sao Paulo University (USP), Brazil, she also has a Master’s degree in Production Engineering from São Carlos Federal University (UFSCar), Brazil, and a Bachelor in Food Engineering from São Paulo State University (Unesp), Brazil. Her research is focused on Digital Transformation, Supply Chain Management - including Sustainable Innovation and Due Diligence, Operations Excellence, and Women in STEM. She supervises undergrad and grad students, and applied research is one of the key points of her work. Besides research, she is involved in establishing new outreach projects approaching Universities, companies, and the community.

Verônica Angélica Freitas de Paula

Verônica Angélica Freitas de Paula is an Associate Professor at the Federal University of Uberlândia (UFU). Ph.D. in Production Engineering from UFSCar, Master’s in Business from FEA/USP, Bachelor in Business from FEARP/USP, and Law from UNAERP. Professor of the Graduate Programs in Business Administration and Organizational Management at UFU, supervising Masters and Doctorate candidates in topics related to Branding, Innovation, and Supply Chain Management, and Coordinator of the School of Business and Management’s International Office. Her main research interests are related to Marketing, Brands, Retail, Innovation, Channels and Supply Chain Management.