The world seems a lot different today than just 30 days ago.
Global markets have taken a massive plunge, schools have shut down globally, shopping malls have closed, the NBA has suspended its season, the Tokyo Olympics have been moved 2021, almost everybody who can manage it is working from home (that’s if they haven’t been let go), and public gatherings have been outlawed — it’s like nothing we’ve seen since perhaps World War 2.
I spoke business survival strategies with Steve Blank for an episode of the Future Squared podcast today. In response to the crisis, he urged leaders to first take stock of their runway, then ask themselves if this crisis is a three-month, one-year, or three-year problem, and adapt accordingly.
The shorter the runway and/or the longer the problem, the more drastic the action that leaders need to take.
Value networks around the world have been disrupted. As a result, previously true assumptions underpinning business models— say, customer appetite and ability to pay — might now be false.
One should not make the mistake of assuming that what was true 30 days ago is still true today.
A Longterm Problem Looks Likely
Even if we successfully flatten the curve in the next few months, and the number of new COVID19 cases grinds to a halt, it is unlikely that the economy will bounce back overnight.
Mass layoffs — such as the standing down of two-thirds of Qantas’ staff — will result in unemployment numbers skyrocketing, with some pundits projecting unemployment in the US will surpass 20% — something we’ve not seen since the Great Depression. If this eventuates, it’s likely to create a ripple effect on supply and demand that we won’t bounce back from in a hurry, and will send economies into recession.
In the United States, the average recession has historically lasted 22 months.
Given all of this — it’s not a stretch to conclude that we’re dealing with a longterm problem — a much longer one than many leaders had hoped for just a few short weeks ago.
The Emergence of New Markets
Given the emerging long-term nature of the problem, in order to survive the crisis businesses might require an entirely new business model — preferably one that makes the best use of existing current resources; people, intellectual property, systems and technology, or capital.
However, while it might seem like nothing but doom and gloom for many companies, the crisis has created not just losers, but also winners and new business model opportunities — should we look for them.
In his landmark theory of disruption, the late Clayton Christensen found that :
- disruptors either come in at the bottom of the market before moving upmarket and attacking large incumbents (think discount retailers moving upmarket to disrupt traditional retailers); or
- disruptors create new markets where they take hold in a completely new value network and appeal to customers who have previously gone without the product.
For example, mobile games not only appealed to existing gamers when they made their debut, but also tapped into a massive new market in women who had largely ignored video-game consoles. In fact, women were found to be a larger market than men when it came to mobile games in 2018.
And this is precisely what we’re seeing now — the emergence of new markets.
Zoom — one of the world’s leading video-conferencing platforms— is tapping into a new market of people who previously went without their product. This includes Gen-Xers and older who work for large organisations and had always optimised for face-to-face meetings before they were forced to work from home.
This, coupled with the fact that almost everybody ‘white-collar’ is now working from home has sent Zoom’s stocks soaring by 50% in the past 30 days alone.
It’s always darkest before the dawn
Oftentimes, when people go through a devastating life event — be it a cancer scare, or say a divorce —they look back on the experience and insist that they wouldn’t change anything. This is because it is in times of adversity that we are more likely to ask the big questions, answer them and make some profoundly positive changes in our lives.
COVID19 might just have the capacity to do the same for a lot of entrepreneurs, small businesses and startups who might need to ask the big questions themselves, only in this case, about their business models.
Where to from here?
If we’re looking to navigate new territories, it’s helpful to have something representing a map — a map that will empower leaders to identify new markets, and new business model opportunities.
I conducted the following non-exhaustive stocktake of short-term winners and losers below — a map of sorts. And when I say ‘losers’, I‘m’ strictly referring to their pre-COVID19 business models — they can become winners by adapting.