When we work with our portfolio, mapping out the likely next few years, we keep hearing the common refrain “nobody knows what’s going to happen” and, therefore, a “V” shaped recovery is as likely as a “U” or “L” shaped one.
We disagree.
We concede that getting to a final GDP forecast is challenging but there are strong clues: in Tech, CIO surveys are showing that new IT spend is frozen and that they are looking to make savings wherever possible; in manufacturing, hospitality and retail, companies lying idle, uneconomically burning through cash piles meant for investment; employers large and small making increasingly permanent headcount reductions, dramatically swelling the unemployment ranks; governments across the world taking on unprecedented levels of debt to shelter their economies. These were not the same economic conditions at the start of the “V”, and the world will take some time to get back to those highs.
One might claim our bullishness on the prospects of tech is myopic cheerleading for an industry that pays our wages. No. There is one thing that the crisis has accelerated that makes up for all the damage Covid-19 has done to the economy. And that is the acceleration of digitalisation. In the face of Covid, with our old lives upended, ships burned and forced westward, we have all become digital pioneers.
We define digitalisation very simply: where all business processes shift to being completely digital, with humans involved only where they add real value. At the simplest end, which I recently wrote about, my father-in-law discovering online food delivery and realising his trips to the supermarket were time-wasters, all the way to the cloud vendors providing on-demand computing and storage resources, digitally.
You may ask how much further down the digitalisation road do we all still have to travel. We have only taken the first few steps — a small brainstorm has led to a sample of analog market practices that offer massive opportunities that a startup with a little data, computing power and magic code might capture.
- In the Energy sector, we see the idiocy of an analog industry that pumps and ships oil that cannot be stored and is given away.
- In the $300bn Print sector, we see the wastefulness of corporations printing branded materials in bulk and airfreighting it all over the world; practices driven by last-century economics.
- In the Media industry, anachronistic content ‘windowing’ centred around the economics of now-empty cinemas (the Oscars have already blinked, allowing non-cinema films to be included).
- In the Airline sector, we see an industry dangerously anchored around the business flyer who is increasingly loving (and hating) the Zoom experience.
- In the Education sector, we see a historically conservative ‘desk’ or ‘bed’-limited industry that is discovering the power and scalability of e-learning.
- And most, most broadly we see global opaque supply chains, currently centred around cost and uniformity, now seeking resilience, innovation and speed.
This short list alone will result in endless opportunities for innovation. New entrepreneurs, perhaps recently laid-off employees, will establish new competitors to their former employers, industry by industry. And supporting this new future will be giant clouds of data, services and content that will require storage, management, analytics, transmission, security, payment, distribution, customer service, sales, marketing, insuring, and financing — ultimately creating the many future B2B tech titans that will drive our industry, economy and world forward.
