Black swan is a test of adaptability. You heard it. We are living through the biggest global crisis since 1945. It will set the tone for the years to come. And maybe even decades. Some say that the crisis may lead to a new way of economic thinking. It most probably will. And to new (or enhanced) and more flexible business models.
The word of this crisis (and any crisis in fact)—whether for us citizens who have to abide by the rules and restrictions of our governments or for the companies and businesses in our local and international environments—is adaptability.
And who can adapt best? The businesses that are flexible. We have entered a work-at-home economy, which favors companies that can come up with solutions no matter if the life moved out from offices to our dining tables and living rooms.
We are noticing uniquely innovative and collaborative actions, with many businesses shifting their modus operandi to adapt to the market demands. This black swan event definitely favors businesses that possess strong organizational agility and alignment. And above all, online players clearly have top leverage right now.
In the diagram below, we have included a few examples of local companies (MENA) next to their sectors.
Disclosure: Some of the companies belonging to the high-risk zone of the diagram might not really be affected negatively if they are able to adapt.
We placed the restaurants delivery platforms into the low-to-medium risk zone. These companies would be expected to do great right now, but the curfew that is set by some governments puts a restriction on when the orders can be made. Customers may also think twice of the extra expenses (cooking at home may be cheaper), and the issue of hygiene during food preparation could also be of concern given the pandemic.
Why is ride-hailing at medium risk? Passenger rides are down (for example, they equal 0 in Kuwait). However, if the business model is flexible, the companies can wait things out. Plus, IntiGo (Tunis) is now providing grocery delivery and concierge services, and Lyft and Uber are also considering the same and medical supply.
Essential ecommerce at medium risk while non-essential ecommerce is at high risk because the consumer choices have been primarily redirected to necessities like staple goods. Yet shopping for home gym equipment, books, toys, and games may make a good impact.
We also think that social media may be a little squeezed due to the decline in advertising spending. Though the current user’s usage is massive.
On the contrary, communication & teleconferencing tools (vs. in-class teaching, office meetings etc.) are booming. WFH is safe and it reduces employers’ costs. Many Gulf countries lifted bans on Zoom, Skype for Business, Microsoft Teams and others. Slack shares jumped up by 26% this year, while Microsoft Teams’ DAUs reached 44 million (vs. 20 million in November). And despite the rising demand, Zoom’s call quality has not degraded.
As we are now embracing e-baskets over regular trolleys, online grocery delivery platforms face a doubled or tripled surge in online orders. Additional onboarding of thousands of shoppers and support staff is a new trend as well as safer and contactless delivery procedures. The increase in demand is unprecedented yet definitely a “good” problem to have right now.
And we cannot forget the crucial role of online streaming platforms – movies, series and podcasts alike – that are giving us and our kids a huge helping hand during these quarantine and self-isolation times. In fact, there is so much streaming that the providers had to reduce the quality to SD (primarily in Europe) and ask people to be more data-spending conscious. By the way, Disney+ launched in Europe in the best time possible!
Although this unprecedented growth of new customers and service users may cease once the crisis is behind us, we believe that it will ultimately change certain consumer habits. Just notice the growth of the online grocery stores: many of them gained the trust of their customers only thanks to COVID-19. And that trust won’t be temporary.
Is this the new normal? Will we see more online conferences, bigger online grocery orders and cloud kitchens rivaling the conventional cooking outlets? (Hopefully; we have recently made investment in one cloud kitchen startup.)
The truth is, many of us desire to have 24/7 goods and services, and the crisis has only pointed out that our day-to-day actions and transactions do not necessarily require in-person, physical presence.
This article was first published as Arzan VC’s April newsletter and has been reproduced here with their permission. The views expressed in this article are those of the author.