In Times of Crisis, Good Companies Try to Survive, the Best Ones Innovate More Than Ever.
Amazon, Ford, and Maersk are perfect examples from the past.
Runaway inflation, the war in Ukraine, tensions with China, disrupted supply chains, and a likely recession... There is no shortage of economic challenges for businesses around the world in the months and years ahead.
Faced with these disruptions, companies must be cautious to maximize their efficiency. Focusing solely on cost reduction is often necessary for the short term but can be detrimental in the long term, especially if it slows down the ability to innovate.
Lessons from past crises
A look at previous crises can be instructive. When the dot-com bubble burst in the early 2000s, the Nasdaq fell 78% and many startups went bankrupt. However, some of the iconic technology companies of our time not only survived but also thrived after these trials.
For example, Amazon's revenue nearly doubled between the first quarter of 2000 and the fourth quarter of 2001. The recession was a watershed moment for the company, which began in the 1990s as an online bookseller.
In late 2000, six months after the crisis began, it launched Amazon Marketplace, allowing third-party sellers access to its website. Amazon had to make heavy investments, causing investors to doubt the company and a significant drop in its stock price in the short term. Yet the company was rewarded with exponential success as it emerged from the crisis.
While Amazon's story is impressive, other companies have preferred defensive actions in the face of a difficult environment and have paid the price. Once the undisputed world leader in cell phones, Nokia faced a new threat in 2007 when Apple launched the iPhone on the eve of the 2008 financial crisis.
Instead of investing in the development of a new, more innovative operating system, Nokia's management opted for the cheaper option: launching new devices based on its existing system to meet short-term market demands.
A strategy that contributed, among other things, to the sharp decline of the company.
Doing more with less
Over the past 20 years, much has changed in the world of technology. The proliferation of APIs and SaaS tools has dramatically reduced the operational burden on companies. Large strategic projects can now be conducted with low fixed costs over the long term. Building a marketplace, for example, no longer requires months or even years of software development because it can be done directly by connecting services via APIs.
Yet the interaction of current software can become complex. During an economic downturn, every company should review its technology infrastructure and SaaS providers to identify areas where it can reduce costs while maintaining velocity and adaptability.
Total cost of ownership (TCO) calculations can provide a clear picture of the true costs of an investment and the long-term consequences of choosing one vendor over another. In the payments industry, the immediate costs of implementing and configuring software do not provide a complete picture, nor do the costs of ongoing transactions.
For example, the cost of mobilizing developers to integrate or maintain non-strategic tools rather than drive innovative projects must be considered. Similarly, the flexibility of a tool or solution should be assessed if the context or priorities change. In addition to calculating the total cost of ownership, a total economic impact (TEI) analysis can also be useful. It looks at costs as investments and examines their potential return.
Continue to innovate no matter what to come out on top
Century-old companies such as the car manufacturer Ford or the shipping company Maersk have had to deal with many economic crises, including the Great Depression of the last century.
Time and time again, staying innovative was the only way for them to come out of a downturn on the right side of history: Ford invented the assembly line in 1914, and more than a century later, the company is among the first automakers to think holistically about their customers' digital checkout experience inside or outside the cabin. Maersk, which has evolved with the shipping industry, has gone through multiple crises over the past century. Today, it offers a fully digital logistics platform to its customers.
For a long time, traditional companies have tried to learn from the success of technology companies and use it to adapt to the digital world themselves. In today's economic climate, it might be a good idea to reverse that knowledge transfer for once: tech startups can learn a lot from their elders in terms of adaptability, innovation, and resilience.
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