The ongoing Coronavirus pandemic will no doubt leave a lasting impact on the business sector. It is a fair assumption that most businesses will struggle; some will fail. An important lesson from the Great Recession of 2007-2009 is the difference between the companies that failed and the ones that survived are – the levels of diversification adopted by the company.
A classic example is Amazon. During the 2000 recession, Amazon emerged a winner and it was the diversity of Amazon’s business portfolio that helped the company massively. It’s no secret that Amazon has a diverse business portfolio – the retail giant leads e-commerce, digital media, cloud computing, and many other sectors. This diverse investment portfolio became meaningful during the downturn because the losses of one sector were off-set by their strong performance in another, and this allowed them to float by during the recessionary times. Their original ideas and most importantly, the willingness to experiment is what took them over the line and in a lot of ways have made them the grand success that we know today. For example, Amazon took a gamble in the brand-new industry of cloud computing and hosting services in the form of AWS (Amazon Web Services) which today is one of the biggest earners of the brand. Spoiler alert: Amazon’s greatest business hit wasn’t Amazon Prime or its Fulfillment centers. To date, it’s AWS – a B2B cloud service started during the last recession.
In order to survive and thrive in a progressively more volatile market, companies have to continuously evolve. When there is a recession on the horizon, it is an understandable response of the business if they try to aim at capitalizing on their short-term profits by cutting variable expenditure, such as R&D expenses. However, if history is to be trusted then in the upcoming downturns cutting complete costs on developing new business avenues is a high-strategy.
Read more in our recent BCA White Paper – Winning after COVID