As I said before in this blog, COVID is shifting the power towards big business. For a while, many commentators said that when the next bear market hit, the FAAMNG companies would fall. However, that is not the case. It appears that COVID is exactly what they are built for and is prompting a dramatic reversal of fortune for the tech giants. Amazon and Facebook are viewed as essential services during a public in lockdown, and Google and Apple are building tools that will enable state health departments to trace the course of potential new COVID-19 infections.
-
Facebook. During a shutdown is providing connections between communities and people whether through Facebook or Whatsapp;
-
Amazon. Where would we be without Amazon? The company whose logistics is saving us.
-
Apple. Apple iPhones and iPads for communication and schooling. Apple TV for entertainment.
-
Microsoft. TEAMS and Office 365 for the displaced employees.
-
Netflix. When you are stuck at home, nothing better than to get caught up in Tiger Kings or Ozark.
-
Google. Well, Alphabet. With all of Alphabet’s portfolio of products from Hangouts, to Gmail, Google Docs, and search we have more options to work remotely.
Many of these companies are saying employees can work from home for a while, and maybe like Twitter indefinitely. However, they are still hiring like crazy, Facebook is seeking to hire 10,000 high-skilled workers this year. Amazon, leading the hiring spree of the tech giants, announcing more than 175,000 new, mostly low-wage jobs in warehouses and delivery. However, it is openly recruiting workers who have been laid off from other industries.
Over 400 start-ups have shed over 50,000 jobs since March 11. A recent survey by NFX of 400 investors and founders found over 50 percent of start-ups had initiated a hiring freeze or had lowered their value in the hopes of attracting new investment. Roy Bahat, head of Bloomberg Beta, said, “We’re telling the start-ups we invest in that the safest assumption is that the next time you can raise money again is never.”
With many start-ups collapsing due to lack of funds, the tech giants are expanding, hiring great displaced talent, buying or copying rivals, and eroding traditional industries. As many traditional companies disappear due to financial difficulties, tech companies will seek to take over their space. Eric Schmidt, Google’s former CEO recently said that the most powerful companies are able to bounce back far quicker than others. “When you have an industry leader, and something collapses, the industry leader, if it’s well-managed, tends to emerge stronger a year later,” he said. As a result, big tech is grabbing market share and with their large cash balances can outspend the competition.
According to Scott Galloway, “There are really two Americas right now. There is Big Tech and there is everyone else. They can do what very few companies can do, which is play offense in the middle of a pandemic.”
Since COVID all of these companies have outperformed the S&P 500 and considering they account for a large portion of the S&P 500 the performance is even greater.
Source: Yahoo Finance
As can be seen, only Facebook is below the beginning of the year share price.
Furthermore, COVID, to quote Isoroku Yamamoto, “has awoken a sleeping giant.” Jeff Bezos is back and energized! At the outset of his earnings call, Bezos warned shareholders they “may want to take a seat.” He has repeatedly snatched profits from the jaws of shareholders to reinvest in the firm. The investment had a theme: Covid-19. Specifically, Bezos outlined a vision for at-home COVID tests, plasma donors, PPE equipment, distancing, additional compensation, and protocols to adapt to a new world. Jeff Bezos is developing the earth’s first “vaccinated” supply chain. This effort builds on what he said in his letter to shareholders on April 27, 2020, where he warned of the size of failed experiments that are coming, which means Amazon is resting on its laurels, but pushing ahead into new markets and ventures.
Many small and medium-sized businesses are going to be roadkill as the FAAMNG companies expand through this time. Also, as I and others have noted before, the growing power of the FAAMNG companies is limiting the growth of, and investment in, many startups as investors will not bet on companies taking seeking to compete against them.
Copyright (c) 2020, Marc A. Borrelli
Recent Posts
Boosting Common Sense Decision-Making in Your Organization
Discover how to enhance decision-making in your organization by focusing on three crucial areas: solving the right problem, gathering all the available information, and understanding the intent. Learn to empower your team, foster a purpose-driven culture, and improve organizational clarity for better decision-making.
Do You Understand Your Costs to Ensure Profitability?
You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.
Sunk Costs Are Just That, Sunk!
If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.
Do You REALLY Know Your Business Model?
Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.
Ideation! Harder Than It Sounds
Bringing in new ideas, thoughts, understanding, and logic is key as your organization faces the challenges of a changing environment. But when you do an ideation session in your organization… how does it go? For so many organizations, many times, after a few ideas have been thrown out and rejected, the thought process slows down very quickly, and a form of hopelessness takes over. How does your organization have better ideation? I’ve come across a new approach with a few teams lately.
Recruit, Recruit, Recruit!
An uptick in business has begun this quarter, and companies are rushing to hire to meet this surge in demand. What amazes me is how many are so unprepared to hire. Continual recruiting is key to the survival of a company. It isn’t the same thing as hiring—continuous recruiting is building a pipeline of people that you would hire if you needed to fill a position, or “A players” you would hire if they were available.
We All Need Clarity
If your organization is focused on obscurity over clarity, whether intentionally or not, your “A” player employees are vulnerable. There is a looming talent crunch. As we start to emerge from COVID, demand is increasing, and many are scrambling to fill positions to meet that demand. Headhunters and recruiters are soon going to be calling your key “A” employees. Have you been giving them a reason to stay?
Not Another **** Meeting
As Leonard Bernstein put it so well, “To achieve great things, two things are needed: a plan and not quite enough time.” Your meetings can be shorter, more fruitful, and engaging, with better outcomes for the organization, employees, and managers. It’s time to examine your meeting rhythms and how you set meeting agendas. This week, I break down daily, weekly, monthly, quarterly, annual, and individual meeting rhythms, with sample agendas for each.
Is Your Company Scalable?
Let’s start here: Why should your company be scalable at all? If your business is scalable, you have business freedom–freedom with time, money, and options. Many business leaders get stuck in the “owner’s trap”, where you need to do everything yourself. Sound familiar? If you want a scalable business that gives you freedom, you need to be intentional about what you sell, and how.
Are you ready for the Talent Crunch?
Companies are gearing up to hire. Unfortunately, many are competing within the same talent pool. Some experts are currently predicting a strong economic recovery starting in May or June. But as the economy booms, there is going to be fierce competition for talent. How will you fare in the looming talent crisis? Your organization should be creating a plan, now, so you can attract the talent you need in the year ahead.