Defining an organization’s culture as a “Family” culture reflects tolerance to subpar performance. Rather focus on those characteristics of a “family” culture that you want.
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.
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
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As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.
“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.
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.
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.
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.