Investment and Innovation – The Way Out of the Pandemic

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They say that desperation is the mother of invention and innovation, and this is something that has been borne out throughout history.

If we go back to World War II, for example, inventions such as synthetic rubber and the atomic bomb helped the Allies to wage war on an overwhelming scale and ultimately emerge victorious. Similarly, the economic crash of 2008 created an entire generation of entrepreneurs across the globe, and this trend has continued to reshape the world’s labour market ever since.

We’ve also seen emerging and new business models emerge in the wake of the Covid-19 outbreak, as companies look to secure their immediate futures and build towards medium and longer-term success.

The Impact of Covid-19 and the Changes so Far

Across the globe, there’s little doubt that the coronavirus outbreak has had a dramatic socio-economic impact (as well as compromising the health of millions of citizens).

In the US, for example, an estimated 16.8 million Americans filed for unemployment benefits in the weeks ending April 4th, while the benchmark S&P 500 index of large companies fell by a staggering 20% in Q1 2020.

In the UK, an estimated 7.6 million jobs (or 24% of the UK workforce) are thought to be at risk as a result of coronavirus and its associated lockdowns, while economists predict that the region could shelve up to 35% of its GDP over the course of 2020.

There are two sides to every coin, however, and this is borne out by the fact that some markets and brands have emerged stronger from the depths of Covid-19. To this end, some 30 of the 500 S&P stocks actually grew in value during Q1, while sectors such as ecommerce have also enjoyed immeasurable growth.

According to Ipsos, this is part of a global trend, where 11 out of 12 international markets saw sustained spikes in online shopping and spending. In Vietnam, for example, 57% of consumers are shopping online with greater frequency, while India (55%), China (50%) and Italy (31%) have also showcased similar expansion.

When observing this, it’s abundantly clear that prominent online markets and digital technologies have been reinforced by the Covid-19 outbreaks, including ecommerce. Online payment methods (such as contactless) have also become more prevalent in 2020, with brick-and-mortar retailers insisting on this as a way of preventing physical contact during the coronavirus pandemic.

Tech-led digital brands such as Amazon and Netflix have also experienced sustained growth during the first half of 2020, with the latter adding 16 million subscribers in Q1 alone.

Of course, some of these gains may be countered by the costs incurred during the coronavirus pandemic, but it cannot be denied that certain markets and business models have become even more prominent as a result of the outbreak.

Planning and Innovating for the Future

Clearly, businesses across a raft of markets are being compelled to adapt in the wake of the coronavirus pandemic, and not only in terms of how they sell and market their products and services.

The fundamental business models driving ventures are also continuing to shift, with an emphasis on lean and agile operations that allow for far more flexible working patterns and the creation of more impermanent workforces.

A key part of this is the rising use of video conferencing and the streaming of live commercial events, through platforms such as Zoom and Microsoft Teams. Zoom has seen sales and its share price increase by more than 50% during 2020 so far.

While these technologies were prevalent prior to the outbreak, they’ve become increasingly familiar and seminal in recent times and are likely to drive more permanent change in the future.

Even more interestingly, the government of Singapore had pledged to increase tech spending by 30% in the wake of Covid-19, creating a total investment of $800 million into the sector as a whole.

These statistics reaffirm the notion that the recovery from Covid-19 will be tech-led, with the pandemic embellishing a trend which saw an estimated 92% of businesses look to accelerate their digital transformation at the beginning of 2020.

It also highlights another prevalent mindset amongst businesses, particularly those that haven’t found themselves in a position to capitalise on the Covid-19 outbreak by virtue of their industry or product offerings.

For example, companies with cash holdings may look to leverage the current volatility in the financial markets, as a way of hedging their capital and building viable income streams for the future.

To achieve this, firms should consider using trading platforms and tools such as the economic calendar to identify price trends and movements, before targeting sensible investments that are within their fiscal means.