The COVID-19 pandemic has had a monumental impact on industries in every part of the world. While some industries have thrived during the pandemic, others have incurred heavy losses. Termed as “The Great Acceleration,” the pandemic appears to have brought about 2 years’ worth of digital transformation in a matter of months. A report by McKinsey reveals interesting findings on how the health crisis has accelerated trends that existed prior to the pandemic. In doing so, it has widened the gap between companies ranking at the top and the bottom in terms of economic profit.
In this article, we will review the factors driving the great acceleration and how companies can make the most of new opportunities to stay ahead of the game and emerge triumphant.
But there is one other major player in the IaaS enterprise market: Amazon AWS.
What’s Driving The Current Gap between Top and Bottom Performers?
The global financial crisis toppled various sectors that had been performing exceptionally well before the crisis. Some popular examples include real estate, electronics, financial services, and energy. A different pattern has emerged during the COVID-19 health crisis.
As per McKinsey, there hasn’t been a major reshuffling of companies and industries in terms of performance and profitability. Instead, companies and industries that were at the top prior to the crisis have proved resilient. Many of these sectors have witnessed exponential growth. Popular examples include:
- Technology hardware
- Personal products
These sectors were responsible for the highest average economic profits before the pandemic. They pulled ahead during the COVID-19 crisis, as well, and have added approximately $275 billion to their expected annual economic profits. Conversely, sectors such as energy, banks, telecommunication, diversified financial services, utilities, and insurance were performing poorly before the pandemic began. These sectors have lost $373 billion in economic profits.
Emphasis on Digital Transformation
There has been a great deal of digital transformation during the pandemic. It also appears that companies that had an infrastructure in place for offering digital products and services performed better during the pandemic. These companies had future-ready business models that allowed them to capitalize on the shifts brought about by the pandemic. On the other hand, companies with legacy business models fell behind.
Developers can deploy simple virtual machines and full application stacks across a cloud environment to monitor and manage remote data center infrastructure with ease. Furthermore, the PaaS framework allows companies to deploy customized apps in a relatively short period of time. All of this translates into less administrative costs that leave your team free to focus on core projects.
To understand this better, we can consider the example of media companies that offer streaming services. These companies outperformed satellite-based companies. As per reports, the market for streaming services grew by 37% during 2020. Much of this growth came from Disney+. The streaming platform beat all expectations and acquired 73 million subscribers in its first year.
Similarly, meal-kit providers also benefited from more people looking for healthy at-home cooking options. According to an industry report, global meal kit delivery services grew by 17.78% during 2020. The report also forecasted an incremental growth of $15.93 billion from 2020 to 2024.
What Can You Do Next?
As mentioned earlier, many of the profitable sectors discussed above were already performing well. These companies have been able to achieve massive gains during the ongoing health crisis. Conversely, those that were experiencing declining profitability have suffered even greater losses. This trend of accelerated growth and decline is being termed as the great acceleration. The question now is, how can you take advantage of this opportunity and grow your business?
The answer primarily depends upon which quintile your business falls in. Let’s take a look at what you can do:
Companies in the Top Quintile
For companies present in the top quintile of economic profit, the current situation presents a once-in-a-lifetime opportunity. These companies can leverage the current trends and:
- Expand their production capacity to meet the rising demand
- Reinvent their regulatory management and production systems
- Continue innovating their ecosystems to address future needs
- Enhance their infrastructure and build their brand
The key is to improve your current infrastructure and dedicate the necessary resources required to benefit from the great acceleration. You can review which strategies and tactics will help improve your position in the market and work accordingly.
Companies in the Middle Quintile
Companies in the middle quintile must throw caution to the winds and grab this opportunity to initiate change. They must develop smart growth-based strategies that allow them to move forward. Fast decision-making, resource allocation, and efficient execution of strategies are vital here.
At present, some of the sectors that fall in the middle quintile include retailing, professional services, automobiles, food, beverage, and tobacco. Many of these sectors can take advantage of digital transformation to meet consumer needs in a better way. Retailers can embrace eCommerce solutions to continue generating sales. Similarly, individuals offering professional services can arrange virtual sessions to engage with their clients.
Companies in the Bottom Quintile
Companies in the bottom quintile must opt for crisis management and take necessary measures that help them avoid further losses. They must also explore avenues that help them recover and rebuild. Once again, it is important to think in a radical manner and restructure your business to align with current trends and consumer needs. Instead of maintaining the status quo, they can invest in new opportunities that allow them to expand their portfolio and revive consumer interest.
At the same time, they must also remain realistic. If nothing seems to give, these companies can also work on transforming their business model to suit upcoming trends.
Wrapping It Up
Companies that act quickly in a crisis often stay ahead of the curve for several years. With vaccinations underway and the global economy recovering, you can take advantage of the current business landscape and achieve new milestones. The great acceleration might not last forever, but you must do what you can to improve profitability while it’s still here.
It is important to remain vigilant and bold here. We suggest that you consider the risks and the rewards and develop strategies accordingly. EdgeCollab can help you out here. Our specialized accelerator program is designed to help small and large businesses alike. We can help you expand to new markets, scale up, and successfully launch new products and services. Get in touch with us today to learn more.