Which tech companies will survive the pandemic-triggered recession?

COVID-19 has become part of practically every news story. There’s hardly any precedent for this level of coverage. It has saturated every pore of people’s consciousness and impacted lives in a way that rivals war.

Building a predictive model to forecast how it will all shake out would be next to impossible. No one can say for sure when the pandemic emergency will begin to subside. No one knows if economic activity will bounce back to pre-pandemic levels once the rate of infections and deaths begins to slow. And no one can say with any certainty whether our jobs, employers, and industries will survive the crunch.

Even if we try to narrow our scope to the technology industry, it’s incredibly hard to predict which vendors will survive this period intact. Which tech firms will bounce back best from the COVID-19 pandemic and its aftermath, and which won’t?

One useful forecasting framework is to look at the factors that contribute to some firms becoming “unemployed.” I’ll borrow concepts that are often applied to individual job seekers in the labor force, but I could just as easily describe factors that frustrate businesses in their constant search for customers, sales, and revenues.

Surviving COVID-19-inflicted structural unemployment

Structural unemployment comes when many people are out of work because their skills fail to match what employers demand. Often, this happens when changing technologies used by key industries or major employers make many workers’ skills obsolete. The solution is some combination of workforce retraining or, if that’s not feasible, recruiting new personnel who have those skills.

A business can become structurally unemployed when its operating processes become obsolete in the face of technological changes that give a persistent advantage to rivals that have disrupted the competitive arena by embracing new technologies. That’s what “digital transformation” is all about. When customers prefer the new technological ways of doing business—such as online, mobile, self-service, digital, streaming, AI-driven, etc.—firms that hold fast to older technologies are likely to find themselves structurally unemployed. In other words, they will lose customers, revenues, and market share until they embrace the new tech (if it’s not too late).

Copyright © 2020 IDG Communications, Inc.

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