almost 4 years ago • 2 mins
As economies continue to grapple with the impact of coronavirus, a new report from Goldman Sachs looks forward to a time when the battle’s lost and won – and sets out what the investment bank predicts will become the four biggest trends in business and investing 👩👩👧👧
The way Goldman sees it, the current crisis is a game-changer. Markets need to embrace these transitional times, which will develop across three phases. First comes preservation: the cash hoarding currently taking place. Next up is consolidation, as buyers of goods, services, and shares stick with what they know works. And finally there’ll be innovation as the disruption breeds new solutions to old and new problems alike.
What the investment bank thinks will be crucial for investors is the ability to discriminate between sustainable consolidation and the merely circumstantial. Goldman sees responsive specialization, rather than unwieldy “vertical integration”, as something all such companies will have in common – while also outlining four specific characteristics which it expects will create some seriously tasty value… 😋
Number one is resilience: having simple systems that can handle future stresses, perhaps at the expense of efficiency. Successful global businesses will simultaneously need to be “local-everywhere”. Second on the list is sticky learning: coronavirus’s acceleration of tech adoption means that firms' attentions will shift from fly-by-night early adopters to big-spending customers; new normals, meanwhile, will rapidly set new standards.
Then there’s risk-based segmentation. Absent medical developments, Goldman sees behavioral patterns among different groups (of individuals and companies) diverging; businesses may narrow their market focus or separate off their most legally exposed areas. On a related note, the fourth and final theme is regulatory reset: new rules in everything from healthcare to social media will destroy some business models while also creating new ones 🙃
The precise outcomes aren’t necessarily clear – the trade-off between resilience and sticky learning, for example, will vary across risk groups, and regulatory realities may end up looking very different from planned. But Goldman Sachs is confident that the successful companies of tomorrow will share qualities of flexibility, resilience, and specialization – and investors might do well to follow those themes too.
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