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How Past Companies Leveraged Technology to Cut Costs And Survive Recessions

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Considering the current situation, a Global recession is inevitable. The International Monetary Fund reported that, in the wake of the coronavirus outbreak, there is a chance for the GDP to shrink in 170 countries across the world. Before the bulls slowly turn to bears, Many companies have already started working towards guarding themselves by making serious alterations in their business models. In a way, this recession will cause a chain of events leading to a meltdown. With the Aviation sector on the brink of collapse, the vendors of Aviation companies would only get limited orders resulting in an economic slowdown. Needless to say, there isn’t just one domain taking the hit. Industrialisation paved the way to symbiosis. So if one collapses, the other one follows. This interconnection is what puts many companies in a precarious position.

However, this is not the first time that we are facing a great recession. The 2007-2009 recession saw a huge alteration in the economy, but still, the majority of business operators survived it. Though experiential learnings from the 1980 and 1997 recessions helped, it was the technological innovations that companies adopted during these times, which helped them minimise the long-term impacts. This is an indication that Technology can revert a company’s market decline or a country’s decline. For instance, in the year 2015 analysts thought the economy of China was depleting and the country could see a potential recession. At that time China had a lot of private debts, as much 230% of their GDP. The economy of China was then architected by Tech Giants such Alibaba and Tencent. Being digital in nature, they had lesser debts as compared to manufacturing industries. Tencent alone makes a profit of $1 billion per month. With their assistance, China didn’t face a financial meltdown, and it has been 5 years since analysts predicted a recession!

Although the recession is not a fruitful period, many companies find it to be the time for experimenting. If you could go through the list of organisations founded during the times of great recession, you would find a lot of Fortune 500 companies. The reason for this is their prudent proficiency in working with cutting edge technologies.

In 1892, the business activities across the nation dropped by 40% due to the Long depression. Factories started laying off their workers to sustain a stable cash reserve. However for the visionary inventor, Thomas Edison it was an opportunity to break into the Market. Following a merger with the Thomas-Houston company, Edison introduced General Electric(G.E). At the onset, he began selling incandescent bulbs. In the late 1890s, oil lamps were used for lighting applications. Hence Incandescent bulbs attracted a lot of people for its innovative touch. Since it was a long depression, Edison was able to get the work done for a cheaper price. The reason for which is the significant drop in labour wages following layoffs. If it wasn’t for an innovation, GE wouldn’t have sustained the depression. Because it wasn’t the brand “GE” that saved the company. If at all it was the brand image then GE should have survived the 2008 recession too. Due to a lack of innovative solutions, GE’s stock dropped by 42% in 2008. This calls for a dire need in technological advancements.

Fast forward to 2008, the story of Airbnb is an epitome of excellence and wise strategy. They started the company during the ubiquitous recession. Brian Chesky and Joe Gebbia slowly connected dots to reach their ambitious startup idea while taking classes from the coveted startup school, Y Combinator. Brian & Joe played their cards right during the 2008 recession. When the recession hit the country at full strength, many were forced out of hotels. At this point in time, Airbnb leveraged the technology and scaled up its online marketplace to offer lodging and homestay. It was relevant to the current situation. Those who were forced out of luxurious hotels sought Airbnb for their accommodation. As of 2017, their revenue stood at a staggering $2.6 billion!


Major alterations in Business Model ahead of a potential 2020 recession

Though Airbnb and G.E are classic examples of leveraging the right technology at the right time, with the advancement in computing there’s a lot a computer can do than what it did 10 years back. The world is slowly shifting to a technology that eliminates human intervention. Machine Learning and Data Science are being practised avidly. All of this is to be prepared for the next recession.

Goldman Sachs is slowly moving towards Automation. If you live under a rock, this investment bank reportedly engaged in defrauding investors during the 2008 crisis. They know the dynamics of recession and how to revert it. Now they are moving towards the realm of advanced computing and machine learning. This 151-year-old organisation suddenly realised the need for automation and are currently hiring a lot of Engineers. This is their backup plan in case the world sees another recession. Following Sachs’ strategy, many other investment bankers have sought technology to automate their trading.

The video conferencing company Zoom found success amidst the Coronavirus pandemic. The company made $4 Billion in just 3 months. This has something to do with the piece of the technology they use. While there are trusted video conferencing software such as Skype, the reason for Zoom to get benefitted is its scalability. Skype can only have 50 people on a video call while Zoom can have as much as 1000 people with 49 on-screen videos. They knew that this lockdown would force many employees to work from home. Hence they prepared for it by increasing the number of participants and thereby beating Skype.

As we head into a new decade, technology has become quintessential for a company’s survival. Needless to say, it is the technology that makes or breaks a company. For instance, following the coronavirus pandemic, 30 million people filed for unemployment in America. Powered by mainframes running on COBOL, the American Government is now facing a problem in changing their COBOL code fast enough to respond to a change of such magnitude.

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