Resilience: this new vaccine against Covid-19
Since March, various economic agents have been trying to identify the impacts of Covid on companies on three levels and define what is exactly this “resilience” they all talk about.
First, the short-term impacts, mainly on companies’ cash flow and ability to survive the violent drops in sales that have affected a significant number of companies, with the exception of a few sectors. To date, and fortunately for most companies, these impacts seem to be managed, in particular thanks to the exceptional support of the State via (i) partial unemployment measures, (ii) the deferral of expenses and taxes and (iii) financing mechanisms set up by public authorities such as “PGE” and other mechanisms via Bpifrance.
Then, the medium-term impacts on various economic sectors can be estimated through the speed of business recovery. To date, this remains difficult to estimate since uncertainty remains regarding the pace of recovery and the likelihood of additional waves of the epidemic. This uncertainty creates a form of inertia on the part of the economy, the decision-makers and, to some extent, the employees who have not all been rushing back to work.
Last, the long-term impacts that corresponds that companies’ ability to rebound and to benefit from new opportunities (new market dynamics, gaining market share and consolidation). This third, more positive point has a lot to do with a company’s ability to react quickly and remain agile. 79% of companies with PE funds as shareholders would consider post-crisis build-up operations[1].
[1] According to a recent study from NEXT Financial Advisors
While this way of measuring impacts can apply to all sectors, we believe that technology and innovation companies have a much stronger capacity for resilience than traditional ones. This is obviously due to their lesser dependence on physical contingencies, but also their higher level of agility and responsiveness in the way they work, make decisions and operate under changing conditions. And this is mainly due to a significant increase in the needs of various economic agents (large conglomerations, SMEs and individuals) for new, faster and more efficient solutions adapted to changing and uncertain environments.
We can cite several examples, starting with the most obvious: tools for digitising work methods that have exploded during confinement. Tools like Livestorm, the French version of Zoom, have experienced exponential growth in terms of usage due to lasting changes in the way organisations operate. Other needs have seen significant increases due to the crisis, for example, the need for companies to analyse and understand social data in real time. Linkfluence, the French champion of social insights, has seen the use of its platform increase dramatically since the beginning of the crisis due to the need for major international brands to check the pulse of consumers in real time and in an environment that changes by the hour. Another example, fraud detection tools via real-time artificial intelligence have become essential, while old systems based on static requirements are now obsolete. The same is also true for the consumer market with its much higher level of consumer demand for the online availability of products and services.
Other companies can become the drivers of a post-Covid economy: these are positive impact companies. They have a greater capacity for resilience in times of crisis as well as sustainability over the long term. This is primarily due to their ability to help society deal with situations like Covid, since they focus on key sectors such as health, solidarity, education, training and employment as well as new patterns of consumption. For example, Famileo, which brings families together by publishing a digital newspaper for seniors, has seen an increase in user activity during confinement, with the number of messages sent via the platform doubling. We must also mention OpenClassroom, whose mission is to “make education accessible to all” and who, during the Covid crisis, experienced a worldwide influx of demand and a dramatic increase in adoption in China and Italy, for example.
Beyond this “situational” type of response to the health crisis, these companies are building sustainable models that are less dependent on cycles by integrating long-term social and environmental issues at the center of their business. Companies that tackle these issues reach large markets based on significant and long-term trends, thus making their business more sustainable. For example, Castalie, a company offering solutions to reduce the use of plastic bottles in corporations, hotels and restaurants, is experiencing an upturn in its market which will continue as long as the problem of single-use plastic remains unsolved. This is also the case for Datafarm, a company developing 100% green servers for farms in order to harness the heat produced and address the issue of Green IT in a sustainable way.
In this context, the role of investment funds comes into question. The capital contribution is significant, of course, for responding, first to the urgent subject of cashflows and then to providing companies with the means for leveraging opportunities that are currently available, specifically consolidation opportunities.
But can funds be limited to financial support? We see that a company’s responsiveness and agility have become the main drivers of rebound and performance. How can we help companies be more agile? By integrating them into open ecosystems, giving them access to communities that allow them to develop a true collective intelligence based on feedback and the sharing of best practices. And finally, the support of the funds must be operational. A company’s ability to make a difference during this period obviously depends on the relevance of their strategy, but also on the high-quality operational execution of the strategy.
