How to Spot Opportunities in a Crisis
And cash-in on emerging, existing, and pivoting businesses
Finding Opportunities In A Crisis
We are in the middle of a historic crisis. It’s undeniable. With the outbreak of a global pandemic, all-time-high unemployment numbers, and our economy essentially going into a medically-induced coma, the period of crisis has officially arrived.
But I’m not here to preach doom and gloom. There’s plenty of that already in circulation, and I’m not particularly interested in adding to the hysteria.
Instead, I hope to shed some light on how opportunities present themselves in the middle of crises like these. How, in every period of fear, if you know where to look and what to focus on, there are opportunities (those that don’t rely on exploiting already-vulnerable people). In fact, crisis-oriented opportunities fall into three categories.
In fact, that’s how Microsoft started. Let’s back up, real quick.
The 1973 Stock Market Crash
On January 11th, 1973, the stock market hit a wall. It crashed. It smashed. And it started burning away all the gains from the preceding decade (sound familiar?). This crash sparked an almost two-year recession, during which the Dow dropped more than 45% and the GDP took its biggest hit in nearly 20 years.
Adding literal fuel to the proverbial fire, an oil crisis began in October 1973 to further compound the damage.
However, this economic nosedive did not deter Bill Gates and Paul Allen from starting a business in the emerging industry of computer software. Their company officially launched in April 1975 — literally just days after the recession was finally considered “over,” which means they were planning their business, laying the groundwork, and developing their product right in the middle of the recession.
Seeing as how they’re currently one of the most valuable companies in the world, I’d say that starting their work in the middle of a historic recession didn’t hurt them in any measurable, long-term way. In fact, I’d argue that the timing actually worked to their advantage.
While all of their would-be competitors were waiting out the recession, Microsoft was building a business that would be perfectly positioned and ready to go as soon as the recession was over.
Just as Microsoft took advantage of the emerging computer software market, there are opportunities all around us. But they don’t all look the same and they’re not all obvious. Now, let’s break down those three categories.
1. Emerging Opportunities
“Emerging” opportunities are what most people think of when they hear the word “opportunity.” Some things that fall under this umbrella include the delivery of physical goods (e.g. Instacart, UberEats, autonomous delivery), online delivery of content (e.g. Netflix, Hulu, Disney+), and facilitating or providing virtual services (e.g. Zoom, Skype, online learning platforms).
When Microsoft started, it was definitely in the “emerging” category of opportunity, since the industry was still in its infancy.
Today, while delivery, streaming, and virtual services aren’t exactly “new,” they are experiencing an unprecedented boost, as they are providing for the essential needs of our population today — whether it be meetings, entertainment, or tissue paper. As things return to a semblance of normalcy, the world will still look different than it did. And that is where these emerging opportunities will take the cake — in facilitating “the new normal.”
To successfully take advantage of these emerging opportunities, you could invest in public companies that provide these services. Easy peasy. Or you could take advantage by taking your business and skills digital. Think about what you currently do or what you currently offer. How can you scale that, using these emerging trends and digital channels, to serve more people than ever before?
2. Existing Opportunities
The biggest “existing” opportunity I see right now is Amazon. Prior to the outbreak, panic, and economic downturn, Amazon was on a huge growth trajectory that placed it among the most valuable companies in the world.
Amazon already had the infrastructure in place. All they had to do was scale up and now they’re leading the charge in providing essential (and non-essential) goods (and content) to households everywhere.
Wal-Mart, which started as a chain of family-owned physical stores, has been astoundingly successful over the past few years with their forays into the world of online ordering and super-fast shipping, in order to keep up with Amazon. Today’s situation has simply acted as a catalyst to get more of the company’s R&D budget sent in that direction.
Both of these companies, as well as many others that already had a strong business but are now positioned to grow as a result of the changing global situations, are the ones to watch in the “existing” category of opportunities.
In case you’re curious, I’ve put my money where my mouth is — Amazon stock makes up a large chunk of my portfolio. If you believe in Amazon the way I do, then I think that would be a great way to hop on that opportunity.
3. Counter-Intuitive Opportunities
This category is my favorite because of its ability to fly under the radar, undetected. Most counter-intuitive business opportunities exist in industries that are the most negatively impacted by stay-at-home orders and social distancing protocols. I also refer to these as “pivot” opportunities.
Pivot opportunities are those that can not only survive but cash in by changing their business to align with the current situation. But it takes a monumental change in the business to really be able to cash in on these opportunities.
Restaurants, instead of closing down operations, could dedicate their entire physical footprint to the fulfillment of delivery and takeout orders — rather than just the kitchens — thus increasing their potential output. They can utilize some of their waitstaff for deliveries as well, thus cutting out the margin-destroying percentage that’s normally consumed by GrubHub, UberEats, etc. all while minimizing the number of layoffs they need to make in order to stay in business; win-win-win.
Though with all the craziness we saw with takeout wait times on Mother’s Day, maybe the real opportunity here is to provide better takeout and delivery logistics services. The right investment in restaurant-focused predictive analytics might pay back many times in the years to come.
I also heard of a metalworking shop in the U.K. that pivoted from manufacturing parts for Ferrari and Porsche (who froze all of their orders) to signing a contract with Honeywell for producing mass quantities of just a couple parts for the ventilators that they’re rushing to fulfill orders for. For them, it was a matter of signing a couple of contracts, getting the right materials, and obtaining the required CAD drawings for the CNC machines.
Cha-ching. Now they’re making more money than ever.
Not everything has to go into an economic coma. Even with global panic. While everyone else is hunkering down, watching Netflix, and waiting for the dust to settle, you could be building your empire and investing in those opportunities that others are too scared to jump into or just unaware of.
I firmly believe that necessity is the mother of innovation and scarcity drives entrepreneurship.
You could sum up all of these opportunities by saying: keep your eyes and ears open, observe behavior changes, and fill the needs that you see. That’s it. That’s all it takes to find opportunities and succeed, whether or not there’s a crisis present, but especially now.