The Market Is Cyclical
As the famous saying goes: “it’s always darkest before dawn”. Throughout history, the markets experienced severe downturns like The Great Depression of 1929 or The Black Monday of 1987. Still, the global economy was able to recover and grow towards previously unseen highs.
There is no reason to believe that the current crisis, caused by the rapid spread of COVID-19 will be any different. Hence, investors are facing a tough question: “what companies are likely to emerge strongly from these turbulent times and therefore are worthy investments?”. The recent articleby McKinsey may hint at the answer.
What Companies Are The Future Leaders?
McKinsey is one of the top players in consulting that helps thousands of businesses to improve every year. Hence, they are in the best position to determine new trends and opportunities along with the types of market participants who can capitalize on them.
According to McKinsey, companies that will actively embrace current challenges and adapt fast are likely to significantly outperform their competition. This is exactly what happenedafter the Housing Bubble of 2008. The key is to find out what companies have the mindset to continue growing even when the world’s economy is on the brink of collapse.
The Recipe To Spot The Potential
The article states that under the current circumstances the strongest driver for growth is digital transformation and outlines 5 most important areas that can help in accelerating it.
First, to succeed the businesses need to understand what market segments will be valuable in the future and develop strategies to deliver within them. Second, the organizations need to be able to build new entrepreneurial businesses on top of the existing corporate structure. Third, they should become less centralized and start to learn on the go to solve unique challenges. Fourth, businesses need to be focused on selecting top-talent and growing it internally according to a ‘skill roadmap’. Finally, businesses need to fuse their technological departments with the decision making ones and invest in technological transformation.
The 5 insights shared by McKinsey can be used as a checklist when performing due diligence on companies that you are interested to invest in. If a business meets all 5 criteria, it is likely to end up as a profitable investment after the pandemic.