Companies that are able to adapt and pivot have lapped their competitors amid COVID-19 crisis
Traditionally, investors have put a premium on large “too big to fail” companies with expansive and solid capital bases, assuming that they’re better able to weather tough times. But with the events of the COVID-19 pandemic crisis, is it possible that bullish bets would be better placed on nimble companies that are “too quick to fail”?
That’s what Maksim Piskunov, associate portfolio manager at AGF Investments, is asking readers to consider in a recent blog post.
He pointed to the example of the global food industry, where the largest multinationals had been bested by small independent producers, who were less tied down by planograms and shelf-placement priorities and therefore able to respond and iterate on new concepts quickly based on changing consumer preferences.
“But that is no longer true,” Piskunov said. “For instance, at one of the most prominent food multinationals, the time it takes for a prototype to hit the market has been reduced by 75%, from an average of two years to just six months.” That company, he said, is now committed to product innovation driven by trends toward plant-based burgers, personalized pet food, and other changes.
The COVID-19 pandemic has only magnified the importance of corporate agility, he noted. In Mexico, one global beer company adapted quickly to an expansive ban on alcohol sales that exempted low-alcohol beer for a time. It took only several weeks for the company to develop a prototype lite beer product under a reputable existing brand, which allowed it to operate as its competitors shut down.
“Not only did this lead to cost savings for the company, it also resulted in a faster restart when restrictions were lifted,” Piskunov said.
A more obvious and impactful example over the past year was the revolutionary development of COVID-19 candidate vaccines. Compared to the multi-year timeframes that the pharmaceutical industry has historically needed, the months-long turnaround time made possible by the resolve of several developers and regulators has been widely hailed as a medical miracle. Behind the headlines, he said many top global vaccine players have fallen behind the curve as they clung to old methods of development that were wanting in terms of timelines and the efficacy of output.
“[M]ore successful firms were much quicker to embrace new technology, like focusing on messenger RNA (mRNA) that was critical in bringing the first vaccine candidate(s) to market late last year,” he said.
One key indicator of a company’s agility, Piskunov said, lay in its digital footprint. Fully digital organizations, he noted, have a professed capacity for change that’s quicker and more scalable than their less technological counterparts, particularly when leveraging cloud solutions.
“It’s with this in mind that investors can discover agile methods being applied to innovation, product design, advertising and brand-building by listening closely to management interviews or reviewing transcripts of earnings calls and other investor events for signs of a company’s digital commitment and willingness to pivot quickly,” he said.
