OUR FRAMEWORK COMPARES THE MAGNITUDE OF POST-CRISIS DISRUPTION TO THE DEGREE OF CURRENT SHOCK TO THE BUSINESS
COVID-19 has impacted consumer and business experiences, starting a ripple effect on the underlying infrastructure with varying consequences.
To understand the impact on the technology, media and telecommunications (TMT) industry, we examined supply and demand as well as changes to operating models across select sectors of each TMT sub-industry:
- Telecom equipment providers & operators
- Media & entertainment
- Internet & digital media
- Technology, including software, hardware, semi-conductors, and IT Services.
Our analysis shows that some sectors will be challenged by deeper shocks than others and will more urgently require operating model changes to survive. Ultimately, there will be an acceleration towards virtualization, connectivity, and automation that will benefit the TMT industry.
Overview of the Matrices
First, we examine the degree of shock and magnitude of change impacting each subsector. The degree of shock can be gauged by examining COVID-19 pain points in supply and demand:
- Demand: Social interaction, Need vs Want
- Supply: Virtual vs Physical Product, Asset Reuse, Labor Intensive, Remote vs Local Labor
Factors influencing the magnitude of disruption to operating models include:
- Customer Interaction and Channel
- Production and Operations
- Distribution and Logistics Supply Chain
Second, we consider the path forward, looking at impact severity and sustained operating model changes. Four types of models emerge:
- Morphing: Substantial change in operating model once economic activity rebounds (e.g. more virtualization of content production and distribution)
- Surviving: Mostly same operating model, revenue expected to rebound with the economy as it is primarily discretionary spend (e.g. ad spend, consulting spend)
- Staying the Course: Current operating model, providing infrastructure and services to support virtualization, positions it for longer-term success (e.g. software)
- Net-new Innovating: Potential enhancements to the current operating model to leverage the changes to how people work and live (e.g. faster deployment of 5G)
The path forward for an individual company depends not only on the impact on the subsector as illustrated above, but also on its specific financial health. Was the company already in danger, with scarce liquidity, before COVID-19? If healthy before, is it at risk now, depending on the depth and length of the COVID impact? Or is the company still healthy with enough liquidity to last through the crisis? A triangulation across shock to demand and supply, disruption to the operating model, and financial health will help chart your company’s way forward.