Businesses are beginning to reopen, some dealmaking has resumed, and new coronavirus cases are declining, but studies show that consumer confidence remains low. Economists who were initially optimistic about a “V-shaped” recovery, are now warning that elevated levels of unemployment are likely to continue into the coming years. Karbo Com joined Fortune’s Andrew Nusca to learn more about how the tech industry is navigating the mounting uncertainty and what he’s hearing from Fortune 500 CEOs.
As Fortune’s Digital Editor and co-chair of the publication’s Brainstorm Tech conference, Andrew has his finger on the pulse of the tech industry’s response to the evolving pandemic. In a Zoom-facilitated “In the Know” discussion, Andrew shared insider insight into the state of venture capital and the new VC mindset, the critical role of media relations, where we go from here, and what we can learn from the companies that are leading the way.
Some have applauded the leadership of the tech industry during this uncertain time; Amazon and Instacart have been lauded as saviors for helping people self-isolate, and video conferencing services like Zoom have kept the remote workforce going. But others have voiced criticism, saying that the pandemic has revealed the limitations of even the world’s richest companies’ ability to respond and innovate in the face of the pandemic.
How would you characterize the tech industry’s current role in our society? Do you see the tech industry leading the way during this time?
You know, I don’t believe tech is a monolith, but I do see leadership within the industry. It’s interesting that year ago we were only talking about the backlash—the techlash. We even programmed a session at our Fortune Brainstorm Tech Conference that we hold every year in Aspen around this topic.
Fast forward to today: no one’s talking about a techlash. Everyone is completely attached to their technology right now: their video chats, and emails, and Slack. This is how we’re able to communicate during this period of social distancing.
I think tech companies are always trying to be at the forefront, but now they are really trying to get it right. The big companies are enjoying the fact that their products are needed more than ever and other companies are looking at this pandemic and thinking, “How can we apply our technology here?”
You mentioned Amazon being lauded for helping us stay at home, and by every extent they are doing that—but it’s very much in their interest. Amazon leapt up to number two on our Fortune 500 list this year, and that’s for 2019, it’s retroactive. It will be very interesting to see where they land in 2020. They’re just doing what they do best. And I think anyone who was perhaps a bad actor and caught up in the techlash is just happy that they are no longer in the spotlight.
Which companies are emerging as the leaders? Who is setting the standard for how companies can successfully adapt?
Well, I think the question is who got a great hand in this deck so to speak, right? I saw a headline by another publisher saying that Amazon has hired as many people to handle the increased demand as work at the Ford Motor Company, which is a Fortune 10 company. So Amazon is doing extraordinary amounts in hiring and getting up to speed. But of course, we all desperately needed Amazon. So it’s just accelerating an existing strategy. Its direct competitors, who have been trying to compete on this basis are also doing really well. Walmart for virtually everything, Target, Best Buy for electronics. They’ve all been experimenting with using their retail stores as warehouses and this kind of moves them along.
So all of the retailers who had a great digital strategy are enjoying this, the ones that didn’t are very much going out of business. So it’s a haves and have nots in retail. Anybody who’s in the business of productivity, Microsoft, you mentioned Zoom at the top of this—and here we are using that technology right now. They are running to either get their clients set up with these technologies, expediting user adoption, or putting in more infrastructure.
Right before the world shut down, I was supposed to interview the Zoom CEO for a Fortune event. Of course we had to cancel the whole thing. But I know for a fact that since then, he’s been doing nothing but trying to put infrastructure in place and declining any further interviews, so he could spend his time there.
So, you know, I think there are just companies that got a great hand and were kind of on the ball and could take advantage of it. And the ones that weren’t, are either struggling to catch up or or unfortunately, going out of business because of the broader economic picture.
Which industries or segments appear to be picking up steam? Where are you seeing the biggest areas of opportunity?
One category that comes to mind that’s been doing very well, of course, is food delivery. We’re seeing a lot of action in that burgeoning space. There was a recent announcement that Uber wanted to buy Grubhub, which is Seamless, and that would consolidate a market. So here’s a market that’s overall growing—I guarantee you every one of those services is trying to figure out how to get more people bringing you your food—but then there’s consolidation because companies see an opportunity to move.
Which models of adaptation seem to be yielding the best results?
Look, over the last decade, large enterprises I’ve been talking about enterprise transformation, digital transformation. And it’s a cute word. It’s a lovely piece of jargon. Companies love jargon. But who’s actually been putting their money where their mouth is? I think that’s that’s really who’s been benefiting.
Most companies in the United States are dealing with a work from home situation. How many companies were actually on the ball? Meaning everybody had laptops, everybody had phones, everybody can access systems remotely, and they don’t have to be on-site to do so. How many companies actually put all of that in place so that remote work can be done. Naturally tech companies themselves are usually pretty good at this. But everybody else…results may vary.
Which companies are succeeding in communicating the right tone, message, and cadence of information during this time? What does successful brand communication look like right now?
It’s typically the companies that had been nailing it before, because of the nature of their leadership and company culture. So anybody from Salesforce to Delta Airlines, who has been doing a very good job in an otherwise horrible spot.
It’s all about communication. It’s all about being forward-looking, here’s how we’re treating this. Every business is going to have to manage down a terrible situation. So in many ways, that’s not the novelty. The question is just how well they communicate to their staff. Make sure that you’re taking care of employees the best you can with benefits and extended policies, if you do have to lay people off. Really, really taking care of people, even if you do have to shrink your business. I think that’s been very, very different. A lot of companies have sat back and gone “Well, it’s industry standard”. The truth is there’s nothing standard about this time right now. This is a once in a generation. So the companies that are really, really trying to take care of their folks, I think are standing out.
On the flip side, what early communications missteps have companies made that we all ought to be learning from?
Not thinking your employees are as smart as they are. I’ve seen so much executive communication as you can imagine, doing what I do, covering what Fortune covers. We’re paying very much attention to what every CEO is saying, and if you aren’t giving your employees the full picture, they’re reading it every day in the newspaper, hopefully on Fortune.com. They very much see where the puck is going, and I think it’s frustrating for a lot of rank and file employees to not have clarity and not hear from their leaders. No one’s asking them to predict the future, but they would like to know how bad things might really be. And of course, there are restrictions for public companies in that regard. But you know, I think most people just want a fair shake, you know, to be a partner at a difficult time.
What trends and movements have you observed as the tech industry responds?
The biggest tech companies are doing very well. Not only do they provide the services that we need at this time, but also they were doing well when we entered this. Startups with a good amount of funding are feeling good that they have a good amount of funding, while startups that don’t are very, very concerned that they’re running out of runway.
I think it’s very clear which kinds of companies or categories are going to benefit at this moment. Education companies are all of a sudden back in the forefront. We talked about them years ago, and the conversation, I don’t know, it went away. Not so sexy. And now it’s back in a big way because everybody’s stuck at home with their kids. And they didn’t exactly take jobs as full time teachers on the side.
There’s health, obviously. Telehealth is seeing a lot of movement, a lot of money is flowing into those areas. And like I said, enterprise tech productivity is continuing to gain momentum.
On the subject of startups, what are you seeing in terms of funding and how VC firms appear to be conducting business at this time?
There’s always activity. There’s not always money right away. But I think investors are willing to put down money on a company that they think is really good. Where you’re seeing the fall-off is with follow-on companies or companies chasing a hot sector that has been flooded with VCs. I think you see that kind of stuff dry up when there’s a downturn.
But look, we have to remember existing startups need more runway and more money because they can’t predict the future. So they’re going to be raising quietly behind the scenes. God knows at what valuations, but they’re going to be raising. Certainly new companies that don’t have a lot of funding or are looking for a little bit more, so that’s still ongoing.
Some of the world’s largest companies were founded in the downturn like General Electric, General Motors, IBM. And then in the last recession we saw Uber, WhatsApp, Instagram, Venmo. Those were all founded one or two years after the economic downturn of 2008 – 2009. So the good ideas are out there. And it’s kind of just a Darwinian moment, I would say.
Good ideas come in a downturn. That is a theory that I think most smart venture capitalists hold. The question is, which idea or company is the good one? We’re seeing a return to the fundamentals. You can’t be spraying money all over the valley as we’ve seen in the show Silicon Valley and other places where startup culture is lampooned.
You can’t do that in a downturn. You’ve really got to focus on the fundamentals, focus on making money, actual revenue, and not just a good idea that raises a billion dollars and just earns all that money with the hope that it’ll pivot its way into a business model. You can’t pull that stuff off in this environment. And so it’s not just a theory from an investing standpoint. People are looking for those moments, those diamonds in the rough. I think startups will be much more locked on what they need to focus on, which is of course music to an investor’s ears.
To switch gears, how has the relationship between companies and the media shifted? Has that relationship changed at all during this time, or are things business as usual?
Well, nothing’s ever business as usual in media. Right now there’s a great hollowing out of media companies right now as there was a decade ago. And I do find that it’s obviously harder to get an executive on the phone, because they don’t want to be seen as just talking to the press, they want to be seen as talking to their own employees or customers. So I think it’s a little bit harder to get them.
I also think that the nature of the conversation is changed. I was talking to a C suite executive at a pretty hot tech startup—I’m using that startup term loosely, they’re quite a large company but they’re privately held. And he was asking me how I thought his company could put its best foot forward in the pandemic in a way that’s beyond philanthropy. Because their business itself is doing just fine, but they want to help out during this crisis. That would have never been a question that I would have fielded previously. I think a lot of leaders are being introspective right now. And like I said, focused on what matters most.
What advice do you have for companies and executives that are looking to strengthen their relationship with the media right now?
In war-time and in peace-time, I emphasize the same thing: build a relationship. I’ll speak for my own publication. We are a business publication, we cover the Fortune 500 and Global 500 companies. We also cover all the startups that are going to become those companies in a few years. Uber got on our Fortune 500 for the first time this year—it’s been quite a ride. Now’s the time to invest in building relationships.
Of course, nobody wants to be talking about a product right now per se. Companies should avoid incessantly pushing out press releases. Instead, they want to be talking about customers and relationships and helping solve problems in the world. It’s a little bit tone deaf to be like, “check out our new product for the low low price.”
But now’s the time to open that dialogue with the media, if you haven’t already. Continue it if you already had it. It will really pay off down the line. What the press is interested in right now is just hearing what executives have to say. Everybody’s trying to compare notes. I’ve had executives ask me what other executives are telling me.
In this latest Fortune 500 issue that we just finished, I put together a package of 14 Fortune 500 CEOs who are just weighing in on how they’re thinking about reopening once the stay-at-home orders begin to subside. Everybody kind of wants to just compare notes.
As you speak to these CEOs, what trends are you picking up on? Where do you see the tech industry going from here?
Most executives acknowledge that they were hoping for a V-shaped recovery and maybe it’s gonna look a little more like a U or a W—or pick your letter of choice. Recovery is going to be gradual. The lingering effects of this are going to last a lot longer than we hope or expect.
And I couldn’t tell you which of those effects are going to last the longest. Every municipality is going to handle it differently, but it’s definitely not going to be business as usual. I think that most companies are trying to bring business back.
The thing that stuck with me the most was what Cory Berry, the new CEO of BestBuy told us recently. One of my colleagues interviewed her and she said, “It will come back, but it won’t come back in the same way and it will be very different.” And so we need to figure that out. If you were making business money in one way, how can you do it in another way? Even for media companies like mine who are getting record readership right now as everyone’s stuck at home and wondering what’s going on in the world—we’ve still got to figure out how to make money.
Everyone’s going to have to figure out—not to use such a well-worn cliche—the new normal and what that exactly is. And so I think that’s kind of the key takeaway for the future.
This interview has been edited and condensed for clarity
Want more “In The Know” expert insights? Learn what separates leaders in data analytics from the rest in Karbo Com’s interview with Nielsen lead data scientist Jake Dailey.