Resilience is the major theme as enterprises report quarterly results and the biggest takeaway is that the giants will weather the storm and smaller companies won’t.
In call after call, technology, business model and supply chain resilience are major topics. Even the large companies that are out of position--say PepsiCo compared to Coca Cola--will figure out an uncertain economy, tariffs and plunging consumer confidence. Apollo has a good deck of the most recent indicators and why CEOs are talking about resiliency so much.
It's time you start thinking about the various forms of resiliency and how they apply to your enterprise.
Consider Walmart's approach to its platform, digital flywheel and optimized scale. Consider the financial giants that continually invest in AI. Consider Google, which is exposed to advertising but has the scale to weather storms, and how it has multiple levers. The list goes on.
Here's what Coca Cola CEO James Quincy said on the company's first quarter earnings call and its supply chain that may actually be tariff proof.
"We're ironically known for Coca-Cola, the world's most global brand and a set of other global brands. But actually it's a very profoundly local business. The beverages in each country are largely made in that country by local employees using local inputs."
Coca Cola in the US system is nearly self-contained. Ditto in Brazil and most regions around the world.
"The imperative is to make the global brands locally relevant. And in the moments of geopolitical tension, one of the key strategies is to drive and reinforce the made in or made by. The fact that it's a local business, the factory is down the road from you, your neighbors make the product. And this underlining of the localness of the production and the distribution and the workforce plus reinforcing affordability tends to be the key thing to do, particularly with Brand Coca-Cola in these moments," said Quincy. "It's not the first time it's had to be used. I'm sure it won't be the last. And so, we think our business model is set up for an environment that can take a degree of disturbance because it's a very resilient business model."
Turns out the Coca Cola model will have to be replicated by most enterprises. The big question is how fast companies can pivot. It's not like Apple can move its manufacturing out of China overnight.
As a result, many companies are pulling their outlooks.
What remains to be seen is how resilient smaller enterprises can be in a shaky economic environment. UPS CEO Carol Tome, who leads a company that is revamping its network and laying off workers, said small businesses are in trouble.
"Many of our SMBs are 100% single-sourced from China. And this is causing so much uncertainty in the marketplace because the administration has announced, as 145% tariff on China goods starting May 2, and the elimination of the de minimis exception," said Tome. "Our SMBs, who don't have the working capital capabilities to pull forward inventory, are saying, Wow! how are we going to handle this cost increase that's coming our way. It doesn't mean that they're not trying to look for alternate forms of supply. They're working with original equipment manufacturers, trying to move to other countries, but as you can appreciate, the large companies get to take the first phone call and they're the ones that are willing to work on changing supply chain."
Those scenes from the buy side are worth pondering as you survey the tech vendor landscape. The upshot: The tech vendors that can save you money will do well. The big legacy types that are adept at squeezing you more are likely to be disrupted.
ServiceNow CFO Gina Mastantuono said the company went through "a very rigorous analysis of our business and its exposure to areas that could potentially be impacted by the current geopolitical."
She added: "What I'll tell you is that demand remains strong. The customers we're talking to are absolutely focused on the future and growth in and cost out. ServiceNow platform remains a deflationary tool that customers are leaning into in times of uncertainty."
ServiceNow is hellbent on growing its CRM business at the expense of Salesforce.
Now let's connect a few other dots. Freshworks is focused on competing with ServiceNow in the midmarket. "Midmarket companies need to automate their IT department, but a ServiceNow implementation is too heavy and expensive," said Freshworks CEO Dennis Woodside.
You can map your entire stack and find similar connections. There are vendors that will enable exponential efficiency and those that will be a drag. Know the difference.
