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6 April 2023 - 8 minutes

How the Tech Industry Faces Adversity

The tech industry has proven to be one of the most resilient of industries in the face of adversity. 

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The tech industry is not immune to challenges by any means. In fact, it’s an industry that’s not simply had to face adversity, but rather, it’s grown and transformed specifically because of the challenges that it’s faced. The pace at which tech is expanding means that an adaptable structure is necessary and the accelerating demand for new innovations is a core reality for tech. That said, the industry does not shy away from adversity; instead, it’s proven to be adaptive, agile and resilient in the face of tough situations. Understanding how the industry faces adversity is crucial in thinking through the future of big tech

What Makes the Tech Industry So Resilient? 

The tech sector is marked by five characteristics which aid it in being capable of confronting challenges that other industries may not be able to as successfully address. These include:

Adaptation

The tech industry is known for its adaptability in the face of challenges. Whether that be a willingness to offer new products, pivot business strategies, or transform business models, the sector refuses to be stagnant. Equally, the decentralized structures that mark the industry, whether that means information stored on the cloud or the ability to work remotely, means the industry can be more flexible in comparison to others. 

Innovation

Innovation is a core component of the tech industry. Finding creative solutions is undoubtedly celebrated among the sector; not every industry encourages workers to engage in the innovation process nor is committed to giving employees space to think outside the box. 

Collaboration

Unlike many other industries, tech sees the necessity for collaboration among workers and even across companies in order to solve common problems. It remains a competitive industry, but with the understanding that collaboration can aid innovation. In challenging moments, tech is able to leverage these collaborations in order to be more resilient in the face of threats to the industry.  

Agility

The tech industry is highly agile, with the ability to quickly shift strategies, priorities or resources as necessary. The flexibility and adaptability promised by tech has allowed for the industry to transform and be resilient in the face of challenges. The decentralization of innovation and of influence has allowed the industry to be especially agile in developing new technologies and being creative in challenging moments. 

Diversity

The tech industry has become increasingly diverse in recent years. That diversity promises new perspectives, ideas and opportunities for the industry to find creative solutions to complex problems. This includes gender diversity as well as the important contributions by folks of color to the industry. 

These characteristics are grounded in examples of the tech industry overcoming tough situations in the past. From the 2020 chip shortage and the pandemic, to the video game crash of 1983, tech has proven to be resilient in the face of adversity. 

How the Tech Industry Faces Adversity? 

The 2020 chip shortage and the global pandemic

The tech industry faced two major challenges in 2020: a global pandemic that significantly disrupted the flow of goods and services and a shortage of semiconductors, a critical component to a number of electronic devices. This meant that the industry was greatly limited due to restrictions on supply chains and manufacturing. Tech navigated these challenges through a number of actions: 

  • Diversifying supply chains: the pandemic made the risks of relying on a single supplier or geographical location for crucial manufacturing components incredibly clear. Many companies were forced to diversify their supply chains, meaning they sourced from multiple suppliers and/or multiple locations in order to manage the risk of potential shortages or disruptions. 

  • Accelerating digital transformation: luckily for the tech industry, the sector was able to shift much of their work to digital channels. There was a new demand by businesses and consumers for tech products and services like cloud computing, online shopping and video conferencing. Instead of waiting for an end to the pandemic, the industry proved adaptable, agile and innovative and embraced the trend towards digital transformation. 

  • Investing in automation: in order to reduce the risk of supply chain disruptions and reduce the reliance upon human labor, many tech companies invested in automation and robots. This meant investing in a more resilient supply chain and helped mitigate pandemic-related disruptions in manufacturing and production. 

  • Innovating new products and services: the chip shortage forced companies to be innovative and explore new technologies and chip designs in order to mitigate supply chain limitations. The research done to explore alternative materials and manufacturing processes led to innovations in the semiconductor industry that will most likely transform tech in the long-run.

  • Collaboration: As noted, the tech industry is highly collaborative. Amidst the pandemic, these collaborations are what helped the industry transform and grow in a moment of great precarity. Many companies worked closely with their suppliers, customers, and industry peers to confront the challenges presented by the pandemic and chip shortage. 

In all, the tech industry faced the challenges of 2020 head on because of its ability to adapt, innovate, transform, and be collaborative in a moment of great uncertainty. Through the diversification of supply chains, accelerating digital transformation, building a more resilient supply chain, collaboration led the industry to see these challenges as a moment for innovation.  It’s tech’s optimism and commitment to solutions and innovation that help it not only overcome adversity, but grow in the face of these challenges. 

The late 90s dot com bubble

The late 90s dot com bubble was an era of rapid growth and speculation in the tech industry. In 2000, the bubble burst, meaning that many tech companies went bankrupt or were greatly impacted by the crash. Of course, tech proved resilient despite the bubble bursting, and that’s owed to the industry’s decisions to: 

  • Restructure: following the dot com bubble bursting, many companies were forced to consolidate and restructure in order to survive the crash. This meant cutting costs, streamlining operations, merging with or acquiring other companies in order to adapt to the new terrain and remain competitive in the face of a changing industry.  

  • Focus on profitability and sustainability: when an industry is thriving, companies can focus on innovation, market share and growth; however, in moments of precarity, businesses are forced to focus on profitability and sustainable business models. That said, instead of simply relying on investor funding, businesses had to prove that they were capable of generating revenue and profit. 

  • Invest in Research and Development: despite the precariousness of the moment, the industry continued to invest in research and development --a decision which proved crucial in aiding the growth of tech. Investments were made to develop mobile devices, social media platforms, and cloud computing. This led to the emergence of not only new technologies, but also new business models that helped to drive growth and innovation. 

In short, tech was able to survive the bursting of the dot com bubble because of its ability to remain flexible, resilient, and solution-oriented in the face of adversity. The sector was able to restructure, refocus its objectives, and continue to invest in innovation in order to survive that moment. What was learned amidst the dot com crash are lessons that have helped shape the industry’s evolution in the years since. 

The video game crash of 1983

The video game crash of 1983 is an early example of the tech industry’s adaptability and resilience in the face of adversity. The video game crash of 1983 marks a period of rapid growth and subsequent collapse in the video game industry. The crash left many companies bankrupt, but the industry was able to survive thanks to a wide range of actions taken by companies:

  • Diversifying the market: before the crash, the video game industry was dominated by a minimal amount of large companies. Following the crash, many smaller companies and independent game developers entered the market. This diversification led to the creation of new and innovative games helped the sector confront the challenges it faced. 

  • Embracing new technologies: luckily, the 1983 video game crash coincided with the emergence of new technologies like home computers and arcade machines. This allowed for companies to innovate and take advantage of the changing industry. 

  • Building trust with consumers: the crash left many previous consumers disillusioned with the video game industry. This forced companies to regain the trust of their consumer base. Companies were focused on offering quality, transparency, and better customer support, leading to greater company investment in game design and development, improving game quality.

  • Adopting new business models: before the crash, the industry primarily focused on the sale of physical game cartridges and consoles. Thus, following the crash, the industry looked to diversify sales through alternative business models. This included digital distribution options as well as subscription-based services which ultimately helped to drive growth and innovation in the industry. 

In sum, the video game industry was forced to be innovative and adapt to the challenges of the 1983 video game crash. The sector used the adverse situation to drive innovation and the diversification of the industry, alternative business models, and ultimately the creation of higher quality games for their consumers. 

What happens next for big tech? 

The tech industry has proved adaptable in the face of challenges, however, can it remain as resilient in the face of adverse situations today? On March 10th, 2023, the tech industry was met with a huge challenge: the failure of the Silicon Valley Bank. SVB was the 16th largest bank in the United State, and it played an especially huge role in the context of tech as the financier of almost half of all the venture-backed tech startups. 

In the end, the tech industry is no stranger to adversity. From what we know, the startup industry will adapt, recover, and potentially come back stronger than ever. For folks who are interested in the current trends in tech, you’re in luck because we’ve just published our 2023 global report.

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