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In 2023, take a tip from tech: diversify to survive


In 2023, take a tip from tech: diversify to survive

Published 13 December 2022 in Magazine • 8 min read • Audio availableAudio available

The uncertain economic landscape makes predicting winners and losers over the coming year more unpredictable than ever. But Howard Yu and his team focus on hard data to predict what it will take for an organization to weather the storm 

Being “future-ready” is always a work in progress. There is a need to constantly improve or risk sliding backwards. It is hard not to worry when confronted with inflation, an energy crisis, US and China decoupling, and a war in Europe. Future-ready companies are the ones capable of delivering today while building for tomorrow. The economic challenges are very real, and the uncertainty of the macro-environment is scary – but curtailing all corporate development is what smart companies carefully avoid.  

Easy money is no longer around, so companies need to prioritize where to invest. Spending must be disciplined, but this doesn’t mean blindly scaling back every innovation. As Andy Grove, former CEO of the US technology giant Intel, said: “Bad companies are destroyed by crises and good companies survive – but great companies are improved by them.” So, who is the most future-ready and likely to thrive in the coming year?  

In this year’s final round-up of IMD’s Future Readiness Indicator, we cover fashion and consumer brands, technology, and, for the first time, global pharmaceuticals. In this article, we will focus on technology and pharma. Additional information about all three sectors can be found on our website at The Center for Future Readiness.

Each industry is deploying a slightly different playbook to win but the overarching theme is inescapable: corporate behaviors among the most future-ready companies are universal. Two major themes jump out. One, diversify in product market or service offering, and two, put purpose at the center to drive business development.  



Tech stocks have been plunging amid hiring freezes and, in some cases, massive layoffs. Even Amazon and Meta are not immune. The entire crypto market is in meltdown. “Peloton equals,” the former US Secretary of the Treasury Larry Summers said recently, likening the tech sector’s current woes to those of the dotcom bust of the early 2000s. 

Yet, some are standing stronger than others. The Future Readiness Indicator measures a company’s strategic preparedness – think of it as a balanced scorecard. We evaluate the health of a company’s ongoing business because investing in the future requires a healthy cash flow. Executive teams also need to see beyond their day-to-day operations., which means diversity of thought is required on the management board. We take note of gender and nationality as well as the industry backgrounds of a company’s top leadership. We measure a company’s growth prospects, look at investors’ expectations, and examine the intensity of a company’s investment in startups or new ventures. Finally, we measure the trajectory of new product rollouts.  

In 2023, take a tip from tech: diversify to survive

Our rankings are based on hard data, which includes financial reporting, investors’ calls, LinkedIn profiles of the management team, CrunchBase, Factiva, and other publicly available reporting.  

The tech giants standing neck and neck at the top are Alphabet and Microsoft. Alphabet’s cash machine – that is, the Google search engine – is now the de facto barometer of the entire advertising industry. Its dominance has increased further with the weakening of Facebook. There are many causes of Facebook’s recent slippage, chief among them the shift in Apple’s iOS privacy policy 

Unlike Google, Facebook never established a direct relationship with users at the phone’s operating level. Instagram, Facebook, and WhatsApp all sit on top of Apple’s iOS or Google’s Android. As a result, Mark Zuckerberg depends on others to gather data to build user profiles, which his company then sells to advertisers to run ads. That’s the reason so many brands are able to target you online. 

But Apple changed its policy last year. Public outcry about data privacy led Tim Cook, Apple CEO, to change the iPhone settings. Overnight, Facebook could no longer follow you over to other sites outside its own app.  

With reduced access to data, Facebook can’t target its audience as effectively as it once did. Snapchat, Instagram, TikTok and the like have also been hit in the same way. Google escapes because it operates Android, and many of us use Google Maps, Gmail, and YouTube. Your default search engine is also likely to be Google. That’s how Alphabet is consolidating the advertising industry while others are splintering. It is the only company that has enough essential product offerings to counterbalance Apple’s move. 

Bad companies are destroyed by crises and good companies survive – but great companies are improved by them.
- Andy Grove

Microsoft follows closely behind. Its strength also lies in the diversity of its business: Word, Excel, Teams and SharePoint, Azure cloud computing, HoloLens in augmented reality, and Xbox. This is a tech giant that looks mostly benevolent and operates everywhere. It hasn’t suffered like Facebook from damaging data leaks. Nor does it have small businesses complaining about anticompetitive behaviors as Amazon does. Microsoft simply works like a good old utility company, running an information highway for all. Microsoft may not have the glamor of Apple, but almost everyone is a Microsoft customer one way or another.  

While other big tech companies including Google and Meta are effectively barred from China, Microsoft has more than 9,000 full-time employees there. As many as 80% of them are research and development specialists and engineering technicians. In a way, Microsoft singlehandedly defies the whole decoupling narrative put forward by Washington and Beijing.  

So, what lessons can be learned from tech? Never pursue easy growth. Instead, pursue quality growth and diversify your products and markets. No one can afford to put all their eggs in one basket as we head into a new year.  


As every CEO knows, likeability is a company’s license to innovate. Doing well on the issue of ESG – environment, social and governance – is no longer “goodwill washing”. It’s not about telling a good story. Unless purpose is placed at the center of a firm’s strategy, it will be unable to sustain new growth for long. No sector illustrates this better than the global pharmaceutical industry.  

There is a crisis among pharmaceutical companies, and it’s not an economic one as we are seeing in tech but a social and reputational one. Governments, regulators, patient groups, and insurers are all asking the same question: Why is healthcare getting so expensive? Drug costs are rising, even as the cost of cars, computers, and washing machines tend never to rise above inflation and, in many cases, drop dramatically over decades. Some products, such as insulin for diabetics, are becoming more expensive after years of commercialization. Insulin is not a diamond with limited natural supply; it’s made in a factory.  

Pharmaceutical companies don’t compete like automakers or fashion houses. Indeed, the pharmaceuticals market is the opposite of perfect competition, economists would claim. And it’s this unique market dynamic that leads to spiraling costs. Prescription drugs are highly regulated. A new drug cannot launch without FDA approval. Prices are determined not by market forces but negotiated with the government and then, in most situations, accepted by insurers. Patients have little choice but to follow a doctor’s prescription. Neither are discounts on offer or “Black Friday” sales. Prescription drugs operate as close to a planned economy as one can find in Western democracy. The situation is accepted only because of an implicit social contract.  

Nine out of 10 drugs fail in clinical trials. Most pharmaceutical companies’ endeavors are moonshots. That’s why our society has come to accept a period of exclusivity guaranteed by patent laws. These patents act as the reward for expensive but worthy research into the discovery of novel drug therapies. Patents are then followed by cheaper commodities through generic alternatives. Doctors around the world can then prescribe the same active ingredients to patients without patented products inflating costs. The privilege that drug companies enjoy is not a license to print money; it exists to help them navigate the long odds of drug development.  

In 2023, take a tip from tech: diversify to survive

Yet, like any social contract, trust can be abused. Very short-term drugmakers, many of which don’t make it onto our ranking, have mastered the dark art of exploiting loopholes. A drug can come to the market with minimal clinical benefits. A company can double down on its lobbying and marketing activities, or it can deploy tricks and tactics to artificially extend patent lengths. While great for the corporate bottom line, and better still for executive bonuses, these methods take away from the focus on science and health.  

That’s why we look at the R&D intensity of a drugmaker and compare that to its marketing and administrative overheads. Does it spend more money on advertising, sales, and lawyers than on running laboratories? It’s also important to look at the drug pipeline. How many drug candidates are scheduled for clinical trials, and what stages are they at? Also vital is the number of therapeutic areas in which a company chooses to engage.  

So, what makes a drug manufacturer future ready? Staying true to a firm’s purpose is key. Such a pharmaceutical company makes enough money so that it can continue to discover new drugs for society, not the other way around. And when that fundamental purpose radiates throughout the organization, everyday choices become obvious — choices around where a company should invest its resources, for example, or what type of executives should lead the company. Do we want top management dictated to by a group of financial wizards or those with deep scientific backgrounds who will influence strategic decisions? Will the company dabble in practices that are technically legal but morally questionable? Without a clear “true north”, the entire social contract underlying this trillion-dollar industry can come undone.  

These findings imply that ESG-related metrics are future-oriented. They gauge how much a company’s purpose sits at the core of growth. What kind of growth does a company choose to pursue during good times? What kind of spending would it slash in bad times? Day-to-day choices determine whether a company can ultimately win tomorrow while delivering today. In other words, these choices determine if it’s future-ready.

Jialu Shan, Lawrence Tempel, Zuriati Balian, and Matthieu Le Cauchois contributed to this article. 


Howard Yu - IMD Professor

Howard H. Yu

LEGO® Chair Professor of Management and Innovation at IMD

Howard H Yu is the LEGO® Chair Professor of Management and Innovation at IMD and the Director of IMD’s Center for Future Readiness. He is the author of the award-winning book LEAP: How to Thrive in a World Where Everything Can Be Copied. Howard directs our Strategy for Future Readiness and Business Growth Strategies programs.


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