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In Practice

2023 Will Be a Time for Business to Experiment

A young woman wearing an orange winter hat and pink headphones around her neck looks up and laughs.

What a year to run a business! An unprovoked war triggers a global energy crisis, the worst inflation in decades threatens to derail the global economy and geopolitical forces push even harder for a rolling back of globalization.

Corporate leaders can’t expect a respite in 2023. Inflation may be showing signs of easing, but high interest rates, energy shortages and residual pandemic supply-chain issues are likely to slow global growth to 2.7% in 2023 from 3.2% in 2022, according to the International Monetary Fund. 

Businesses already bruised by the pandemic need to prepare for the next round of challenges and opportunities by trying new things and seeing what works.

Research, Plan, Experiment

Businesses need to be nimble, prepared and willing to experiment in 2023. Now is the time to review what worked this year and what risks could arise next year from macro and micro trends. Some are universal — a changing workforce, access to capital, climate change, supply chain bottlenecks — but others are industry-specific. 

Companies should ramp up their data collection and analysis to better understand their customers and colleagues. What products are customers likely to abandon if they have to choose between higher energy costs and groceries? Data can help provide answers. 

Business leaders also need to understand their people. Do your employees have the skills they need, or are you about to have a brain drain as experienced managers retire? What benefits do they value, and what are they willing to give up? Use the data to build best- and worst-case scenarios. That way, business is ready, whether it’s to relocate a factory or acquire a competitor, shrink a product line, or provide new benefits. 

Interest Rates

Businesses and consumers had grown accustomed to low interest rates and easy access to credit. But that disappeared in 2022 as central banks raised rates to tame inflation. Capital in 2023 will be harder to get and cost more than in the recent past, when lenders would provide cash for a good idea without a product or overwhelming proof that it could become a money-making business. 

Companies will now need a solid track record and business plan to get cash. But tight credit also could lead to more acquisitions as businesses collapse or seek mergers.

Transition plans that articulate the long-term value of a low-carbon business — and explain the cost of inaction — may help executives walk the line of differing stakeholder expectations.

Add Links to the Supply Chain

While many of the pandemic-era bottlenecks have cleared, lots haven’t, and protectionism is creating shortages and pushing up prices. Companies need to identify these and other potential supply-chain risks, whether they could come from geopolitical tensions or severe weather shuttering a plant. 

A growing number of companies are trying to avoid these challenges by diversifying suppliers, factory locations and shipping strategies. Companies are now prioritizing security, access and stability but are taking cost and friction into account by building more time into projects to ensure that plans are realistic.

Embrace Your New Team

Despite economic weakness, business will continue to face a war for talent, especially as experienced baby boomers, the youngest of whom are 60, continue to retire. Business needs to adjust — and quickly — to Gen Z. These digital natives will account for 30% of the workforce by 2030. Born between 1997 and 2012, they have very different expectations about work from older generations. 

The pandemic trauma left them more focused on personal health and less on traditional careers. They expect far more than remote work and appropriate pay. They want benefits that align with their focus on holistic health and opportunities to grow at their own pace. Companies should experiment with different hybrid options to see what works best for their culture. Many are successfully using job sharing, flexible hours and four-day work weeks to attract and retain talent.   

Digital Assets Are Here to Stay

2022 gave us the most brutal of crypto winters, but CEOs should not write off digital assets. The sector shows real promise of useful innovations, and the underlying distributed ledger technology continues to gain ground in real world applications, such as the European Investment Bank’s recent 100 million-euro bond issued on a permissioned blockchain. In financial markets, this will translate to the “tokenization” of stocks, bonds and other assets, bringing major efficiencies and reducing liquidity needs and operational risks. 

Meanwhile, digital currencies will assist in the increasing digitization of the economy, including in the metaverse, with central bank digital currencies, private sector stablecoins and bank-issued tokenized deposits all playing a role. There is also strong potential for decentralized finance (DeFi) to eliminate expensive and time-consuming human-centric processes, although it will be challenging to ensure DeFi solutions are truly safe. 

The spectacular disasters of 2022 — principally the collapses of crypto exchange FTX and the Terra/Luna stablecoin platform — and their ripple effects underline the need for guardrails to protect consumers, investors, the financial system and the wider economy. Fortunately, policymakers are in the process of designing laws, regulations and supervisory approaches appropriate for the digital assets sector.

More Climate Pressure

Company leaders will need to make tradeoffs as, on top of current economic challenges, they face climate-related pressure from multiple angles. This includes employees, consumers and regulators, who are often pushing for faster progress and increased transparency, and a spectrum of shareholder views, from the climate-committed to those who think corporates should stick to purely focusing on the bottom line. 

Developing detailed transition plans could help provide stakeholders comfort that executives are getting it right. The clock is ticking. About three-quarters of consumers say they want businesses to act on climate change, according to a recent Oliver Wyman Forum survey of those in the United States, United Kingdom and Brazil.  

Government pressure also is growing, with several committed to mandatory external disclosures. Earlier this year, the U.S. Securities and Exchange Commission proposed a mandate for public businesses to disclose their greenhouse gas emissions, while more than 1,300 of the largest U.K. companies have to disclose climate-related financial information, including transition plans, as of April 2022. 

Transition plans that articulate the long-term value of a low-carbon business — and explain the cost of inaction — may help executives walk the line of differing stakeholder expectations.

Companies will need to make tradeoffs as they face these and other challenges, with careful consideration of climate change and China’s shifting COVID policies. But they can also think of this as a time to experiment, to try new strategies and to question long-held assumptions. 

Mistakes will occur, but failure also is an opportunity to learn and to innovate.

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