2022 Predictions

HNY. I believe that all organisations should have an aligned view on the near future. My 17 predictions for 2022 are as follows:

1.??Pandemic: In recognition that we are all not safe until the world is vaccinated, 80% of the world’s population will have received at least one vaccine dose. Developed economies will race to get populations in developing nations vaccinated to prevent the breakout of further variants. In Australia, 91% of our population aged above 16 has received double vaccination in 2021 and there will be a race to get boosters in arms. We will see hundreds of thousands of infections and Hospital admissions peak in March/April. Services across the economy will be disrupted on the account of personal isolation. The supply chain for rapid antigen tests will begin to meet demand mid-year and their use will become common practice. New treatments will emerge that will reduce the severity of the disease. Hospitality, entertainment and travel will start the year slow struggling under peak infections. There will be no more government induced lock-downs or assistance and borders will reopen cautiously.

2.??Consumers: The pandemic rolls on but starts to dissipate later in the year. The major worries for consumers will be housing affordability as it peaks, an under pressure healthcare system, environmental degradation, and rising inflation and the resulting higher costs of living. Savings rates, buoyed by government assistance over the last 2 years, will come down.

3.??Economic: We will see monetary policy starting to be reined in without slowing growth. Inflation will rise, interest rates will start to ratchet higher and unemployment levels will remain at historic lows. 10 year US treasury bond yields will rise marginally to 1.75%. We will see rising inequality and very little reform on taxation. ?

4.??Major Events: The Winter Olympics in China will be marred by ineffective protests and underwhelm with Norway leading the gold medal tally. The FIFA World Cup in Qatar will see France win their third title. The Republicans will win control of House of Representatives diminishing President Biden’s power to drive reform. Emmanuel Macron will win French presidential elections positioning him as the Statesman of Europe. Boris Johnson will be under pressure and get forced out of Downing Street. Russia and Belarus will attempt to destabilise and wedge Ukraine against Europe. The Australian election, to be held before the end of May, will be fought on the pandemic response and fear on the economy, healthcare, housing affordability and climate change. The mis-management of job-keeper will not factor in the election, but the scale of infections, economic disruption and healthcare system stress will.

5.??China: Xí Jìnpíng will be appointed as China’s leader for a third term?at the CCP’s 20th Congress. The economy will slow impacting global demand for commodities. China will maintain a covid-zero policy until the middle of the year and then pivot to living with covid.?“Common prosperity” will remain a cornerstone of Xi Jinping’s priorities to manage growing inequality. More high-profile Chinese tech companies will delist?from the U.S. (e.g. Pinduoduo). China will intensify diplomatic contact with countries in Africa, Latin America, and Southeast Asia as leverage against a disenfranchised West. There will be no major confrontation in the South China Sea, but it will remain a geopolitical flashpoint. Expect no change in China’s coercive trade policy towards Australia and don't expect Chinese students in the same numbers when border ease that we saw pre-pandemic.

6.??Cloud: Gartner estimates that less than 15% of Enterprise IT spending has moved to the Cloud so far and up to 30% of workflows. Fuelled by +$50B investment by AWS, Microsoft and Alphabet expect an acceleration in cloud infrastructure and the number of SaaS applications consumed per organisation.

7.??Cyber Security: Organisations will increase their investments in cyber security resilience to identify, protect, detect and responding to increased risks on a disruption to operations or data loss. Keeping customers safe will become essential in system and product design. Regulators, Proxy Advisors and Global Investors will start scoring an organisation’s cyber security resilience to inform potential investors of the risks and costs (e.g. insurance). Ransomware attacks and breaches will see new highs.

8.??Big Tech: Regulations curtailing the monopolistic power of big tech will rise led by Europe, forcing Big Tech to double their lobbying efforts to mitigate risks. On the heels of leadership transitions at Amazon and Twitter in 2021, we will see a new CEO at Facebook with Mark Zuckerberg moving to Executive Chair for Meta. These companies will continue to outperform the market.

9.??Metaverse: The rebranding of AR/VR to metaverse cements as the next platform after smartphones but the hype still exceeds the adoption and utility. Applications beyond gaming and self-expression will start to emerge.

10.?Web 3.0: The rebranding of blockchain and crypto to Web 3.0 will gain traction but will not reach mainstream yet. New open and distributed models for building software and networks where users create, and control networks and money will surge. Expect to see lots of innovation and huge uncertainty with crypto stores of value, payments and money transfers. Bitcoin will be increasingly seen as a store of value (despite its volatility) not a currency, whilst payments applications will remain fragmented.

11.?Investment: The key investment thematics will be categories with continued structural tailwinds like cyber security protection, cloud computing architecture, artificial intelligence, e-commerce, digital health and electric mobility. Leading organisations in these categories with intense customer love, high growth and positive unit economics will generate better than market returns.

12.?M&A: After a record 2021, expect deal volumes to grow despite regulation and pandemic challenges. Buyouts backed by private equity will also see solid grow. Technology, financials, industrials and energy will see the most activity. In Australia, Chemist Warehouse will become the biggest IPO of the year creating a new Pharmacy battlefield against Wesfarmers who will ultimately acquire Priceline.

13.?Work: Expect wage inflation to rise and labour shortages to heighten, especially amongst software engineering, data analytics and CRM/personalisation talent. Employees will demand flexibility, well-being programs and hybrid working, where 2 or 3 days a week from home will become commonplace. Travel budgets will not return to pre-pandemic levels ever so video-conferencing will become the default for meeting. CBDs will rebound but not reach their pre-pandemic peaks for many years. Expect elevated attrition rates as employees consider other options.?

14.?Supply Chains: We will see higher commodity prices, higher shipping costs, higher energy costs and slower delivery times. The global shortage of semi-conductors will become a source of geo-political tension and constrain product development. Organisations will review product roadmap timelines, develop a more diversified global supply (i.e. less reliance on China), hold higher levels of inventories (less just in time) and create global contingency plans for supply disruption.

15.?Sustainability: We can expect more extreme weather events resulting in floods and fire. Global pressure on Australia’s climate policy and 2030 target will rise and be positioned as grossly inadequate/irresponsible. Climate policy will be an important, but secondary driver, in the Australian election. Organisations will lead government and accelerate to a low carbon economy with new standards of ESG reporting and analytics. Solar energy across Residential and Commercial dwellings will boom as we move to a more distributed and renewal energy grid.

16.?Mobility: There will be a global shortage of new cars leading to firmer prices. We will see a boom in EVs with the number of models released growing potentially. Prices on ride sharing platforms will rise and we will return to public transport slowly with lower usage than pre-pandemic levels. ?

17.?Retail: We will see the structural shift to e-commerce continue becoming more social and experiential resulting in double-digit growth. Visits to shopping centres will not reach pre-pandemic levels with visits being shorter and more mission versus discovery driven. Meta marketplaces will also continue to grow at a faster rate than the rest of the market. Payments will become less visible with less friction. They will be more cashless, card-less, and digital wallets will dominate. Fulfilment will be faster, free, branded, automated and more sustainable with a renewed focus on supply chain models. Retailers will step-change personalisation and measure life-time value of their best customers.

Here's to your future...