Business trends to watch in 2023

General

2022 marked the end of two significant eras. Firstly, it signaled the conclusion of almost three decades of easy access to funds, with investors flocking towards growth stocks, startups, and speculative technologies in pursuit of high returns on their investments. However, with interest rates hovering between 3-4% and set to increase, we can anticipate a shift in investment portfolios. Private equity investors will become more vigilant, while startups will find it increasingly challenging to raise funds. Property prices will likely soften, and bubbles may burst. The effects of this change in monetary policy will be profound and are already beginning to manifest.

Secondly, 2022 saw the conclusion of an era of disruption, where nonconformists and insurgents had the upper hand over the establishment. In business, the exponential growth of big-tech companies with their "move fast and break things" mantra was celebrated, and Masa Son (Softbank), Jeff Bezos, and Elon Musk were lauded for their daring ideas. In politics, Donald Trump and Boris Johnson defied conventional wisdom and succeeded by working against the establishment.

However, over the last four months, this disruptive cycle appears to have finally ended. Celebrated tech firms such as Facebook, Shopify, and Klarna experienced significant losses in their value. Cryptocurrency exchange FTX even went bankrupt. Elon Musk's handling of his Twitter account was severely criticized in the media. In politics, Liz Truss' disastrous premiership highlighted the dangers of moving too fast and flying blind, while most of Donald Trump's election-denying supporters failed to get elected in the mid-terms.

As we enter 2023, we may be returning to a more practical approach to business and politics, where change is incremental, and innovators work alongside established players rather than against them. Real expertise may be valued once again instead of disparaged. Let's hope for a return to a more pragmatic style of leadership.

Strategy

In the new year, we may see some changes in corporate strategies. For many years, big companies have relied on outsourcing and offshoring to save costs. But recent supply chain issues have shown that this approach can be risky, as it can lead to a loss of control and capabilities. Some managers now regret outsourcing too much.

Similarly, companies have also been focused on their "core business" and have spun off other divisions. However, this approach has made them less able to adapt and innovate when faced with unexpected challenges like Covid lockdowns. Some executives now feel that they have been too narrowly focused.

As a result, diversification may make a comeback. This means that companies will look to expand their range of products or services, which could help them to be more adaptable and innovative in the face of changing circumstances.

Organisational

Looking ahead, there are things we know and things we don't know. We know that people are living longer and having fewer children, so our population is getting older. Older workers can be really valuable during tough economic times. Technology is also advancing quickly, with more people working from home and using digital tools. This means managers need new skills to manage remote teams and help workers learn new digital skills.

Social trends are less predictable, but we do know that more women are working and need flexible working options and childcare support. There are also unpredictable events, like the ongoing debate about hybrid work arrangements. But regardless of these uncertainties, people want more flexibility and personal autonomy in their work.

To prepare for the year ahead, we need to bring different generations together, invest in training and skills development, and create more flexible work arrangements. This will help us build resilience and support healthy, engaged employees who can make the most of the opportunities that come our way.

Economics

In 2023, there will be a lot of economic uncertainty, which means that businesses will be unsure about how to invest their money. Uncertainty can come from many different factors, like the economy, regulations, and taxes. When the economy is in a recession and there is high inflation, businesses may be tempted to spend less money on things like equipment and technology. But, this is actually the time when investing in growth can be most important.

Looking back at the dotcom bubble in the early 2000s, companies that strategically invested in their business while also watching their expenses tended to do better than those that just cut back on everything. Amazon, for example, didn't make a profit until 2002, but they continued to invest and grow during the recession, which set them up for success in the future.

So, the key trend to watch in 2023 is uncertainty, and the challenge for businesses will be how to manage it during a recession. Those who can successfully navigate the uncertainty will be in a good position to grow when the economy eventually recovers.