Unexpected levels of disruption caused by health, climate, geo-political and economic related developments have forced business leaders to adapt their strategic course repeatedly in the last three years. Whilst executives are used to the mantra that change is the only constant, the past few years have reduced it to an understatement where change is not only constant but seemingly never-ending.
EY research into more than 3,000 strategic growth plans of privately owned global businesses shows that strategic priorities have changed across four distinct phases.
What might seem a lifetime ago, in 2019, pre-pandemic, the general focus of entrepreneurial business leaders was on accelerating growth. EY’s research shows that the top-3 key strategic priorities at the time were:
- Enhancing customer experiences and optimising customer journeys
- Adopting new technologies (like AI)
- Having a strong focus on building new skill sets and competences into the organisation, mainly related to digital technologies
In 2020, when the pandemic hit and many countries around the world went into an economic recession, business’ priorities had to drastically change. For most businesses this meant a change in focus from growth to crisis management and business continuity. Almost overnight the top-3 priorities changed to:
- Health and wellbeing of the workforce
- Customer retention
- Liquidity and cash flow management
During 2021 things took another turn. The pandemic had shifted, or in same cases accelerated, customer buying patterns and expectations. This meant that companies had to adopt new ways of working and doing business. These changes together with various other forces had caused serious supply chain disruptions.
Whilst this caused ongoing distress for many businesses, for those who were able to adapt quickly to the changing circumstances significant opportunities for growth arose, hence their swift re-focus from business continuity back to accelerated growth.
The division between thriving and surviving companies became distinct and their trajectories rapidly diverged.
The thrivers had shifted their top-3 priorities once more to:
- Re-designing the ‘customer journeys through digital - and renewed product and service innovation to meet the changing customer demands
- adopting new technologies to enable these changes with further investments in data analytics capabilities
- recruitment of digital talent and upskilling of the workforce.
By 2022 new economic and geo-political developments significantly impacted business decisions once again. The ‘Great Resignation’ that accelerated during and following the pandemic has caused serious talent shortages. To top it all off, the devastating war in Ukraine has caused an unparalleled energy crisis, significantly increasing cost levels and further boosting inflation rates. This has in turn prompted central banks across the world to raise interest rates to control inflation – meaning an increased cost of capital for businesses.
With these rapid changes and uncertainty, the top-three priorities today have shifted to:
- Managing talent shortages and retention rates
- Cost saving programs, increasing efficiency and productivity levels, adjusting the supply chain and renewed approaches to pricing to maintain margins
- Adopting new technologies to improve cost levels with a significant rise in the focus on cyber security
One thing has become abundantly clear over the last few years: uncertainty and change are the new normal.
But how do you define the right course for your business amidst all these uncertainties? Three key success factors stand out.
- Building resilience. Resilience, agility, and maintaining an entrepreneurial culture across the business will be vital. Leading companies focus on creating digitised end-to-end visibility of their supply- and value chain which also enables them to simulate different types of disruptions. “Failing quickly” and taking the learnings from past experiences must be encouraged to drive continuous improvement and agility.
- Scenario planning: Resiliency is not just about the ability to respond quickly to disruption and unexpected events. It’s as much about thinking ahead, planning for what might be coming and being prepared.
- Balancing capabilities across 7 key drivers of growth: Market leading companies maintain a strong focus on balancing the company’s maturity across 7 critical drivers: Customer, People, Technology, Operations, Funding & finance, Transactions & Alliances, and Risk. Imbalances in terms of capability maturity across these drivers will sooner or later cause setbacks since the growth drivers are all interconnected.
Volatility is set to persist. Indeed, there are multiple disruptive forces shaping national and global operating environments, including geo-political disruption, climate change and environmental, social and governance (ESG) policies, technological innovation and demographic shifts. Whilst the outlook may look uncertain for the future of globalisation and business, successful private company leaders know that with change comes opportunity.
Agility, resilience, and an entrepreneurial culture will create the airbag the business needs to absorb short-term shocks. Scenario analysis and planning will prepare the business for what might be coming, and identifying and correcting potential imbalances across the seven drivers of growth will help drive sustainable growth and long-term value for all stakeholders.
Resilience through agility and opportunity from risk will be discussed during EY-Parthenon’s Malta Future Realised Conference on October 18 at the Mediterranean Conference Centre. For more information and to register visit: https://www.ey.com/en_mt/events/malta-future-realised-2022
Darin Pace (left) is EY Malta’s Business Development Lead and Peter Bos (right) is EY Global Private Markets Leader
