From inflation to the war in Ukraine and the ongoing effects of COVID-19, a perfect storm of economic, social, and geopolitical disruptions has increased uncertainty for business leaders. Building on research and insights from technology executives across industries, Metis Strategy has identified five actions leaders can take to navigate that uncertainty in the months ahead:
Recent downgrades to economic forecasts suggest an economic decline is on the way (indeed, some argue that it has already begun). In July, the International Monetary Fund released an updated global economic outlook which forecasted growth to slow to 3.2% in 2022, down an additional 0.4% from its April forecast and sitting at just above half of the 6.1% growth from 2021. The IMF cited the war in Ukraine, supply chain disruptions, and tighter monetary policy among the key drivers behind the decline. In the U.S., inflation continues to rise, recently surpassing 9% to reach a 40-year high. Additionally, interest rate hikes to tame inflation are already underway by the U.S. Federal Reserve. With so many economic factors at play, uncertainty will be the only constant for the time being. As such, contingency planning and risk management in decision making will be vital to long-term success.
Multi-scenario planning allows decision makers to identify potential outcomes and the likely predictors of each to ensure that the organization is ready to act quickly no matter what comes to pass. Companies must not place too much emphasis on small data variations, as this course of action will not necessarily yield the best results given the array of factors at play. Rather than try to predict or plan for each incremental interest rate hike, for example, leaders instead should prepare for a combination of possible economic conditions: inflation and a recession, inflation and economic growth, stagflation, and so on.
By pursuing macro-level planning for multiple scenarios, organizations will better be able to see the shifting landscape and make timely adjustments rather than wavering due to “paralysis by analysis.”
New work models demand new infrastructure. That sentiment has never been as profound as it was over the past two and a half years as CIOs facilitated a massive shift to remote work. Today, those CIOs face a mandate to enable productive work in a hybrid environment.
As hybrid work models become the norm, it is time for CIOs to focus once again on their organization’s long-term agenda. Corporations know that the pace of change in technology has never been as quick as it is today, and at the same time will never be this slow again. With over 70% of organizations pursuing a flexible or hybrid work model, companies must invest in infrastructure, training, and culture to provide teams with the tools they need and ensure a strong and collaborative environment across more flexible work models.
That requires giving people the tools and skills they need to navigate the uncertainty that lies ahead. Upskilling and reskilling programs are some of the most prominent ways to do this. A LinkedIn study found that 94% of employees would stay longer at a company that invests in their learning. This has manifested itself in many ways at insurance giant MetLife, which launched a digital academy for employees to develop technically. The company has also worked to foster a culture in which employees feel empowered to achieve their career aspirations, Bill Pappas, MetLife’s Head of Technology and Operations, said in a recent episode of the Technovation podcast. Part of developing a strong hybrid model includes investing in the necessary tools, from collaboration platforms to cloud infrastructure, that enable teams to work productively from wherever they are.
Every organization must define its own version of a sustainable work model, including how to attract and retain employees, and how to nurture the desired culture. As old work operating models are redefined and new ones are implemented, investments in people and infrastructure that enable digital dexterity, paired with an increased focus on cultivating culture, will be key differentiators for organizations’ long-term success.
Supply chain challenges brought on by COVID-19 and the war in Ukraine, among other factors, have exposed the fragility of global trade networks, which have seen relatively little disruption over the past 30 years. The global economy’s reliance on Ukraine and Russia for crucial commodities such as oil, wheat, and neon (used in chip manufacturing) has hurt national economies and small businesses alike. The war also has disrupted both air cargo routes and sea shipments, driving up wait times and prices. Trade restrictions (such as sanctions and tariffs) and weakening trust between countries further compound those challenges. Increasingly, companies are questioning whether global supply chains will be as beneficial as it has been in the past.
Consequently, executives are re-assessing the viability of relationships with suppliers both foreign and domestic. Decision-makers may benefit from diversifying their supplier portfolios, possibly favoring those that are more geographically proximate and located in more politically stable countries to further help prepare and protect against future disruptions. Companies such as Intel and General Motors, for example, are building new manufacturing capabilities within the U.S. to decrease their dependency on suppliers in Asia. However, the decision to regionalize varies widely across organizations and industries, and many economists, academics, and executives are speculating about what the next decade holds. Professor Willy C. Shih of Harvard Business School argues that regional supply chain blocs may be the future of international trade as organizations emphasize safer and more stable routes. Others contend the benefits of a global supply chain (i.e. reduced costs), will regain value and that a “transformational shift from global to regional business” is unlikely. The common factor across both theories (and many others) is that significant instability is likely to endure. That makes building supply chains with sufficient flexibility of paramount importance. Technology offers several avenues to achieve this.
Many organizations are turning to digital tools to boost supply chain resilience and transparency. Companies can leverage artificial intelligence and machine learning to carry out risk analysis of supply chain patterns in real-time. Autonomous planning, for example, allows organizations to increase supply chain efficiency and decrease necessary human involvement. Enterprise resource planning upgrades and advanced track-and-trace solutions also offer more visibility into the movement of goods and can help mitigate risk. Furthermore, emerging technologies such as blockchain, autonomous mobile robots, and 3D printing may offer additional benefits from the warehouse floor to a product’s final destination.
Cybersecurity remains a priority for all members of the executive suite. Last year saw a record number of data compromises, up 68% from 2020 with an average cost of a staggering $4.24 million per breach. Roughly 65% of respondents in Foundry’s 2022 State of The CIO study said current socioeconomic pressures have further boosted the importance of increasing cybersecurity, and cyber has been noted as the CEO’s top priority for IT in 2022.
The increasing volume of digital interactions has led to a dramatic rise in the likelihood of breaches and the cost of protection. Facing a threat landscape that is evolving faster than ever, organizations should act quickly to re-evaluate company polices, assess risk management strategy, and bolster both internal and external security practices. This requires a mindset shift in how security is viewed. Traditionally viewed purely as a cost center, organizations must view cybersecurity as a critical piece of the enterprise risk mitigation strategy. Today, businesses must continuously update their cybersecurity practices to reduce the risk of becoming a target and ensure they can respond quickly if or when they face an attack.
Technology leaders should communicate clearly to C-level peers and boards about how risk is being managed. At the same time, it’s important to continue developing strong cybersecurity hygiene at all levels of the organization and to disincentivize unsafe behaviors. Security policies should be evaluated and updated regularly to ensure that they are keeping up with changing times. Regardless of what specific technologies an organization pursues, it must accompany the mindset shift to cybersecurity ultimately as a risk mitigator and cost saver, rather than just a cost center.
Environment, social, and governance initiatives (ESG) have been on the rise for the past several years. Individuals are becoming increasingly concerned not only with working for a company that is actively pursuing ESG initiatives, but also in purchasing from one. This trend shows no signs of slowing down.
It is critical that organizations clearly communicate actions and results of ESG efforts to the public. Historically, however, ESG goals have not always had clear or easily obtainable data and metrics. Technology is making that job easier. Connected devices, for example, can conduct remote diagnostics of buildings, enabling “smart buildings” and helping to minimize their carbon footprint. CIOs can lead the charge on ESG initiatives by identifying key results that IT can deliver, weaving ESG into an organization’s broader digital strategy, and rallying support across the organization to ensure progress on ESG initiatives is fully realized.
The global business environment is in a period of transition. Leaders must use this time to ensure their organizations can respond in a nimble fashion to unexpected changes and not only survive, but thrive, no matter what the future holds. This requires a holistic look across people, process, technology, ecosystems, and strategy and, in many cases, willingness across the enterprise to transform operating models and ditch traditional ways of working. Technology leaders can be at the forefront of this shift, pairing their expertise in digital with a focus on operational excellence to drive sustainable change across the enterprise.
