In this era of uncertainty, many executives are wondering which changes will have the greatest impact on their business in the year ahead. Based on its own research and conversations with thousands of corporate strategists across industries and geographies, The Corporate Executive Board's Corporate Strategy Board has identified 10 major factors that will likely have significant impact across industries and how businesses can best position themselves to prepare.
1. Consumer preferences will remain "reset" based on values, not price
While consumers will buy less, their buying behavior will be dictated by how well products "align to their values," rather than price. Companies should learn to anticipate unarticulated market needs and translate consumer preferences into product offerings.
2. Energy costs will continue to increase in the medium term
In the long term, new energy regulations could fundamentally affect the basic profit structure of many companies, especially those in energy-intensive businesses. Companies that invest in energy efficiency and prepare for supply chain ripples will be better positioned for future.
3. U.S. tax policy could erode the competitive positioning of U.S. companies
The United States' tax handicap increases, relative to emerging markets, may render U.S. multinationals noncompetitive from a margin perspective. As a result, companies should keep repatriation top of mind and play in higher-margin markets.
4. Innovation happens for emerging market consumers, not in emerging markets
To spark new growth streams, companies will increasingly conduct "reverse" innovation—developing products in emerging economies and versioning these products for sale in home markets. The best-positioned companies will push innovation practices to be truly global and facilitate seamless idea flow across their organization and network.
5. A new return to vertical integration gains traction
Recent volatility has created urgency for firms to re-internalize sensitive and strategically activities that were once trusted to third parties. To integrate vertically, companies should scour their "extended enterprise" value network for important assets that could be at risk and internalize them.
6. Industry shifts create competitive shifts
As competitive playing fields change, companies must be prepared to compete with new players in new ways. To evolve with the market, companies must reassess their core competencies and markets and use scenario planning to identify nontraditional competitors.
7. Increases in information requires more judgment from decision makers
Executives have been buried under a flood of information for years, but the exponential growth in data systems continues to exacerbate this trend. As a result, companies should look to cultivate and exploit asymmetries in high-quality information and build robust information filters based on unbiased judgment and experience.
8. Markets reward long-term strategic focus
Investors (and boards) will grow skeptical over the long term of companies that rely on share buybacks to boost stock price, rather than demonstrate a strong long-term growth strategy. To avoid this, align senior executive performance objectives to longer-term corporate strategy objectives.
9. Economic recovery won't mean recovery for everyone
Some companies will have experienced such damage from the economic downturn that they will not be able to successfully recover as the economy does. Companies that closely monitor the health and performance of their suppliers, partners, and customers will be able to guard against business disruptions.
10. A new war for talent commences
Corporate Executive Board data shows that 25% of high-potential talent have expressed interest in leaving their companies—up 13% from non-recessionary periods. Companies must develop high-potential employee engagement plans and maintain robust pipelines of quality talent in in order to win the coming talent war.