After almost two years of economic and operational disruption, organisations have moved beyond the survival battles associated with Covid and are looking forward to strong growth. But alongside the perceived opportunities, business leaders are also facing some profound and difficult challenges, ranging from recruitment problems and supply chain shortages to the longer term impact of climate change. In theory at least, businesses know that to take advantage of increasing demand they will have to do things differently in order to remain competitive. If 2022 is to become the year of growth, continued business transformation is essential.
But to some organisations, this is a daunting prospect. As transformation and digital disruption expert Roger Flynn pointed out at a recent Boardroom event, it is tempting for companies to stick with what they know: “There are a number of reasons why people stand on the sideline and don’t jump in,” he says. “The fear of change can be absolutely debilitating.”
But a philosophy of “if it ain’t broke, don’t try to fix it” isn’t sustainable in the current business environment.
An Optimistic Mood
Over the past few months, there has been a palpable optimism in the air – a bullishness even.
That much was evident in a survey carried out by professional services firm, Deloitte in the final quarter of 2021. Based on responses from CFOs representing FTSE-100 and FTSE-250 companies, the study revealed not only an appetite for growth but an expectation that performance is set to improve in the months ahead.
Out of the 85 CFOs taking part in the study, 59 per cent reported that demand for their company’s products and services had returned to pre-pandemic levels while around a quarter expected a full recovery by the third quarter of 2022. Moreover, an overwhelming majority (84 per cent) expected productivity to increase.
As Ian Stewart, chief economist at Deloitte, observed on publication of the report: “Like equity markets, which rallied into the new year, CFOs seem to be looking past Omicron and plan to focus their businesses on growth in 2022.”
But if the opportunities are apparent, the headwinds are intense. And truth to tell, organisations are not expecting an easy run over the next few years. The Covid risk has been downrated, but while order books are filling up, the ability of businesses to address increased demand is being undermined by continued staff shortages (often characterised as the great resignation) and supply chain problems. According to Deloitte’s survey, 46 per cent of businesses are currently experiencing recruitment issues and 37 per cent are reporting disruption to their supply chains.
In addition, existing inflationary pressures have been supercharged by the impact of the war in Ukraine on oil and gas prices. Meanwhile, businesses are also having to prepare for a world in which the use of fossil fuels is phased out.
The Key to Sustained Resilience
So, the challenge for businesses is to take advantage of growth, without being knocked off course by unpredictable events.
The good news is that businesses are responding to that challenge. Deloitte says more than 90 per cent are planning to invest in digital transformation and around three quarters are set to spend more on developing workplace skills. This kind of investment is essential if organisations are to overcome current and future challenges. Digital transformation is the key to sustained resilience.
The Data Imperative
A key factor in creating resilient businesses will be an increased use of data – or to be more precise data analytics tools. This was a point made strongly by Richard Fleming.
“When you have thousands of people within an organisation, you have to make sure they are empowered from the top, so they have the tools to facilitate the change that they need to succeed,” he said.
But what does that mean in practice? How for example can data analytics be applied to mitigating supply chain disruption, a problem created by factors as diverse as semiconductor shortages, the war in Ukraine (and sanctions against Russia) and China’s rolling shutdown of Shanghai?
It’s a question of empowering decision making with actionable information. With supplies of components, goods or raw materials often being shipped in from all points of the compass, managers need not only data on availability and delivery status but also information on compliance with regulatory standards. With sustainability and the net zero agenda becoming ever more important, organisations also need to assess their supply chains in terms of Environment, Sustainability and Governance (ESG) standards. With analytics tools providing insights, managers are able to respond to supply chain problems much more quickly.
Analytics can equally be applied to addressing labour shortages. With investment in skills rising, employers must also pay attention to recruitment and retention. Analytics tools can provide an ongoing narrative on who comes into the company, who is leaving, and why. This in turn can help drive recruitment and training policies and strategies.
Many of the challenges currently faced by businesses will pass in months, or a few years. The one certainty is that new problems – whether economic, regulatory, or geopolitical – will emerge to take their place. It is companies that have invested in themselves – and in digital transformation – that will succeed.