As the business world continues to evolve at a breakneck pace, keeping up with the latest trends has never been more critical. Here are some of the more significant trends shaping the economy, leadership, new technology, and staffing issues in today’s business landscape.
The global economy has been through a lot over the past few years, from the fallout of the COVID-19 pandemic to ongoing trade tensions between major powers and inflationary pressures. While nearly everyone has felt the impact in one way or another it is also important to understand and remember how it is we got the current economic climate and how that impacts business owners:
- There were both major “supply side” and “demand side” forces largely as a result of the COVID-19 pandemic that worked in unison to create major inflationary pressure.
- Shortages of materials driven by the COVID-19 pandemic disruptions of supply chains from raw materials to intermediate goods – all at seemingly different times as governments had different responses to the pandemic – which have driven up prices.
- With more “ammo,” when the earliest stages of the pandemic released, consumers and enterprises had pent up demand and resources available for the demand of these discretionary items, thereby increasing demand and the price for these items.
- The “initial” stages of the COVID-19 pandemic – think March 2020 – July 2020, saw both companies and individual consumers increasing their savings at record rates as both a response to the potential economic concerns of the pandemic and as a result of shutdowns in key discretionary spending areas, like dining and travel. This did continue, but not at the same page, throughout 2021.
- The above was compounded by various government stimulus programs like Recovery Rebate Credits, Paycheck Protection Program (PPP) Loans and Employee Retention Credits (ERC) available to individuals and enterprises, which provided increased fiscal support.
- The result of this was rampant inflation on a global scale. The primary method of combating inflation for central banks is by use of interest rates – particularly for the United States, the Federal Funds Rate. The Federal Funds Rate is the rate at which banks can lend to one another of their reserves to meet banking requirements for the Federal Reserve; in practice, it is a benchmark rate used as the “base” for nearly all credit markets – both consumer and business. Since March 2022, when the rate was .25%, the rate has been hiked 8 times to be as of February 2023 4.75%. March 2022 marked the end of a historical run of near-zero interest rates still stemming from the 2008 financial crisis. The increase in rates and interest expense, thereby making it more expensive to borrow, will:
- Decrease consumer demand for items typically financed that are major economic drivers – housing, cars and items of that nature, which will decrease the price of these items.
- Increase interest rates on credit cards, which will increase monthly payments consumers will need to make, thereby overall decreasing consumer demand.
- Increase borrowing costs for organizations which will make major capital expenditures, expansions, mergers and acquisitions more expensive and lower both the cost of these items and lowering the valuations on these projects.
As we move into 2023, businesses must stay vigilant and be ready to adapt to the following economic trends:
- Increased focus on sustainability: As consumers become more environmentally conscious, companies must respond by reducing their carbon footprint and finding ways to be more sustainable. In the coming years, expect to see an uptick in corporate social responsibility initiatives, such as eco-friendly packaging, renewable energy sources, and responsible supply chain practices.
- Digital transformation: The rise of the digital economy has been one of the most significant trends of the past decade, and it shows no signs of slowing down. Businesses must continue to embrace digital technology, from e-commerce platforms to AI-powered analytics tools, to stay competitive and meet evolving customer needs.
- Continued Inflationary pressure: While central banks have worked to ease inflation and some reports are starting to show a decline in the inflation rate, it will normally take several quarters to years for the full impacts of the central banks efforts to see a return to “normal” levels of inflation.
- Increases in interest rates: As inflation pressure continues, the Federal Reserve and world banks will continue to increase rates which will continue to drive consumer demand down and make borrowing more expensive for organizations.
Effective leadership is key to driving business success, and the following trends will shape the way leaders operate in 2023:
- Focus on mental health and well-being: The past year has put a significant strain on employees’ mental health, and leaders must be proactive in addressing these concerns. Expect to see more emphasis on wellness programs, flexible work arrangements, and mental health resources in the workplace.
- Embrace of diversity, equity, and inclusion: The social justice movements of the past few years have put a spotlight on the need for more diversity, equity, and inclusion in the workplace. Leaders must work to create a more inclusive culture, from hiring practices to fostering a sense of belonging among all employees.
New technology trends
The pace of technological change shows no signs of slowing down, and these are some of the most significant trends to watch in 2023:
- Increased use of automation: Automation has already transformed many industries, from manufacturing to healthcare. In the coming years, expect to see more businesses embracing robotic process automation, AI-powered chatbots, and other tools to streamline processes and improve efficiency.
- Advancements in quantum computing: While still in its infancy, quantum computing has the potential to revolutionize everything from drug discovery to logistics. As this technology continues to mature, expect to see more companies investing in quantum computing research and development.
- Artificial Intelligence: AI is becoming a key tool for businesses, with applications ranging from automating routine tasks to analyzing vast amounts of data to gain insights into customer behavior. As the technology continues to evolve, companies that don’t embrace AI risk falling behind their competitors.
The workforce is constantly evolving, and businesses must stay ahead of these trends to attract and retain top talent:
- Emphasis on upskilling and reskilling: As automation takes over many repetitive tasks, workers must adapt by developing new skills. Companies must be proactive in offering training and development programs to help their employees stay relevant in a rapidly changing job market.
- Increased use of flexible work arrangements: The past year has seen a massive shift towards remote work, and many employees now expect greater flexibility in their work arrangements. Companies must be willing to embrace remote work, flexible hours, and other options to attract and retain top talent.
- Increased wages: Much like the inflation experienced for increased costs of goods and services, this too impacts the labor markets. With less available staff for roles, organizations will need to increase wages to attract and retain employees.
The world of business is constantly evolving, and staying up to date on the latest trends is essential for success. By keeping an eye on these economic, leadership, technology, and staffing trends, businesses can stay ahead of the curve and continue to thrive in a rapidly changing landscape.
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Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.