Six 2023 Leadership Trends That Will Reshape the C-Suite
Profits, politics and planning will look very different in the months ahead.
The last few years have proven that disruption is the only “normal” in business. The world is still slogging through seismic plot twists of the previous few years, making inflation, supply chains, Ukraine and hybrid workplaces a critical topic on virtually every corporate agenda.
While most forecasts call for nothing but grey skies, we disagree. History shows that periods of economic uncertainty heighten innovation and lead to new products, services and business models. After all, companies like General Motors, Microsoft and Electronic Arts formed during recessionary times.
In 2023 we expect to see new ideas and products emerge from the rubble of disruption we’ve experienced on a global scale. But to get there, c-suite leaders will need to rethink how they lead their organizations.
We expect the most successful c-suite leaders to lean into these six key leadership trends in the coming year.
1. Productivity Improvements Will be a Critical Path to Profitability
Over the last few years, a handful of digitally native organizations have chosen growth over profitability and had ample investors who were happy to take risks on future opportunities.
Rising interest rates have ended that party. And as a result, investors are pressuring companies to continue to grow and make money or at least commit to concrete paths to profitability.
Throughout the second half of 2022, many organizations abruptly shifted their focus from growth at all costs, even if that meant risking profitability, to achieving profitability by cost-cutting measures.
And while some companies may need to lean into cost-cutting efforts in 2023, more c-suite leaders will look to enhancing productivity within their workforce to achieve sustainable growth and profitability. For these leaders, the productivity improvements will come from technology, data and analytics.
2. Balancing Short-Term and Future-Back Planning to Drive Sustainable Growth
Long-term planning will always be a core component of business strategy. But the upheaval of the last few years has made it painfully clear that companies need to speed up the journey from thinking to doing. And that means integrating quick wins with future vision, so that the results you drive today do not hinder your long-term progress.
Take, for example, Disney’s recent decision to increase prices for park admissions, annual passes and vacation clubs. This decision infuriated loyal Disney fans, who accused the company of price gouging. While the company may have achieved a quick win from this plan, the long-term effects of the decision may slow Disney’s progress toward its vision.
In 2023, c-suite leaders will need to carefully balance short-term and future-back planning:
- Short-term planning: This type of planning requires leaders to think and make at the same time. Risks are reduced with small bets to show progress quickly. Using data and behavioral insights, companies can identify things they know, which they can execute now. They can also explore what they think they know with new and near-term concepts. And those efforts will inform what they think, allowing them to hypothesize
,and validate along the way.
- Future-back planning: This approach is about creating predictive models of the future, nine years or more out, to model the probable and preferable future. Which levers should a company pull to get there? Might they do better to build, buy or partner? It considers complex elements, such as politics and socioeconomic shifts, so leaders can confidently see where the business fits in the future and the immediate steps they need to take to get there.
C-suite leaders who successfully lean into this leadership trend will be well-positioned to achieve immediate wins while also investing in the future of their organizations.
3. Purposeful Data-Driven Decision-Making Will Reduce Risks
Data-driven decision-making is critical to increasing confidence and reducing risks. And while that’s been true for decades, more and more companies realize they may have too much historical data and need more predictive data to better inform their decisions. As a result, many executives are making different demands of their AI and analytics teams, aiming to sharpen their business strategy.
But being data-driven in your decision-making is only one part of the equation. During times of uncertainty, it’s essential to be purposeful in utilizing data to inform your decision-making.
Amazon has long aced this approach, using analytics to evaluate whether a decision is a one-way-door or a two-way-door.
Two-way-door decisions are safer and relatively easy decisions to reverse. For example, if the pricing strategy for a new service is hindering performance, it is possible to right-size and reposition the offering or pricing strategy.
One-way door decisions are more complex, nearly impossible to undo, and require rigorous scrutiny. For instance, a company that misjudges the demand for a product or service has no opportunity to take that decision back. These decisions require rigor and high confidence levels that predictive data modeling can provide.
In constrained business environments, risky decision-making can be detrimental to the success of your organization, which is why it is more critical than ever to understand the true impact of the decision and be purposeful in how you evaluate the opportunity.
4. Environmental, Social and Governance (ESG) Regulations Will Require Businesses to Rethink Their Global Approach
There was a time when everyone building a global business and a global brand thought they could have one approach that would work across different countries: One operating model. One brand positioning. One value proposition. That time is over. Every country has divergent priorities, consumers and governments requiring differentiated business strategies.
Consider the increase in ESG regulations that have surfaced globally. For example, the European Union (EU) recently passed the Corporate Sustainability Reporting Directive (CSRD). This new directive will soon require large companies that meet specific requirements or are listed on EU-regulated markets to disclose environmental and social metrics across their supply chains. It will also hold these companies legally responsible for their ESG commitments. To meet CSRD targets, large companies doing business in the EU will have to rethink their supply chains and operations and their entire value chain from product and service design to business models and innovation.
And in the U.S., the Securities and Exchange Commission’s new proposed rule amendments will require domestic and foreign companies to disclose climate-related risks, governance of climate-related risks, greenhouse gas emissions, climate-related financial statement metrics
, and information about climate-related targets and goals.
Global businesses need to ditch their one-size-fits-all approach to international expansion to meet evolving government regulations and consumer preferences. Instead, these companies will need to find new innovative ways to tailor their brands, business strategies and operations to meet the diverse needs of each market.
5. New Models of Production Will Unlock Sustainability, Efficiency and Customer Intimacy
The era of mass production may be ending right in front of our eyes. As a result, we’re seeing a new leadership trend emerge from the c-suite: decentralization. Not only is this a solution for the supply chain challenges it is also a more sustainable and efficient way to impact local communities.
Many leaders also realize that decentralization can get their products into the hands of their customers in a quicker and more sustainable way. Localized production also allows for co-creation with their customers, improving service and a low-cost path to differentiated and more relevant product offerings.
There are risks, however. Getting decentralization right will require leaders to closely re-examine their operating models, decision rights
, and leadership skills. Without leadership setting a solid direction for the organization, leaders risk efficiency without innovation or innovation without efficiency.
6. Leaders Will Walk a Tight(er) Rope When It Comes to Political Issues
The purpose-driven gospel of recent years insists that companies take a stand on issues–or risk losing employees and customers. But figuring out how to do so keeps CEOs, CPOs and CMOs up at night.
BlackRock’s struggles are emblematic of this challenge. Six states (thus far) have yanked billions in investments from the world’s largest money manager, protesting its commitment to environmental and social change.
Over the last few years, organizations have been called upon to take a stance on hot-topic political issues ranging from healthcare to ESG. But taking a stance (or not) has become more complicated as companies increasingly navigate accusations of being either too woke or not woke enough.
In the year ahead, leaders will strive to sort out political agendas with three different pathways:
- Publicly support political issues
- Stay silent on political issues
- Show support for political issues within their workforce policies without publicly supporting the cause
Regardless of where you or your company stand, the decision to engage publicly on political issues needs to consider the full range of potential consequences that might arise. Speaking out quickly might feel good in the first 24 hours, but unintentionally create outcomes that fly in the face of the very values you espouse.
The only true business constant is continuous business disruption. Creative leadership, purposeful planning and data-driven decisions will be vital to driving profitability and growth during times of uncertainty.