While many business challenges have surfaced (or worsened) in 2024, companies should address the following current business issues:
- Creating stability in the age of uncertainty
- Adapting to the future of work
- Adopting ESG as part of your business model
- Accelerating digital transformation
- Cultivating robust agility
Business challenge: Creating stability in the age of uncertainty
COVID-19 and the Russia-Ukraine war have disrupted the equilibrium of supply and demand, sending shock waves through the world economy. The compounding effects of these current business problems affected demand, the cost of goods, supply chains, and investment decisions, resulting in a period of inflation — and increasing the likelihood of a recession or stagflation.
Inflationary pressures
According to the OECD, year-over-year inflation rose to 9.6% in May 2022, representing the steepest price increase since 1988. This resulted from a combination of inflationary pressures, namely an increase in demand, energy costs, and supply chain disruptions.
While the pandemic initially decreased demand due to health scares, lockdown measures, and travel restrictions, vaccine rollouts and monetary stimuli policies skyrocketed demand beyond what supply chains could handle. The increased demand, coupled with the effects of the Russia-Ukraine war, has caused the largest increase in energy prices since the 1973 oil crisis, affecting the overall price of commodities.
In addition, the pandemic caused delays in the production of many goods, which resulted in undiversified supply chains, mass layoffs, trucker shortages, and factory shutdowns that slowed the continuity of supply chains and raised prices for consumers. Combined, these pose one of the biggest challenges for businesses today.
Looming recession or stagflation
Given these inflationary pressures, experts worry about a looming recession or stagflation as governmental entities step in to correct inflation.
Central banks have already started implementing contractionary monetary policies to counter the effects of inflation. Yet, achieving the textbook “soft landing” is rare, as restrictive monetary policies can easily lead to a full-blown recession. This can prompt businesses to prioritize cost-effectiveness, resulting in layoffs, decreased profits, reduced cash flow, and limited R&D.
Stagflation (where a recession sets in before prices have had a chance to decrease) is also a possible business challenge that can result in low growth, high unemployment, and inflated prices. This unfavorable combination can wreak havoc on economies and cause a dilemma for policymakers, as trying to lower inflation may cause further unemployment, while decreasing unemployment can worsen inflation.
What to do
Given this period of instability, it’s a good opportunity to readjust your business goals and adapt to economic rifts by, for example, recession-proofing your business. Here are three focus areas for your business goals to navigate this business challenge:
- Ensuring spending visibility
- Investing in technology and innovation
- Upskilling existing employees
Ensuring spending visibility
Gaining an acute understanding of your organization’s spending can help your business stay afloat. By creating better visibility into your spending, you can get a detailed picture of how, where, and why money circulates throughout your company. Using this knowledge, your organization can:
- See where money is wasted, allowing you to cut costs and increase your savings
- Enhance prioritization and resource deployment
- Understand which activities can be automated
- Improve and adapt your sourcing strategy
- Streamline operations
Investing in technology and innovation
Technology can reduce business costs via “digital deflation.” As digital products and services are cheaper than offline alternatives, your business can use them to decrease costs and lower consumer prices. Moreover, implementing tech tools that automate repetitive tasks, such as scheduling and billing, can streamline processes and allow employees to focus on more strategic activities. This facilitates more cost-effective business operations and weakens the effect of economic fluctuations on your business, thus reducing its impact as a current business issue.
“What economists know, but the news reporters generally ignore…is that digital goods and services typically reduce both actual and measured inflation.”
– Forbes