Everything changes with time and changes bring disruptions. Here are five macro factors that will impact the business environment in 2023 and force businesses to change.

1. Geo-political changes

Digitisation and globalisation have made the world’s economies more interconnected. Nowadays, even a small local incident may have a significant worldwide impact. A case in point was the Suez Canal blockage in 2021 due to an aground container ship. The incident led to a major supply chain crisis across Europe and many parts of Asia. Likewise, the Russian-Ukraine war disrupts businesses in places not even remotely connected to the war front.

Such geo-political challenges will continue to have an impact on businesses in 2023. The Russian-Ukraine crisis shows no signs of blowing over. Worse, the conflict threatens to spill over to the rest of Europe and impact businesses significantly. The tension between China and Taiwan is another flashpoint that could disrupt businesses.

Disruptions need not come through wars alone. Governments worldwide are increasing regulations and policies that impact businesses. The pandemic-related costs induce governments to increase taxes. Rising inflation strains the bottom line and reduces sales. The fallout of a negative balance of trade and local unemployment lead many nations to raise import duties. Such regulations can break business models and also throw up new opportunities.

2. Environmental sustainability

Climate change is the next big crisis after COVID and will likely impact businesses in a big way in 2023. Almost all Deloitte’s 2023 CxO Sustainability Report participants opine climate change negatively impacts their organisations.

Climate-linked disasters such as floods and high temperatures make the business environment unpredictable. Businesses must remain flexible to improvise last-minute changes to cope with climate-induced disruptions.

Most CEOs opine that the high prices associated with 2022 will continue in 2023, thanks to climate change. Soon, the costs to mitigate climate change will become linked to inflation, which may spiral out of control.

With public consciousness high, businesses come under pressure to adopt sustainable practices. Companies that reduce their carbon footprint become attractive to customers and other stakeholders. Businesses that cannot play ball might become unpopular and fall in the crosshairs of regulators.

Businesses change their business models and operational practices to cope with climate change. The Deloitte survey reveals 59% of companies have switched to sustainable materials. 59% of companies also make conscious efforts to improve energy use efficiency. 49%of companies develop new climate-friendly products or services. 

Examples abound. A case in point is Nike having changed its work process to adopt a form of fabric weaving that uses less material and labour time. The change has kept huge quantities of potential waste out of landfills. It also reduced the company’s materials, transportation and waste disposal expenditures.

3. Talent shortages

For over a decade, the talent shortage has crippled several industries, especially IT and field services. Skill development needs to catch up with technological advances. Gen Z has a different outlook on life and is not too keen on several types of jobs that businesses offer. The biggest manifestation is the “great resignation” that followed the pandemic. Employees look for meaningful employment beyond compensation. They were ready to stay home on benefits rather than put up with work they did not like. 

Automation and AI may mitigate the shortage of lower-level jobs to some extent. But there is no substitute for the cognitive ability of the human workforce at higher levels. 

In 2022, European employers struggled to fill 1.2 million open job roles. Employers in Australia faced a similar struggle to fill 400,000-odd vacant positions. In 2021, Singapore saw 163 job vacancies for every 100 available candidates.

Companies engage in a talent war as the labour supply shrinks and the power shifts from employers to employees. The labour shortage will become more acute in 2023. Data from CFO.com reveals more than one out of three employees plan to quit in 2023. 90% of business owners find very few qualified candidates for such open positions. An analysis of Gen Z skills gaps reveals workforce-wide erosion of social skills.

Enterprises that expect to cope with such crippling shortages will have to:

• Devise innovative methods to headhunt the right talent. Increasing the paycheck will not suffice. Innovative measures such as “quiet hiring” and non-traditional hiring tactics snag in-demand skills.
• Invest in reskilling and upskilling employees to make them future-ready. The WEFs Future of Jobs Report estimates 50% of all employees need reskilling by 2025. Upskilling enables internal talent mobility.
• Promote remote work and work-from-home to source talent from across the globe. This will need significant changes to operational models and reporting procedures.
• Enrich the employee experience to reduce talent churn. The 2022 Gartner Frontline Worker Experience Reinvented Survey reveals 58% of enterprises that employ frontline workers have invested in improving their employee experience. One-third of those who haven’t done so will do so within the next 12 months.

4. Technological advancements

Technological advancements have always disrupted business. One of the exemplary cases was Eastman Kodak, once a household name, filing for bankruptcy in 2008. Digital cameras rendered their photographic film-based cameras obsolete. Likewise, Nokia lost out to Samsung and other mobile upstarts due to its inability to adopt the new smartphone technology.

Several businesses, such as Uber and Airbnb, developed successful rent-based online business models. Such hyper-efficient and flexible models offered customers a new world of convenience. Traditional brick-and-mortar counterparts struggled to match such convenience. 

Rapid technology advances will continue to disrupt the business landscape in 2023. Several emerging technologies, including automation, IoT and Artificial Intelligence, will become mainstream. GhatGPT is a case in point, with several generative AI tools threatening a paradigm shift in work and business. The extensive 5G rollout in 2023 will enable realising the potential of several of these technologies. Once that happens, several incumbent business models will become obsolete. Upstarts will soon replace companies that do not change. Businesses hoping to cope with the ongoing tech-based disruption would do well to:

• Commit to digital transformation. Even if a business is happy with the status quo, the odds are that customers, suppliers and employees won’t be happy and will move on. Digital transformation helps companies upgrade systems and link to the broader ecosystem.
• Give data its due. In the age of AI, businesses place increasing trust in algorithms. Data becomes all important, and the wrong data could lead to algorithmic bias and errors that cost the company heavily.
• Embrace a culture of transparency and openness, coupled with empowering work teams. Without such a positive culture, it becomes difficult for employees to leverage the benefits of the latest tech adoption.

5. Cyberattacks

Cyber attacks are at an all-time high. The risk of business disruption owing to cyberattacks will remain high in 2023. Allianz’s 2023 Risk Barometer report reveals cyber-attacks will threaten businesses this year, also. Rapid digitisation makes cyber incidents the top concern in the report for the second year running. For instance, a ransomware attack can sound the death knell of the business. 

Most businesses struggle to plan or prioritise amidst uncertainties. The right tools to keep pace with the fast-paced and uncertain changes help them to cope. Traditional ERPs and CRMs are not up to the task. Businesses need state-of-the-art cloud-based and AI-powered solutions such as Workday solutions. Workday’s AI-powered open and connected system empowers the workforce and enables seamless operations. The suite offers several possibilities, including collaborative planning, actionable data, and digital transformation. These features allow businesses to become flexible and resilient. Businesses also become empowered to make fast decisions and cope with uncertainties well.