Business operations trends for 2023 (6 predictions, 5 ways to respond)

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Introduction

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Welcome to 2023 - a year that is shaping up to be challenging for businesses due to a number of macroeconomic trends. Inflation is on the rise worldwide, economic growth is slowing (bringing some countries even into technical recession), and external capital with high interest rates is limited.

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In this blog post, we'll delve into the trends that operations executives (e.g., COOs, VPs, or Directors of Operations) and operations managers can expect as they navigate the challenges of 2023, and I’ll also provide some hints how best practice operations teams will respond to these struggles.

What to expect from 2023 if you work in business operations?

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I know that this time of year is filled with predictions and forecasts, so I'll keep mine brief. While you may come across many articles about 2023, this one is specifically geared towards business operations teams managing the day-to-day of operationally complex companies, such as ones working in logistics, supply chain, customer service, or finance functions. Please note that the following predictions are based on my personal opinion, derived from following macro trends and conducting interviews with over 300 operations executives in the past few months.

1. Increased pressure from CEOs (and shareholders) to improve profitability.

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In the second half of 2022, the focus has already shifted from growth to profitability, but this trend is expected to continue and intensify in the new year. Profitability will be crucial for businesses to survive, to be independent of external financing, and to be able to compete for customers.

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Operations executives will need to further reduce costs, closely manage margins, and report on profitability metrics with greater granularity and frequency.

2. Changing, but contradicting consumer behavior.

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Consumers are already more price-sensitive and this trend is expected to continue. They are turning to cheaper (often white-label) products, buying in smaller quantities, and purchasing less frequently. However, there will still be strong buying power from the most affluent segments, and this will lead to increased competition for their money. Balancing costs and customer experience has always been a challenge for operations teams, but it will be even more difficult now. It is helpful if your board has a clear strategy and therefore operations can make an informed decision between the two.

3. Continuing layoffs - and bankruptcies.

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There will be further layoffs in 2023, and given the pressure on unit economics, these layoffs may be larger than what would be justified by a slowdown. This means that operations teams will need to be prepared to do more with less. Additionally, there will unfortunately be additional bankruptcies, particularly among smaller, more fragile companies. It's more important than ever to diversify your supplier base and have a contingency plan in place to protect the continuity of your operations.

4. Consolidation of competitors.

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Difficult economic conditions are likely to accelerate the consolidation of many ventures in 2023. Your smaller competitors may merge in order to achieve better unit economics, which will put even more pressure on your profitability targets. Your board may also decide to acquire smaller players in the industry, and it will be important for your operations team to be ready to seamlessly integrate them.

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Make sure you have standardized processes and best practice tools in place to enable a smooth integration.

5. Acceleration of globalisation - again.

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In recent years, globalisation has slowed due to supply chain disruptions caused by COVID, trade wars, and other shipping incidents. However, it is my belief that the current economic environment will reverse this trend. Cash is king, and companies will be more focused on price than ever before. With shipping delays and high container prices no longer as much of a concern, operations teams may need to find new partners in faraway locations again. Don't be afraid to do so.

6. Increased focus on sustainability.

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As you focus on improving profitability, don't neglect sustainability, which will become even more important in 2023. I hope and believe that business operations teams will also prioritize sustainability even more in the new year. However, this emphasis on sustainability will be driven more by economic interests than anything else in 2023, due in part to high energy fees and the newly implemented regulations that will soon impose carbon taxes on companies.

How will the best operations teams respond with the use of technology?

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Companies that have already invested in operational efficiency are likely to see their investments paying off in 2023. For those that have not yet made these investments, it's important to start doing so as soon as possible. Fortunately, we have technology available that can enable significant improvements in a matter of weeks, rather than years.

1. Double down on digitalisation & automation.

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One of the most effective ways to reduce costs is to digitize and automate your day-to-day operations. To get your requests prioritised, use data-driven business cases to persuade your tech teams. If they are unable to fulfill your requirements, consider looking for no-code solutions in the market that can help improve your operations - there are many options available.

2. Utilise your data - make it gold.

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Investing in data is essential for improving operational efficiency. If you have not already done so, make sure your tech and data teams are focused on improving data collection and storage. Make sure that they follow best practices, such as storing data in cloud-based, centralised data sources and making them readily available for business use. If you have these systems in place, it's important to finally put them to use. There are many ways that granular data can be profited by, such as monitoring and alerting of operational incidents or granular KPI changes. Another prioritised use case should be to apply machine learning on operational data to find efficiency improvements. Don't let this valuable resource go to waste.

3. Scale your AI capabilities.

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Artificial intelligence is no longer just a fancy technology - it can already be leveraged in a variety of enterprise use cases. Make sure your business is taking advantage of this powerful tool. For example, you can improve chatbots in customer service, optimize demand planning and inventory management, and set up automated recommendation systems. Don't miss out on the benefits that AI has to offer.

4. Invest into sustainability.  

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It's important to continue investing in sustainable practices, particularly in areas where energy or transportation costs can be reduced. For example, solar and wind panels are becoming increasingly affordable as a source of energy, and switching to fully electric vehicles can generate positive return faster than ever. Not only will these investments improve your brand, but they will also boost profitability in the current energy price environment.

5. Empower your team with the best tools.

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Even if you don't have more headcount (quite the opposite may be true), you can double the efficiency of your operations teams by providing them with the best tools available in the market. Make sure they have self-serve access to data, the ability to monitor operational events on a granular basis, and the ability to easily set up automations.

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In addition to saving them hours of work, this will also increase their ownership and motivation - key factors to keep them in these challenging times.

Do you agree with my predictions and best practice hints? Are we missing anything important? Feel free to leave a comment or contact me if you would like to discuss further!  

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