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2022 was a year of huge investment in tech – estimated at over $4 trillion globally – as companies continued on the digital transformation journeys that were accelerated by the Covid pandemic. Despite the economic turmoil and uncertainty seen in 2022, according to the Digital Leadership Report tech investment grew at its third fastest rate in fifteen years, with over half of digital leaders expecting their technology budgets to rise.
Nevertheless, as recessionary forces gather and economies continue to battle high inflation and rising costs, it will become more essential than ever to derive a return on investment in terms of increased efficiency, agility and responsiveness. So, while I expect 2023 to be another big year for investment in technology – after all, which business can afford not to? – this spend will need to show measurable pay-offs to keep the boardroom onside.
Looking at the digital landscape for 2023, I see five key trends that I expect to predominate.
Companies will need to be more digital and more human. Businesses can’t afford to take their foot off the digital accelerator. They have developed a taste for the transformation journey and know that, done well, it can help to reduce cost by enhancing efficiency and productivity. But at the same time, we’ve seen something of a return of the human during 2022 as conditions have stabilised after the pandemic. Companies have rediscovered the value of face-to-face meetings, events and interactions both internally and with clients, even if people tend to pick and choose when to ‘go physical’ and when to ‘stay virtual’. In the customer context, it’s about enabling customers to smoothly self-serve online whilst ensuring that there is human support available when needed. It’s about balancing the digital and the human. The most successful businesses in 2023 will be those that get this balance right across every interface.
Companies need to be utterly focused on the customer. The customer is the most important part of the equation – especially when businesses are fighting for every pound of spend in constrained economic times, and when there are so many options available to both retail and corporate buyers with a few digital clicks. ‘Improving the customer experience’ was the second highest priority for digital leaders in the 2022 Digital Leadership Report – only ranking behind ‘Improving operational efficiency’ – and this will continue in 2023. Analytics will be a key priority – how are customers interacting with the business, through which channels and with what conversion rates, what is their buying behaviour showing? It will be more important than ever to be able to ‘join up the dots’ and track the customer journey across all touchpoints and platforms.
Data, cloud and automation will be investment hotspots. Knowing your customer, and understanding them, depends on data. All businesses sit on mountains of data now – but the winners are those that can derive insights from it. Investment in data systems and capabilities will therefore march on in 2023, as will investment in the cloud for agility, flexibility and scale. Half of respondents in the Digital Leadership Report say that they expect investment in cloud to deliver them competitive advantage in the next 12 months. However, anecdotally, we have found that some organisations struggle with how to capture the full value that cloud offers. A lack of expertise and the security aspects of distributed software, for example, can be hard to overcome. I expect more organisations to increase their focus on deriving full value from cloud in 2023. Meanwhile, 2023 could be a massive year for automation, robotics and RPA. At a time when human talent is scarcer and more expensive than ever, the business case for increasing automation has probably never been greater. Our research in 2022 found that automation has moved far beyond the IT function itself and is increasingly being embedded into areas like Finance, HR and Customer Support. A third of digital leaders think that automation will be critical for competitive advantage in the next year. As with cloud, some organisations have struggled to find the really compelling use cases for automation – and RPA grew at a slower pace in 2022 than in previous years – but I believe that those businesses that look ‘outside-in’ will find the returns. Really understanding the benefits from the customer or client’s point of view gives you the use case. Expect automation to keep driving forwards this year.
Continuing (limited) progress on diversity and sustainability. I have been mildly encouraged by the improving gender diversity in tech, although change still remains too slow. 14% of digital leaders were female in 2022, up from 12% in 2021, while across tech teams as a whole the figure stands just shy of a quarter, at 23%. I hope we’ll see continuing positive movement this year. To really effect substantial change, we need to shift the narrative from early school years so that tech resonates with girls and they see all the potential it has to offer in ways that speak to them – creativity, problem solving, social purpose. But change at that level takes time, of course. Similarly, sustainability is another area that the tech industry has yet to fully embrace. In our 2022 research, a quarter of digital leaders (23%) said that sustainability has only a negligible or no part to play amongst their priorities, and only a similar number (22%) are using technology to measure their carbon footprint to any great extent. This has to change. Everyone needs to recognise their own accountability and responsibility. For the tech sector, energy usage is the obvious starting point – taking steps to move to sustainable energy sources. “That’s my cloud provider’s problem” won’t cut it as a response. Digital leaders have an opportunity to act as agents for change. They need to reboot their sustainability focus, building it into their matrix of considerations for every project and activity. This shouldn’t only be for the organisation’s own direct activities but throughout the supply chain. It may only be through mandated regulatory reporting and disclosure requirements that we really see the dial moving here.
Hybrid will remain a work in progress. Hybrid and remote working are certainly here to stay, but the successful companies in 2023 will be the ones that really get their offer right – giving staff the flexibility they’re looking for while also keeping productivity high and maintaining a sense of company culture, identity and purpose. It’s easier said than done. The early productivity boost seen through Covid has dissipated now as remote working has simply become normal. Mental health and wellbeing remains a concern. There is also the worry for many employers that their staff become more akin to a collection of freelancers than members of a tight-knit company team. It’s a case of keeping on working at it, communicating, experimenting and innovating to find the optimal balance.
As we head into 2023, there are many uncertainties ahead – even more than there were at the beginning of 2022. One thing is certain though: technology helps companies become more efficient and do more with less. For that reason, it will continue to be fundamental to corporate operating models and strategies. Those businesses with smart and targeted investment strategies will be the most likely to achieve high performance and growth.