What priorities and challenges do companies expect to face in 2023? A discussion of findings from our 2023 Enterprise Key Issues research, with Associate Principal John Van Decker, North American Advisory Practice Leader Jim O’Connor, and European Advisory Practice Leader Martijn Geerling.
Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by John Van Decker, chief of Research at The Hackett Group. His guests today are Jim O’Connor, Advisory practice leader for North America, and Martjin Geerling, Advisory practice leader for Europe at The Hackett Group. Today’s episode will cover The Hackett Group’s 2023 Enterprise Key Issues Research Study.
In late 2022, The Hackett Group asked executive management people in finance, HR, information technology, procurement, supply chain and global business services about their strategic priorities for 2023. The resulting report analyzes and consolidates the findings for common issues between business services, functions, and GBS organizations.
To begin, Jim gives a brief summary of some of the findings of the study. We expect 2023 to be a difficult year as the global economic downturn progresses and recession, inflation, workforce shortages, and geopolitical turmoil press on. Aligning your organization to a strategy that will help mitigate internal and external risks is difficult but necessary. In last year’s study, there was a lot of focus on technology to leverage these challenges. Over 40% of organizations have legacy solutions in need of replacement by the cloud. However, as more technology projects occur, there are a lot of challenges companies fall into such as budget and conflicting priorities.
Then, Martijn shares how this year’s study compares to previous years. We must bear in mind the economic backdrop of today vs. this time last year. In 2022, a major theme was mitigating the transition back to the office after working from home. This year, however, the discussion has shifted to focus on inflation and recession risks. Some of the things organizations are changing are responses to this economic situation. A key concern is to ensure supply chain continuity to increase revenue and maintain profitability. Addressing inflationary pressure is another key concern. Similarly, good old-fashioned cost reduction is also entering the playing book.
Next, hear how Europe’s response to these concerns differs from the response of North America. American clients, Jim shares, are surprisingly resilient and are continuing to spend on key projects and talent. It is important to note that these responses vary greatly depending on the industry. Looking across functions, we see that HR and procurement are actually up significantly, whereas companies are cutting finance departments. Financial services and tech companies are generally continuing remote work, while manufacturing and engineering companies are asking their employees to remain on-site. More progressive organizations are viewing this as an opportunity to reduce costs in smart ways without disrupting critical projects.
On the other hand, The Hackett Group’s European clients are also preparing themselves for a possible recession. Budgets are more constrained than they were this time last year, but companies are still willing to spend more on digitization. Looking at the short-term issues like wage inflation, which has taken longer to unfold in Europe than in the U.S., the European market is beginning to feel the impact of their own wage spikes. Also, Europe’s proximity to the war in Ukraine makes Europeans more aware of things like business continuity, risk and supply chain diversification.
The Hackett Group advocated the view that any company can become Digital World Class. Digital World Class, Martjin explains, is really the evolution of The Hackett Group’s traditional measure between world-class performers and their peers. Digital World Class companies are those who outperform others in their industry with a focus on the experience, effectiveness and operating excellence that a company delivers. Getting to this performance is difficult, so they leverage benchmarking to better understand how to bridge the gap between peers and Digital World Class performance. Finally, Jim touches on how difficult it will be to achieve Digital World Class in this upcoming year. Even outside of the many challenges companies are presently facing, the achievement of Digital World Class is difficult no matter what. Assuming a company has the proper road map to pursue a Digital World Class status, The Hackett Group asks them to consider the challenges they have ahead. These include insufficient budgets, conflicting priorities and lack of the right kind of talent.
- 0:56 – Welcome to this episode hosted by John Van Decker.
- 1:51 – Jim gives a brief summary of some of the findings of the study.
- 3:41 – The differences between this study and previous years.
- 4:56 – Key responses companies plan to address these pressing issues.
- 6:34 – Regional differences in Europe and North America’s response to these concerns.
- 11:02 – How the European market is handling these pressures.
- 13:58 – Explaining The Hackett Group’s Digital World Class classification.
- 15:40 – How difficult will it be to achieve Digital World Class in the coming year?
- 18:10 – Thanks to Jim and Martjin for joining us today.