Deals, growth, regulation and trust crises: Four predictions likely to shape business in the next 12 months
Speaking with many business leaders and stakeholders in the U.S. and abroad over the last several months, one common theme comes to mind: From New York to Frankfurt, Barcelona to St. Louis, and San Jose to London, I continue to be bullish on business and its ability to succeed. Although it feels like the environment is getting harder and harder, I see management teams continuously adapt and raise their game. I have also noticed that many successful organizations have management teams that have the mindset of focusing on what they can control and being knowledgeable — but not obsessed — with what they can’t control.
My continued optimism is based on my discussions with CEOs and other executives while seeing the changes they are continuously making in their businesses. And I have four key predictions that I think will likely impact the business outlook over the next 12 months. While making predictions can be risky business, I believe these particular ones are worth noting because they will likely determine whether a company will be able to leverage opportunities and overcome potential challenges:
1. Take advantage of the robust deals market
The U.S. deals market should be relatively strong over the next 12 months. There is plenty of available capital and private equity firms are still raising record amounts of money that will need to be put to work. The U.S. continues to be a leading destination for inbound investment given the predictability of our political system and economy. Companies are also buying assets in order to find revenue growth opportunities and cost synergies. In other cases, they’re looking to drive innovation by acquiring companies with leading technology capabilities. Meanwhile, shareholder activism continues to put pressure on companies to optimize their portfolios and focus on their core businesses. Given these conditions, we expect a rich M&A and deals environment, which is, of course, tempered by high asset prices and the need for strong post-deal execution capabilities. To leverage the continued strength of the market, companies will need to have a clear buy and sell strategy.
2. Find “growth seams” to grow faster than others
Despite a sluggish overall economic environment and low GDP growth, some companies will experience much higher growth rates than their peers. Large companies should take note as we’re seeing some companies (particularly smaller to medium-sized) execute strategies that are focused on finding the “growth seams” — the places where growth exists, and in many cases where others don’t see it. More and more companies are “not following the herd” and instead are targeting pockets where they see growth opportunities due to market inefficiencies or where competitors don’t understand or are not properly analyzing the underlying data. In other cases, companies are growing faster because they truly know how to work in a particular market or country. The point is that you shouldn’t use average sector growth in choosing a strategy; instead, you should be looking for growth opportunities that others are simply not seeing.
3. Brace yourself for increased rulemaking and regulation
This prediction may seem counterintuitive given all the talk from Washington about rolling back regulation (and I want to be clear that I am neither advocating for nor enthused by the prospect of increased regulation). But the growing trust gap between government and society is forcing rulemakers, regulators (I’m using regulators in the broadest sense here) and elected officials alike to listen to what voters care about most. More and more, constituents want their elected officials at all levels to address societal issues, which could precipitate greater regulation and oversight. From data privacy to labor standards to claims about product performance, different constituencies across the country and world care about different issues. As a business leader, it’s important to think about where you operate, where your brand is important, how policymakers are likely to respond to constituent demands and whether your team has the mindset and talent to succeed in this new paradigm.
Case in point is the issue of climate change: While the U.S. has pulled out of the Paris Climate Accord, some cities, states and even businesses are submitting their own commitments to the global climate accord; and many will likely enact laws and regulations that mandate greater renewable energy use and higher emissions standards. This is just one example of how you have to be on top of the areas of your business that may be impacted and have a strategy that gets you ahead of any looming regulation.
4. Get ready for trust crises
As we’ve already seen this year from cyber breaches and PR nightmares, almost every company is potentially exposed to a “trust crisis” in the next 12 months. We now live in a 24/7 world where social media gives customers and other stakeholders the power to demand greater transparency and accountability from companies and brands. We’re already seeing this with consumers airing their grievances on social media when they’re dissatisfied with products or customer service. Companies are now under even greater scrutiny and can no longer afford to ignore societal issues that intersect with their business. Combined with the growing trust gap between business and society, companies will be increasingly challenged in ways that we have never imagined before: From worker safety and compensation to CEO pay to the diversity of corporate boards, many of these issues will require the direct attention of the C-Suite. Increasingly, how customer data is used and protected, corporate tax rates and practices, and even how companies give back to their communities will put pressure on trust. In a world where businesses are under the microscope, we have to lead by making sure we know where our vulnerabilities are, by putting ourselves in the public’s shoes from time to time, and by continuing to build trust in our brands.
As business leaders look to take advantage of the opportunities in the market, we need to focus on those things that we can predict and control. The best way to do this is for leaders to elevate their focus on the world around them to better capture the opportunities and mitigate the risks that lie ahead.