The top 5 decision factors of 2021
It took over 80 years for the Industrial Revolution to transform economies through innovations in machinery. It took 18 years for the internet to change how people interact, access information and shop. But it only took 18 months for the COVID-19 pandemic to fundamentally disrupt how people live and work across the globe.
Now, as the dust begins to settle, a new reality is taking shape. But the whirlwind isn’t over. In fact, our research suggests the rate of disruption will continue to accelerate.
To cope, CEOs of small and midsize businesses need to stay nimble and continually innovate. They also need to make several hard decisions in rapid succession, such as when – or if – to bring employees back to the office, compete in the talent wars and address supply chain problems.
To help you prepare, consider our latest research findings on these five factors.
Factor 1: Betting on the economy
Earlier this year, economic optimism surged among CEOs. In Q2 2021, the Vistage CEO Confidence Index hit 108.8, the ninth-highest level seen since the Index’s inception in 2003. By Q3 2021, however, the Index backed off to 97.1 — not because CEOs were feeling pessimistic about the economy, but because the rate of growth was decelerating.
At this point, the economic outlook is still good. However, headwinds such as inflation, supply, talent scarcity and the COVID-19 Delta variant are threatening to dampen growth.
The burning question for CEOs is how big to bet. Key considerations include how much to increase fixed investments, where to direct those investments, whether to increase headcount and how to recruit and retain top talent.
Factor 2: Building a hybrid workplace
The great work-from-home experiment has revealed an important finding: most people are productive at home, and many prefer remote working.
CEOs are now facing big policy decisions about the workplace model to offer long term, whether that’s fully remote, in-person or a hybrid of the two. Our survey found that, beyond this year, 68% of CEOs plan to offer work-from-home options for some employees in their organization.
Making these policy decisions is complicated by the fact that certain aspects of work are better done in person while others are better done remotely. Culture is another consideration, as it’s harder to keep employees connected when they’re working from home. Given the great worker migration — and subsequent shift in power from the employer to the employee — CEOs also need to carefully consider their employees’ preferences on remote vs. in-person work.
Factor 3: Adapting to a new kind of customer
Buyer behavior has changed. In the last 18 months, buyers have become more autonomous, digitally engaged and comfortable shopping without a salesperson. This is putting pressure on organizations to radically change how they approach sales and marketing, such as by getting salespeople and marketers to work in close alignment and shifting messaging toward customer benefits and outcomes.
In many cases, businesses are increasing their investments to manage this pressure. Our survey found that 42% of small and midsize businesses are increasing their marketing investments this year, with 82% spending on digital marketing in particular.
Factor 4: Managing rising costs
Headlines everywhere talk about inflation and everything is getting more expensive. In our Q2 survey, CEOs of small and midsize businesses reported increased costs from suppliers (80%), labor costs (79%) and raw materials (64%). Adding to this challenge, supply chain problems are getting worse. Businesses are facing shortages in raw materials, computer chips and shipping containers. Ports are backlogged and delivery drivers are hard to come by.
To absorb costs, businesses must increase their prices. This remains a fine balance between profitability, market forces and customer acceptance in place of lower-cost alternatives. Market corrections, which can be unpredictable, add to this complexity.
Factor 5: Leading a digital transformation
Throughout the pandemic, the companies that have fared the best are the ones furthest along on their digital transformation journey. This correlation between technological advancement and business success is likely to grow stronger as our dependence on technology increases.
Currently, 65% of CEOs are investing in technology to reduce the labor burden on their product or service. They’re directing most of that spending toward automation, system optimization and worker collaboration tools.
Meanwhile, the threat of cyberattacks is growing. With so many employees working remotely on unsecured home networks, companies are more susceptible to hackers. Cyber criminals are also using more sophisticated tools and strategies to break into businesses. Even if you’re among the 49% of CEOs with an up-to-date cybersecurity plan in place, your business is still at risk for an attack.
Use disruption to your advantage
There’s more you should know. Our research report, Decision Factors 2021: Thriving on Disruption, takes a deeper dive into these five factors and features exclusive insights from top experts. Download the report to learn how to manage — and take advantage of — the disruptive forces at play this year.