Chief strategy officers (CSOs) are tasked with a dual challenge in foresight: to observe and make short-term decisions based on the trends that are happening today and, at the same time, to advise their companies on long-term shifts that will have impact five to ten years in the future. These strategists, uniquely positioned as key advisors to their CEOs, have tremendous influence on the companies that shape the future of our economy and society from mergers and acquisitions to employment to environmental, social, and governance (ESG) policies.
The Outthinker Strategy Network regularly meets with 70 heads of strategy from large ($1B+) and mid-market ($100-900M) organizations to learn the focus areas on their minds going into 2023. These are the trends they are watching most closely, and the ones that all business leaders should be paying attention to as they prepare for the coming year:
- Planning for Uncertainty
- Inflation and Pricing Strategies
- Incorporating Sustainability into Strategy
- The Future of Work
- Automation and the Fourth Industrial Revolution
- Metaverse and the New Internet
- Diversity, Equity, and Inclusion
- Shifting Organizational Models
- Delivering Proximity
- Customer Lifetime Value (CLV) as a Strategic Tool
1. Planning for Uncertainty
According to the International Monetary Fund, global uncertainty has increased steadily and significantly since 2012. Traditional six-month or annual planning cycles cannot keep up with current levels of disruption caused by technology advancement, external threats, and a rapidly shifting competitive landscape. Organizations must learn to adopt dynamic strategies that can adapt to unprecedented uncertainty.
Christian Busch, author of The Serendipity Mindset, explained that strategy must be reframed to be able to shift when the unexpected inevitably occurs:
“Strategy has always been about how do you essentially have something that allows you to know where you’re going, how you’re going there, that maps that out. But a lot of the work we are doing is around saying, how do we reframe that a little bit away from voting for rigid methodological, to allowing for the unexpected on the way to happen as well.”
2. Inflation and Pricing Strategies
Over the last 30 years, the US experienced average inflation of less than 2%. Now that level is at 6.5%, higher than many Americans have ever experienced. Companies and strategists are looking at strategic pricing to address inflation and many are using technology to adjust their approach to pricing.
Hermann Simon, pricing consultant and author of Beating Inflation, tells us:
“There is an illusion. Costs are increasing: energy costs, raw materials, electronic ships, all the costs are increasing, and if you believe you can just pass these cost increases to your customers, that is a version of cost-plus pricing, which I call Marxist pricing. Why Marxist pricing? One of Karl Marx’s most famous theories, labor theory of value, that the value of the product is determined by the input of labor – that’s of course nonsense. If you make the best steam locomotive in the world, nobody will buy it, despite a lot of labor going into that. So, what you have to understand is how the willingness to pay changes with your customers. Do you have the pricing power to increase your prices without losing volume and customers?”
3. Incorporating Sustainability into Strategy
As organizations look deeper into their sustainability challenges, they are realizing that sustainability can no longer exist as an initiative separate from business operations. Many corporations have incorporated sustainability into the CSO’s remit.
“There’s no question that business doesn’t just have a role to address [climate change], business is the solution to climate change. We don’t really have any other way of doing this,” says Bruce Usher, author of Investing in the Era of Climate Change.
4. The Future of Work
CSOs this year were less concerned about where work gets done and more concerned about when, how, and who does it. While return-to-the-office potentialities were hotly discussed in 2020 and 2021, this year strategists are shifting focus to talent shortages and automation. We spoke to future of work experts Keith Ferrazzi, who extolled the benefits of asynchronous work, and Anna Tavis, who shared that automation will lead more employees to experience greater purpose in their work.
According to Ferrazzi, who coauthored Competing in the New World of Work:
“We think that the hybrid question is remote or physical, but it’s not. It’s remote/physical, asynchronous/synchronous. All we did was move from physical to remote and we stayed on the left-hand side of the quadrant only, we did not develop the instincts, habits, rituals, and practices of doing asynchronous work.”
5. Automation and the Fourth Industrial Revolution
CSOs are increasingly aware of the convergence of what were once emerging technologies — artificial intelligence, internet of things, 3D printing, quantum computing, etc. — into a completely new experience living and working. Mark Esposito, thought leader and author of The Emerging Economies Under the Dome of the Fourth Industrial Revolution, shared how organizations can leverage these technologies and insights on how humans and machines will work together:
“The difference is, the previous industrial revolution was impacting low-income labor, because they were doing a lot of mechanization. We were shifting labor from physical to less physical. It was ideal to go from a factory to supervising a shift. In the fourth industrial revolution, we’re actually less interested about low income vs. high income but we’re much more in the middle-income distribution. It has been a revolution that has impacted the white collar office jobs.”
6. Metaverse and the New Internet
CSOs must observe current trends to determine which are hype and which are worth investment and attention. While 2022 resulted in a disillusioning year for the metaverse, strategists are keeping a pulse on virtual reality for the next decade and expect an evolution in how businesses and consumers use the internet in the nearer term. We interviewed Vijay Govindarajan, bestselling author of The Three Box Solution, who advises leaders not to close the door on the metaverse just yet:
“If I have to pick one mega opportunity for all types of companies, it is the metaverse. Metaverse is going to open up a humongous possibility gap and it is going to fundamentally change corporations, transform them.”
7. Diversity Equity, and Inclusion
Beyond the adoption of new hiring practices and confronting bias, CSOs are taking on systemic challenges to bring diversity to the workforce, especially in strategy roles. Julia Boorstin, journalist and author of When Women Lead, spoke to us about how what we think has changed about diversity really hasn’t changed much, and what leaders can do to make sure it does:
“The data are just so crazy: 8% of CEOs of the Fortune 500 are women. Eight percent, and that is an all-time high.”
8. Shifting Organizational Models
The adoption of agile and other decentralized models are a welcome transition to employee-centric, intrapreneurial initiatives, but they often cause friction with hierarchical approaches expected by command-and-control leadership and investors. CSOs are exploring and experimenting with implementing these models in a way that satisfies all stakeholders. According to Kevin Nolan, CEO of GE Appliances:
“I started hearing things: [Haier’s] RenDanHeYi, a different way of doing business. I didn’t understand what they were saying and I didn’t know how to see them. I asked for an org chart. They don’t have org charts … it got to a revelation of this company that was just purely customer-focused.”
9. Delivering Proximity
With customer preferences, global tensions, and supply chain disruption top of mind, CSOs are asking how their organizations can deliver the best (and fastest) experience to meet customers when and where they are. This can equate to new agile ways of working, foreign direct investment, or adoption of digital technologies. We spoke to innovation expert Rob Wolcott, co-founder and chairman of The World Innovation Network, who explained why “proximity” is key to meeting customer demands:
“All these digital technologies allow us to distribute sensing access to data analytics, agency production at smaller and smaller levels all around the economy ever closer to each moment of potential demand. And that’s what digital technologies drive across all industries. Digital technologies push the production and provision of products and services ever closer to the moment at which they might be demanded in time and space.”
10. Customer Lifetime Value (CLV) as a Strategic Tool
Many businesses claim to be customer-centric by focusing on identifying and putting customer needs first and treating all customers well. However, not every customer is created equal and not all customers want a premium experience. Many CSOs are looking at CLV as a strategic leverage point. We interviewed marketing expert Peter Fader, author of Customer Centricity, who argues that organizations should use data to identify their most valuable customers and focus primarily on serving them well:
“Not every customer wants to have a relationship, but some do. And understanding those differences – which customers want the relationship, deserve the relationship, and what that relationship should look like, not just, ‘Here’s some more stuff you should buy.’ But surrounding them with a variety of products and services, some of which we may not even sell, to show them that we really want to have a true symbiotic relationship. That’s what customer centricity is all about.”