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Five issues for private businesses to focus on in 2023
January 2023
By Blair Sheppard, Global leader, Strategy and Leadership for the PwC network and Peter Bartels, Global Entrepreneurial & Private Business leader.
Facing the world’s first “polycrisis”
Inflation. Recession. War in Europe. The energy crisis. The aftermath of the pandemic. Supply chain disruptions. It’s hardly surprising that we often hear the challenges facing today’s businesses described as “unprecedented” or even “unique”.
Arguably, similar crises have all happened before. But while today’s crises are not unique individually, two factors are putting all businesses in truly uncharted territory.
Firstly, today’s crises are hitting companies at the same time, while the comparable crises of the past – from the First World War to Spanish flu to the Great Depression – happened in sequence, not simultaneously. So this time you can’t pull them apart and tackle them separately. Put simply, you can’t solve one without thinking about the others. Secondly, this time is different because today’s crises are caused and accentuated by long-term Megatrends. These Megatrends were long in the making but are now finally hitting the world in very real terms.
Acting short term, thinking long term
A sobering statistic in the 26th PwC CEO Survey is that approximately 4 out of 10 CEOs predicted that their business would not be trading in 10 years from now if they continued on their current path. To survive and thrive businesses need to address both the effects of the short term polycrisis and the impact that the long term Megatrends will have on their future.
This requires business leaders to think and act differently, and so 2023 must be a year of true creativity. A year for adapting and reinventing, during which they’ll have to combine the entrepreneurial spirit with speed, foresight and responsiveness to position themselves for future success.
In our view, private businesses will be in the forefront of this change. Why? One reason is that they’re agile by nature and can move faster than listed companies. Another is that they have the latitude to take risks without having to report to public shareholders. A third is their vast experience of reinventing themselves in response to changing market conditions – something many family businesses have done multiple times. Last but not least, the entrepreneurial spirit at the heart of private businesses gives them an edge in times of disruption and flux.
Five focus areas for 2023
On a practical level, we believe that these five key areas are where private businesses should focus in 2023 and beyond.
1. ESG
All businesses know they need to act on Environmental, Social and Governance (ESG) issues. Now the time has come for real change – going beyond good intentions to create a practical plan that achieves tangible results.
Key questions include:
- Can we articulate in a 60 second elevator pitch how we are incorporating ESG into our business?
- Short term: How are we communicating our values and strategy? A key differentiator for many private and family businesses is the values upon which they are founded and operate. Have we considered if our strategy is still fit for purpose in a world dominated by the Megatrends and ESG, and if it needs to be adapted.
- Long term: How are we factoring in the impact of ESG on our business and its future valuation?
2. Supply chain
According to PwC’s CEO Survey 2023, 44% of private business CEOs are adjusting their supply chains which is lower than listed company CEOs. Considering the growing geopolitical tensions between the West and countries such as China and Russia, now is the time to reflect on the vulnerability of supply chains.
Key questions include:
- How well positioned are we for a less globalised world with more localised supply chains?
- Short term: Have we developed scenarios for overcoming our dependence on suppliers and customers in certain countries?
- Long term: What opportunities will open up for new sourcing strategies such as onshoring and nearshoring?
3. Technology
In the past, private and family businesses sometimes struggled with digital transformation. But now they’re making great strides, often energised by their ‘digital native’ NextGens.
Key questions include:
- Do we need to be more involved with our business-critical IT and cyber agenda rather than leaving it to our internal experts?
- Short term: How are we aligning our technology investments with the threats to resilience?
- Long term: Is our strategy fit for purpose in a platform-driven economy?
4. Workforce of the future
Private businesses gain a competitive edge from their employee relationships founded on shared values and mutual trust. But even the strongest bonds must be nurtured especially given the effects of the pandemic and technology on people’s roles and working patterns.
Key questions include:
- Would I honestly recommend working in our private business to family and friends?
- Short term: Are we addressing the immediate needs and expectations of our people across aspects like pay, hybrid working, culture, training & development, and providing work that’s meaningful and purposeful?
- Long term: Do we have a clear plan for ownership/leadership succession and the future of the business?
5. Never let a crisis go to waste
Our final point runs through all of the above and that’s to never let a crisis go to waste. It also encapsulates this idea of thinking both short and long term. To survive and thrive in the face of multiple disruptions, private businesses may need to consider radical changes to aspects ranging from who owns the business to who takes executive decisions to how it’s funded.
Key questions include:
- Am I still the best entrepreneur or leader to head up our private business?
- Short term: How effectively are we managing our cash flow and costs – and how alert are we to emerging weaknesses in our supply chain and customer base?
- Long term: Are we considering new funding or ownership opportunities, such as the journey to family equity or private equity investment?
A defining year
Whatever 2023 brings, it’s a year that will play to private businesses’ inherent strengths. It’s time to leverage those strengths to the full – and focusing on our five key issues will help.
Find out more about private business issues
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