With 2023 now in full swing, there is growing concern about the state of the global economy –a major recession seems imminent, and businesses are struggling to keep up with the changing economic landscape. Many experts believe that it is time for companies to get back to basics and concentrate on reducing costs, freeing up cash flow, increasing speed, and reducing complexity, all the while staying within regulatory limits.
With that in mind, what will the major economic trends in 2023 be, and how can businesses take a back-to-basics approach to drive growth?
The current economic landscape
The world economy has been facing numerous challenges in recent years, including political instability, climate change, and technological disruption. These challenges have led to a significant shift in the way companies operate, with many seeking to adopt new technologies and business models in order to stay ahead of the curve. However, this rush to innovate has come at a cost, with many companies losing sight of the fundamentals of doing business.
The pandemic has only served to exacerbate these challenges, with many businesses struggling to stay afloat in the face of a global recession. In response, governments around the world have implemented a range of fiscal and monetary policies designed to stimulate growth and protect businesses from the worst effects of the recession. However, these policies have also had unintended consequences, such as inflation, rising debt levels, and increased market volatility.
Many of the trends that were supposed to fix the finance industry, such as crypto and Web 3, haven’t proven to be effective at producing long-lasting companies. While these technologies have certainly attracted a lot of investment and attention, they have yet to deliver on their promise of transforming the way we transact and do business. Instead, they have largely been seen as speculative assets, with few real-world use cases beyond trading and speculation. Companies like Meta (previously Facebook) that bet big on ‘the metaverse’ saw hundreds of billions of dollars wiped from their stock prices as investors fled in droves.
Investment without thinking of returns
One of the key drivers of the current economic landscape has been the explosion in investment in fintech, payments, and other technology-based businesses. Many investors have poured billions of dollars into these companies, hoping to capitalise on the promise of new technologies and business models. However, this rush to invest has often been driven more by hype and speculation than by a clear understanding of the potential returns on investment.
The mantra of ‘move fast and break things’ has become synonymous with the tech industry in recent years, with many companies rushing to bring new products and services to market without fully considering the risks and costs involved. This approach has led to numerous failures and setbacks, with many companies struggling to scale their businesses and generate sustainable returns.
The fundamentals of business
In light of these challenges, many experts are advocating for a back-to-basics approach to business. This means focusing on the essential elements of doing business all while staying within regulatory limits. By doing so, businesses can improve their resilience and ensure they are well-positioned to weather the economic storms ahead.
Let’s look at a few key examples:
Fulfilling a real need
Returning to the example of Meta, a major part of its plummeting stock price is that they bet the farm on a product that had no obvious use case. Their metaverse product offered an experience similar to the already existing Second Life videogame, though it was billed primarily as a way to socialise and hold business meetings. The barrier for entry was steep –the VR headsets required to run it cost anywhere from £399 to £1499 – and unlike the Facebook app it can only be used at home. At a time when rising cost of living, middle class families using food banks and four-figure energy bills fill the headlines it seemed desperately out of touch with what real people need.
B2B businesses face a similar challenge: all businesses are facing the possibility of a coming recession and all need to concentrate on their bottom line first and foremost. Companies will need to look at themselves and ask whether they are serving a genuine need that other businesses have and whether they are doing so at a price point that makes sense during a difficult economic climate.
Companies like WeWork and Uber had very mundane products (office space and taxis respectively) but were able to become household names because of massive investments before they had shown the ability to turn a profit. The former has ceased operations and the latter has never turned a profit.
With changes to interest rates, the era of cheap money is over, and companies will once again have to prove that they can generate returns to investors rather than having a ‘story’. That profitability will need to come from a realistic business model rather than using venture capital investment to run a business as a loss-leader until such time that you have saturated the market to the point where you can raise prices.
Complexity is a major barrier to growth for many businesses. As companies grow and expand, they often become bogged down in bureaucracy andstruggling to adapt to changing market conditions. Their products can also increase complexity, adding extra steps and points of failure to what should be simple processes. By simplifying their operations, businesses can improve their agility and responsiveness, making it easier to pivot when needed and capitalise on new opportunities.
Getting back to basics
In conclusion, the economic landscape in 2023 presents significant challenges for businesses. However, by taking a back-to-basics approach, companies can drive growth and improve their resilience in the face of difficult economic conditions.
This means focusing on reducing costs, increasing speed, and reducing complexity, all while staying within regulatory limits. It also means avoiding the hype and speculation that have characterised much of the tech industry in recent years and instead focusing on delivering real value to customers and other businesses.
By doing so, companies can stay afloat and position themselves for long-term success, even in the midst of a global recession.
To learn more, visit: https://www.decta.com/
About the author (Scott Dawson)
Scott Dawson, Head of Sales and Strategic Partnerships at DECTA.
Scott is a highly motivated and results oriented individual with 20 years of experience within the payments industry.
Previously, he served as Commercial Director at Neopay, the market leader at delivering compliance solutions to eMoney and payments institutions. Scott has also held fraud management positions at PSI Holdings and Neteller, before becoming Senior Fraud Manager and then Business Development Manager at ClickandBuy, which was acquired by Desutsche Telekom.
DECTA provides end-to-end payment infrastructure, from acquiring to issuing and processing, but unlike other players in the crowded payments marketplace they offer bespoke-as-standard solutions aimed at making payments accessible to everyone.
The company is headquartered in the UK and has offices around the world. DECTA’s seven core products have seen more than 2,000 merchants harness its technology resulting in more than £1billion in transactions globally. Its value chain includes its own licence with Mastercard and Visa, certified processor for Unionpay International, and multiple payment methods throughout the UK.
For more information visit: https://www.decta.com/