Businesses are increasingly investing in digital solutions to meet rising customer expectations and drive growth. According to a study by McKinsey, over 65% of executives say their companies have increased spending on digital initiatives due to customer demand. Additionally, Gartner reports that 56% of CEOs view digital improvements as a top priority for driving revenue growth, underscoring the strategic importance of digital transformation. Yet, despite these investments, many organizations struggle to achieve the digital transformation they envision. Why? The problem often lies in the approach itself. Here are the most common pitfalls holding organizations back and how they impact the company’s ability to drive sustained growth—along with strategic shifts that can make a difference.

1. No Leadership-Level Vision, Product Ownership or Roadmap 

The lack of a clear vision and leadership buy-in can result in a reactive approach. Especially in sales-driven B2B companies, digital tools are often developed to address a single customer or account’s needs. Without a dedicated product owner or roadmap, development teams become consumed by short-term requests instead of working towards a strategic vision. This reactive approach leads to over-customization, technical debt and inflated budgets, which often produce low value for both the customer and the business. 

A digital strategy without a strong leadership vision can never become a catalyst for growth. To build and maintain buy-in, leadership must see digital transformation as integral to their overall growth agenda — not just an IT initiative but a central driver of efficiency, customer experience and new revenue streams. 

How this impedes growth: Without a clear digital vision, companies fail to differentiate themselves in the market, struggle with scalability and often miss out on new revenue opportunities. The result is stagnation in key growth metrics like customer acquisition, revenue and market penetration. 

Making the strategic shift: Successful digital transformations start at the top. It’s critical that leadership articulates a digital vision that aligns with the company’s overarching business strategy. This means moving beyond one-off digital projects to embedding digital as a core driver of the company’s growth. Clear product ownership is essential, ensuring that there is accountability for steering the digital direction and maintaining focus on long-term goals. A well-defined digital roadmap with a focus on scalability, innovation and customer value provides the necessary guidance to stay on course amidst competing priorities. 

2. Have a “Build It and They Will Come” Mentality 

There’s a persistent myth that launching a new digital tool or platform will instantly bring success. The truth is technology alone isn’t a silver bullet. Merely investing in a platform without understanding its role in your business strategy leads to wasted resources. Successful digital products require a deep understanding of customer needs and the flexibility to adapt as those needs evolve. They also need a strategy for driving adoption, both internally and with customers. 

When companies fail to integrate their digital efforts with their broader growth strategy, they miss opportunities to enhance customer engagement and increase market share. A poorly adopted tool becomes a sunk cost, diverting attention and resources away from other strategic growth initiatives. 

How this impedes growth: An underutilized digital product fails to generate the expected return on investment, resulting in lost revenue opportunities. It also undermines customer confidence, impacting long-term customer loyalty and retention. 

Making the strategic shift: Businesses must move beyond the “build it and they will come” mindset to a more holistic and customer-centric approach. This involves understanding not just what customers want, but how digital capabilities fit into the broader customer journey. Design thinking can play a pivotal role, driving companies to prototype, test and iterate digital solutions in close alignment with customer needs. Moreover, digital initiatives should be tied to measurable business outcomes. Aligning digital tools with KPIs such as customer acquisition, engagement rates or sales growth can ensure that investments are not just technically sound but also commercially viable. 

3. No Planned Funding Beyond Product Launch 

Launching a digital product is just the beginning, not the end. Yet, many businesses fail to plan for ongoing funding to support post-launch iterations, updates and user engagement. This lack of continuous investment can make even the best-designed product quickly obsolete. In fact, studies show that 70% of digital transformations fail, often due to short-sighted budgeting and underestimating the need for sustained investments post-launch (Boston Consulting Group, 2020). 

A lack of post-launch funding stifles innovation and prevents companies from responding to market changes. Digital platforms must evolve to keep pace with shifting customer expectations and technological advancements. Without a commitment to continuous investment, companies can’t capitalize on growth opportunities that arise from an agile and evolving digital strategy. 

How this impedes growth: A stagnant digital product reduces competitiveness and limits revenue expansion. Companies that don’t invest in product evolution will likely face declining engagement and lower profitability over time. 

Making the strategic shift: To truly leverage digital as a growth driver, companies must adopt a mindset of continuous evolution. Digital products should be viewed as living assets that require ongoing investment, iteration and optimization. Budgeting should reflect a commitment to long-term value creation, not just initial product launches. Agile methodologies, which emphasize iterative development and rapid response to change, can help companies adapt to evolving market demands. Measuring ROI should also be dynamic—regularly assess the impact of digital tools on customer behavior, market trends and competitive positioning to make informed decisions about future investments. 

4. Over-Customization of Tools vs. Keeping a Clean Core 

Customization can be a double-edged sword. Over-customizing platforms can create technical debt and complexity, making future updates costly and time-consuming. Instead, organizations should focus on maintaining a “Clean Core” — using standardized solutions for non-differentiating functions and investing in tailored solutions only for areas that offer a competitive edge. 

Customization may seem appealing in the short-term, especially to meet specific customer demands, but it often becomes a barrier to scalability. Over-customized solutions can bog down innovation and limit the agility needed to support a broader growth strategy. Companies need to prioritize their unique differentiators, focusing customization efforts on what will drive revenue and competitive advantage. 

How this impedes growth: Over-customization drains resources and makes scaling digital solutions difficult, hindering the ability to drive rapid growth. It leads to inefficiency, making it harder to adapt to market demands and ultimately reduces the speed at which a company can capitalize on new opportunities. 

Making the strategic shift: Businesses need to adopt a strategic approach to customization—focusing only on what truly sets them apart. A “Clean Core” philosophy means standardizing non-differentiating elements to minimize complexity while concentrating custom efforts where they matter most for strategic growth. This approach not only accelerates time-to-market but also allows for greater flexibility in adopting new technologies. Companies that embrace a modular architecture can scale faster, reduce technical debt and be more agile in responding to new opportunities, ultimately driving sustainable growth. 

5. Lack of Data Governance/Data Architecture That Fuels Strategy 

Data is the backbone of any digital initiative but without a solid data governance framework, it’s hard to turn data into actionable insights. Effective data architecture not only ensures data accuracy but also enables faster, more informed decisions. Lack of governance leads to data silos, poor data quality and an inability to fully leverage analytics and AI-driven insights. According to a Gartner report, 87% of organizations have low business intelligence and analytics maturity, largely due to weak data governance frameworks. 

Data-driven insights are crucial for identifying growth opportunities, optimizing operations and personalizing customer experiences. Without a clear strategy for managing and utilizing data, companies miss critical opportunities to refine their value propositions, improve customer targeting and drive revenue. 

How this impedes growth: Poor data governance leads to inaccurate analytics, inhibiting a company’s ability to make strategic decisions that drive growth. This can result in misaligned sales efforts, missed customer opportunities and suboptimal product development. 

Making the strategic shift: To truly harness the power of data for growth, companies need to invest in robust data governance and architecture. This means establishing a single source of truth for data, implementing governance policies that ensure data quality and creating frameworks that facilitate the integration of analytics across the business. Embracing AI and advanced analytics should be a priority, but it requires a solid data foundation. Organizations that can turn data into actionable insights will gain a competitive advantage, driving better customer experiences, operational efficiencies and new revenue streams. 

A Case in Best Practices 

A Prophet client in the parts manufacturing and distribution industry spent 15 weeks defining its digital strategy, roadmap and business case before launching a minimum viable product (MVP) to a subset of customers, with the CEO as the executive sponsor. The strategy focused on the desirability, viability and feasibility of the solution and included a three-year roadmap with stage-gate check-ins to ensure progress. 

Customer service representatives were trained to support new tools and traffic-driving tactics were embedded in the investment plan. As the platform expanded to different business areas, customizations were only adopted if they aligned with the broader strategy. A focus on streamlining data and reducing complexity minimized integration challenges. 

This thorough approach is paying off, with increasing adoption driving cost savings and new revenue growth in emerging market segments. 

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The past four years have been tumultuous, with executives, across industries, forced to navigate market-wide headwinds, high-interest rates and a weakening labor market. Thankfully, the recession many feared, never materialized. Yet, leaders prepared for the worst, with 2023 widely considered the “Year of Efficiency.” Companies minimized and cut costs, optimized productivity and — at times — restructured their organizations to get closer to the market and remain above water.  

However, the tide is shifting, and 2024 is widely regarded as a return-to-growth year in which resiliency will reign supreme. To better understand what is behind this sense of optimism, Prophet analyzed over 50 corporate earnings reports from some of the world’s largest businesses, across industries. 

Our research found that last year’s “doing more with less” strategy paid off for most organizations, creating 85% year-over-year growth in net income across the companies studied. That’s a drastic improvement from similar research we conducted last year, which found a 22% decrease in earnings in 2022. 

Now that companies have optimized their organizations, they are getting back to the basics of growth. They are investing in flexible growth strategies that can endure beyond cost-cutting initiatives and efficiency maneuvers, and, thus, 2024 is shaping up to be the “Year of Resiliency.” 

Five Top Learnings From This Pivotal Earnings Season 

1. Leaning into Growth, Once Again 

“Efficiency” and “budget cuts” were the flash words that bounced around in the first half of 2023. Now, “innovation” and “expansion” are center stage. This earnings cycle saw exciting announcements for new products, services and experiences that transcend traditional industry boundaries.  

In retail, for example, Target announced Target Circle 360, its new paid membership program. It is pulling a page out of Amazon’s and Walmart’s playbooks and living up to CEO Brian Cornell’s promise of “making sure that we make Target a growth company again.” After Walmart’s year of optimizing, it witnessed a significant 23% year-over-year growth burst in e-commerce sales, bolstered by the announcement of a new B2B purchasing site, Walmart Business. 

Others are also expanding their portfolio of offerings and innovating their go-to-market strategies. Apple is rolling out a new B2B service platform, Apple Business Connect. Pfizer is extending its expertise (and brand) beyond respiratory as it goes deeper into oncology. And Peloton is launching “Peloton for Business.” These expansions represent the beginning of an accelerating trajectory toward growth.  

2. Embracing GenAI as a Strategic Growth Lever 

Almost all the companies in Prophet’s study say GenAI is a top priority, playing a role in driving not just efficiency but sustainable growth. Major technology players are paving the way, both as exemplars of “moving from talking about AI to applying AI at scale” within their business to launching new products like Microsoft Copilot, Google Gemini, and Amazon Rufus that allow other industries to use AI to power growth.  

EdTech company Chegg is embracing GenAI by developing automated, higher-accuracy question-and-answer services. In entertainment, DraftKings is using GenAI to lower customer acquisition costs and improve its targeting capabilities across its marketing efforts, resulting in it raising its 2024 revenue guidance. In the energy sector, GenAI has helped ExxonMobil leverage automated deep-sea drilling and optimize its widely dispersed field assets, helping it beat earnings expectations. 

To be clear, GenAI faces challenges, with mounting social concerns — and lawsuits — tied to privacy and cybersecurity issues. And then, there are the massive costs associated with training, upskilling and managing new systems. While introducing new technologies into an organization is not new news, GenAI is at a scale that requires massive paradigm shifts for most companies to maximize its positive impact while minimizing the downsides mentioned.  

3. Harnessing Customer-Centricity to Fuel World-Class Experiences 

Companies with the most substantial potential to break through increasingly competitive interconnected marketplaces are discovering ways to harness technologies to enhance customer-centricity, establish deeper levels of relevance and deliver unmatched value. 

In healthcare, CVS Health realized 11.9% revenue growth by harnessing advanced analytics, machine learning, and process automation to predict customer needs and generate tailored care services, such as its ExtraCare loyalty experience. It provides personalized health and beauty products, and members can choose “benefits that best fit their needs.” MetLife uses advanced technologies to create personalized insurance products that cater to specific customer needs and risk profiles. United Health Group, Walgreens and Cigna are all leveraging technologies to coordinate value-based care, enhance digital offerings and improve the patient experience. As a result of these investments, every healthcare company in Prophet’s analysis beat analyst estimates for revenue and earnings in the fourth quarter. 

In transportation, Ford Motor Company brought in a former Apple executive, Peter Stern, to help adapt to the changing EV landscape and build customer experiences through Ford+. CEO Jim Farley describes that hire as “transformational for this strategically vital part of our business.” 

In another way to get closer to customers, GE HealthCare is acquiring MIM Software to complement Predix, its industrial manufacturing cloud platform. MIM Software’s AI and analytical capabilities across practices are reshaping the possibilities of precision care for patients and providers, enabling GE to “meet customers’ most complex and pressing needs, today and into the future,” says CEO of MIM Software Andrew Nelson, proving once more how customer-driven solutions continue to elevate experiences.  

4. Driving Next-Generation Employee Value Propositions 

It is no secret the workplace has vastly changed as executives grapple with the COVID-induced remote-hybrid debate, the repercussions of mass lay-offs and quiet quitting and the undeniable risks posed by rapid automation. Executives in Prophet’s analysis believe their talent are the critical lynchpin to driving the transformative growth most are seeking. Accordingly, many companies are backing up their claims with significant investments and shifts in compensation, development and employee well-being. 

The Home Depot’s 2023 decision to invest approximately $1 billion in annualized compensation for its frontline, hourly associates — even in a down year — illustrates the importance of nurturing what it considers its key differentiator: the “Orange Aprons.” This strategic move underscores the company’s recognition that maintaining a satisfied, skilled, and motivated workforce is essential for navigating economic uncertainties and securing sustained growth. It is paying off, too, with meaningful improvement in attrition rates and an increase in its customer service score by 600 basis points. 

In leisure, Hilton adapted to the changing dynamics of work by launching the innovative “Hilton Work Anywhere” initiative. By enabling corporate employees to work remotely from its global network of hotels, Hilton taps into the growing demand for flexibility and remote work opportunities. Comparatively, Cisco focused on building external economic resilience by partnering with global HR services company Randstad to equip over 25 million people with digital skills through Cisco’s Networking Academy. Such partnerships and reskilling programs are pivotal in powering the future of innovation, growth and global competitiveness. 

5. Moving to Profitable Sustainability Impact 

While sustainability has continued to be a top priority for consumers, more companies in Prophet’s analysis are now proving that “doing the right thing” isn’t the only benefit of pushing an innovative sustainability agenda. For instance, building materials and provider Holcim set a goal of achieving 100% renewable energy in U.S. operations by 2050, and its eco-friendly solution ECOPact concrete, now accounts for 19% of Holcim’s ready-mix net sales. The company is also “driving fast-paced growth in circular construction” through its waste-minimizing ECOCycle practice, helping it differentiate and grow as a leader in sustainable construction. 

Eastman Chemical is working to solidify its position as “a leader in creating a circular economy,” capitalizing on customer demand and growth opportunities by replacing plastics with recycled-content-made products and innovative molecular recycling facilities.  

By embedding sustainability into their core growth strategies and moving beyond 2030 or 2040 Net-Zero Carbon commitments, companies are addressing pressing environmental challenges and positioning themselves as forward-thinking leaders in their respective industries, setting a new standard for corporate responsibility and innovation…and driving sustainable growth. 

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Acknowledgments: Jason Tan, Jane Lee, Zach Lipkin, Mae Mourtisen, Will Littlejohn, Erik Muenster 

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These are the types of results that B2B manufacturing and distribution businesses can realize if the right digital strategies are developed, and when leaders take on the necessary transformation work to bring these strategies to life. Unfortunately, many companies in the manufacturing sector are still trying to get by with outdated systems and patchwork solutions – leading to operational inefficiencies and limiting their strategic options for growth. There is hope: Those who embrace digital transformation can create new possibilities. 

In our work with a range of B2B manufacturing and distribution leaders, we’ve seen successful digital transformation enable companies to expand into new markets, unlock new avenues for growth, engage new customers and gain a tangible competitive advantage. In this article, we explore why digital growth strategies matter and how to develop the right e-commerce approach for your business. 

“We believe our industry will begin seeing more disruption from large online players and big digital marketplace players, and want to support our customers from seeing attrition as a result. We saw it as absolutely critical to digitally transform to meet rising consumer expectations and to ultimately help our customers grow their businesses.” 

Rob Saper, General Manager, Dexter Distribution Group

The Significance of a Digital Growth Strategy 

Digital growth strategies can support a range of business objectives, from increased sales and stronger customer loyalty to higher efficiency and lower costs. But the simplest reason that B2B companies need digital and e-commerce strategies is that customers expect them to have one. All customers are looking for convenience, flexibility and personalized experiences. Every company must have a digital platform that supports effortless ordering, rapid delivery and responsive service.  

When Dawn Food Products Inc. made it easier for customers to discover new products on its online self-service platform, the company saw a surge in online orders for products that customers had not previously purchased offline. The well-designed digital solution prompted customers to buy more and expand their relationships with Dawn.  

Digital platforms add value beyond purchasing by providing an outlet for content and services that cater to diverse customer needs associated with the core product set. Anheuser-Busch InBev’s BEES B2B sales platform, for example, empowers retailers and partners with customer insights, personalized product recommendations and sales trends. AB InBev now generates 63% of its revenue through B2B digital platforms, with BEES experiencing a remarkable 60% growth from 2021 to 2022. 

Digital strategies also empower companies to scale efficiently, accommodating a growing customer base without the limitations of traditional brick-and-mortar operations. Casey’s Distributing achieved an eightfold increase in productivity by transitioning from manual order processes to a SaaS-based e-commerce platform integrated with inventory management software. 

Platforms that automate manual processes and connect diverse systems reduce both error rates and costs. They make it possible to harness the power of data and analytics to generate invaluable insights that can be used to optimize pricing, marketing programs, inventory, and supply management. These platforms help companies understand where they should invest in growth and how to scale the business.  

E-commerce strategies are critical for B2B companies to extend into new market segments and compete with established players, new market entrants and potential disrupters. To engage smaller businesses with simpler needs than its larger customers, Grainger operates Zoro.com alongside its flagship website. The expanded product assortment has been a hit, generating $1 billion in annual revenue.  

Over time, as digital strategies evolve and capabilities mature, companies may consider refining their business models or launching entirely new value streams. The right platform allows companies to test and learn about new products and services. For instance, Schneider Electric’s  Exchange created a new marketplace of data services that foster collaboration and networking within the energy sector. 

A common theme for successful e-commerce strategies is data monetization. Marketplace and platform models featuring different vendors offering their products produce data and insights that customers value. They also create a market for selling advertising space. B2B businesses, especially distribution companies and others that serve as middlemen, can follow the lead of Walmart, Target, Kroger and others that have built large businesses by selling ads and customer data directly to advertisers.

Seven Steps for Developing a Successful Digital Growth Strategy 

To build successful e-commerce and digital strategies, companies should consider the following key steps: 

1. Define the Vision and Goals

Envision your business aspirations and how they relate to what customers want. Determine where your e-commerce and digital strategy can deliver maximum value in meeting customer needs. Clearly identify, document and gain organizational consensus on the top areas of opportunity across the customer journey.  

2. Assess Customer Readiness for Change

Proactively engage customers to determine their preferences for digital engagement versus traditional business approaches. Communicate clearly what’s changing and how they will benefit from a more digital experience. Take advantage of the inherent stickiness of manufacturing and distribution to gradually evolve customer mindsets toward digital ecosystems and, ultimately, strengthen existing relationships. 

3. Prepare the Organization

Assess organizational structures, processes and resources to determine whether they need to be enhanced or adjusted to execute against the new digital ambitions. Engage business units and organizational capabilities that will be affected by the new strategy to ensure they understand the goals and their role in it.  

4. Prioritize Change Management Needs

Craft a change management approach that addresses fears of job security and change fatigue, especially among essential customer-facing staff. Consider refining incentives and shifting cultural attitudes to foster innovative thinking and behaviors. Invest in training and upskilling and equip the workforce with the right tools so they can thrive as their everyday work and your business operations get more digital. 

5. Create a Roadmap and Business Case

Develop a detailed plan outlining how your digital strategy will unlock value over time, with key milestones and quantifiable targets. Engage stakeholders to gain buy-in based on formal business cases and roadmaps, which is especially important for low-margin businesses unaccustomed to transformational change.  

6. Choose the Right Platforms and Technologies

Evaluate and select e-commerce and digital platforms that best align with your business objectives. Integrate the back-office systems and data repositories necessary to build the foundation for high-impact customer-facing solutions.  

7. Continuously Monitor and Adjust

With the roadmap and business case as the baseline, devise and track meaningful customer, financial and operational metrics to monitor the success of your digital strategy. Adapt your strategy accordingly while keeping the long-term vision in mind. Plan to iterate continuously as digital transformation is more an ongoing journey than a single destination. 

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Our new global research commissioned from Forrester Consulting has found that human-centric companies are more likely to see results from their business transformation efforts. In fact, human-centric organizations are 10 times more likely to achieve revenue growth rates of 20% or more.   

Forrester surveyed over 300 organizational growth and transformation decision-makers across geographies and industries to uncover how firms are using human-centricity to design and assess the effectiveness of their transformation initiatives. Our maturity model provides a comparative analysis that illustrates how human-centric firms are outperforming their peers when it comes to delivering transformative growth.  

In comparison to less human-centric organizations, respondents from human-centric organizations are more likely to achieve or expect these benefits:

Barriers to meeting transformation goals for initiatives that are less human-centric:

This study offers resources for decision-makers looking to transform their organizations to be more resilient, improve their culture and satisfy all stakeholders while setting themselves up for future business success.

Source: A commissioned study conducted by Forrester Consulting on behalf of Prophet, July 2023.

The last few years have proven that disruption is the only “normal” in business. The world is still slogging through seismic plot twists of the previous few years, making inflation, supply chains, Ukraine and hybrid workplaces a critical topic on virtually every corporate agenda.   

While most forecasts call for nothing but grey skies, we disagree. History shows that periods of economic uncertainty heighten innovation and lead to new products, services and business models. After all, companies like General Motors, Microsoft and Electronic Arts formed during recessionary times.  

In 2023 we expect to see new ideas and products emerge from the rubble of disruption we’ve experienced on a global scale. But to get there, c-suite leaders will need to rethink how they lead their organizations.   

We expect the most successful c-suite leaders to lean into these six key leadership trends in the coming year.  

1. Productivity Improvements Will be a Critical Path to Profitability   

Over the last few years, a handful of digitally native organizations have chosen growth over profitability and had ample investors who were happy to take risks on future opportunities.    

Rising interest rates have ended that party. And as a result, investors are pressuring companies to continue to grow and make money or at least commit to concrete paths to profitability.   

Throughout the second half of 2022, many organizations abruptly shifted their focus from growth at all costs, even if that meant risking profitability, to achieving profitability by cost-cutting measures. 

 And while some companies may need to lean into cost-cutting efforts in 2023, more c-suite leaders will look to enhancing productivity within their workforce to achieve sustainable growth and profitability. For these leaders, the productivity improvements will come from technology, data and analytics.  

2. Balancing Short-Term and Future-Back Planning to Drive Sustainable Growth  

Long-term planning will always be a core component of business strategy. But the upheaval of the last few years has made it painfully clear that companies need to speed up the journey from thinking to doing. And that means integrating quick wins with future vision, so that the results you drive today do not hinder your long-term progress. 

Take, for example, Disney’s recent decision to increase prices for park admissions, annual passes and vacation clubs. This decision infuriated loyal Disney fans, who accused the company of price gouging. While the company may have achieved a quick win from this plan, the long-term effects of the decision may slow Disney’s progress toward its vision.  

In 2023, c-suite leaders will need to carefully balance short-term and future-back planning:  

• Short-term planning: This type of planning requires leaders to think and make at the same time. Risks are reduced with small bets to show progress quickly. Using data and behavioral insights, companies can identify things they know, which they can execute now. They can also explore what they think they know with new and near-term concepts. And those efforts will inform what they think, allowing them to hypothesize, and validate along the way.
• Future-back planning: This approach is about creating predictive models of the future, nine years or more out, to model the probable and preferable future. Which levers should a company pull to get there? Might they do better to build, buy or partner? It considers complex elements, such as politics and socioeconomic shifts, so leaders can confidently see where the business fits in the future and the immediate steps they need to take to get there.    

C-suite leaders who successfully lean into this leadership trend will be well-positioned to achieve immediate wins while also investing in the future of their organizations.   

3. Purposeful Data-Driven Decision-Making Will Reduce Risks   

Data-driven decision-making is critical to increasing confidence and reducing risks. And while that’s been true for decades, more and more companies realize they may have too much historical data and need more predictive data to better inform their decisions. As a result, many executives are making different demands of their AI and analytics teams, aiming to sharpen their business strategy.   

But being data-driven in your decision-making is only one part of the equation. During times of uncertainty, it’s essential to be purposeful in utilizing data to inform your decision-making.   

Amazon has long aced this approach, using analytics to evaluate whether a decision is a one-way-door or a two-way-door.    

Two-way-door decisions are safer and relatively easy decisions to reverse. For example, if the pricing strategy for a new service is hindering performance, it is possible to right-size and reposition the offering or pricing strategy.    

One-way door decisions are more complex, nearly impossible to undo, and require rigorous scrutiny. For instance, a company that misjudges the demand for a product or service has no opportunity to take that decision back. These decisions require rigor and high confidence levels that predictive data modeling can provide.    

In constrained business environments, risky decision-making can be detrimental to the success of your organization, which is why it is more critical than ever to understand the true impact of the decision and be purposeful in how you evaluate the opportunity.   

4. Environmental, Social and Governance (ESG) Regulations Will Require Businesses to Rethink Their Global Approach 

There was a time when everyone building a global business and a global brand thought they could have one approach that would work across different countries: One operating model. One brand positioning. One value proposition. That time is over. Every country has divergent priorities, consumers and governments requiring differentiated business strategies.   

Consider the increase in ESG regulations that have surfaced globally. For example, the European Union (EU) recently passed the Corporate Sustainability Reporting Directive (CSRD). This new directive will soon require large companies that meet specific requirements or are listed on EU-regulated markets to disclose environmental and social metrics across their supply chains. It will also hold these companies legally responsible for their ESG commitments. To meet CSRD targets, large companies doing business in the EU will have to rethink their supply chains and operations and their entire value chain from product and service design to business models and innovation.   

And in the U.S., the Securities and Exchange Commission’s new proposed rule amendments will require domestic and foreign companies to disclose climate-related risks, governance of climate-related risks, greenhouse gas emissions, climate-related financial statement metrics, and information about climate-related targets and goals.  

Global businesses need to ditch their one-size-fits-all approach to international expansion to meet evolving government regulations and consumer preferences. Instead, these companies will need to find new innovative ways to tailor their brands, business strategies and operations to meet the diverse needs of each market. 

5. New Models of Production Will Unlock Sustainability, Efficiency and Customer Intimacy   

The era of mass production may be ending right in front of our eyes. As a result, we’re seeing a new leadership trend emerge from the c-suite: decentralization. Not only is this a solution for the supply chain challenges it is also a more sustainable and efficient way to impact local communities.    

Many leaders also realize that decentralization can get their products into the hands of their customers in a quicker and more sustainable way. Localized production also allows for co-creation with their customers, improving service and a low-cost path to differentiated and more relevant product offerings.   

There are risks, however. Getting decentralization right will require leaders to closely re-examine their operating models, decision rights, and leadership skills. Without leadership setting a solid direction for the organization, leaders risk efficiency without innovation or innovation without efficiency.   

6. Leaders Will Walk a Tight(er) Rope When It Comes to Political Issues   

The purpose-driven gospel of recent years insists that companies take a stand on issues–or risk losing employees and customers. But figuring out how to do so keeps CEOs, CPOs and CMOs up at night.     

BlackRock’s struggles are emblematic of this challenge. Six states (thus far) have yanked billions in investments from the world’s largest money manager, protesting its commitment to environmental and social change.    

Over the last few years, organizations have been called upon to take a stance on hot-topic political issues ranging from healthcare to ESG. But taking a stance (or not) has become more complicated as companies increasingly navigate accusations of being either too woke or not woke enough.    

In the year ahead, leaders will strive to sort out political agendas with three different pathways:    

• Publicly support political issues     
• Stay silent on political issues     
• Show support for political issues within their workforce policies without publicly supporting the cause     

Regardless of where you or your company stand, the decision to engage publicly on political issues needs to consider the full range of potential consequences that might arise. Speaking out quickly might feel good in the first 24 hours, but unintentionally create outcomes that fly in the face of the very values you espouse. 

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News that global markets are either in or inching toward a recession is creating uncertainty, causing many companies to consider pausing or reducing transformation initiatives. However, history has shown that challenging economic times can often lead to the urgency that stimulates profound innovation.  

For decades, recessions have accelerated change and given birth to giants. Some examples include Hewlett Packard and Hilton in the 1950s; Microsoft in the ‘70s; and new economy brands like Uber, WhatsApp, Venmo, Instagram, Airbnb, Slack and Dropbox all roared into life during the Great Recession, which began in 2008.  

New platforms and operating models–from the sharing economy to subscription models to crypto–rise in times of uncertainty. And legacy companies may have a competitive advantage if they have the right components in place. These unpredictable markets offer unexpected opportunities for established companies. Consumers develop new needs and behaviors causing competitors to change tactics and reveal new white space opportunities.  

We’re not saying it’s easy to shift course to address these changes, but those ready to step up to the challenge often find exceptional growth, even when competitors struggle. 

Incumbents can significantly capitalize on this advantage if they start to act more nimbly, leveraging their strengths and leaning into risk. In many cases, consumer trust in their brand proves invaluable, giving legacy companies permission to capitalize on new consumer behavior with new business models.  

Organizations that have already started transformation efforts have a clear advantage. Many that were proactive during the pandemic have positioned themselves in a way that increases their chances in achieving new growth. This is especially true as they emerge from the downturn. But these organizations will need to address the scope and renewed urgency of change within this market by meeting it head-on and accelerating their transformation. Recessions alone are transformational – altering the economy, consumers and the competitive landscape. Just as the pandemic required adapting to new ways of shopping, working and doing business, this new terrain will undoubtedly bring its own paradigm shifts. 

While accelerating is crucial, the environment transformation leaders currently face is rife with risk. Leaders need to unlock ways to confidently readjust their transformation strategy and approach. 

The challenge to not only transform, but to do so at an accelerated pace in a down economy, requires a new approach. Mike Leiser, Prophet’s chief transformation officer, recommends leaders take a uniquely human view through the lens of our Human-Centered Transformation Model. This model requires a shift in thinking that will help organizations unlock and accelerate transformation.  

“Businesses don’t change,” he tells us. “People change, and people change businesses.” 

This is particularly true for legacy companies. They often have the capacity to fund transformation but need to overcome significant obstacles, including older operating models and antiquated talent incentives. We suggest starting with some hard questions about each interrelated dimension.

Organizational DNA Focus on Core Transformation Strategies and Driving Near-Term Value 

Consumer needs and behaviors are dramatically different than those pre-pandemic, and it’s unclear how today’s inflation and rising interest rates will affect them over the next down cycle. These fundamental shifts will require leaders to evaluate their transformation priorities and roadmaps. However, with all areas of corporate spending increasingly under the microscope, transformation leaders will be called to show immediate impact and results. Very few companies will have the luxury of thinking in long-term “moon shots”, prevalent in stronger economies.  

To get a better sense of potential changes, Prophet reached out to several experienced transformation leaders who have weathered the storm of a past recession. One such veteran is Stephen Crowley, former SVP of ATM technology & operations at Bank of America, who found himself in the eye of the financial crisis in 2008. 

Crowley explained that, at the time, ATM and check depositing was still a modest business. But when it transformed toward digitizing 25% of all checking deposits, the effort became a massive, yet pivotal play to differentiate itself from other banks. The company radically accelerated its timeline, moving up goals and pouring support into an entirely new way of operating ATMs and check processing centers. 

He shared his key lessons in connection with successfully doubling down on the vision:   

1. If you want to focus on the business case around transformation in this economy, concentrate on customer experience–people can defect quickly in a downturn. For Crowley, that required standing in front of a thousand ATMs to watch customers make deposits.   

2. Think about what kind of paradigm shift is happening and what’s transformational about the process itself. From a timing perspective, Bank of America was positioned to succeed where others had previously failed because smartphone technology had caught up to facilitate the transformation. 

Questions to Help Clarify Transformation Strategy:  

• How are customer and employee behaviors shifting? Spending habits? Lifestyle changes? Priorities?  
• Are competitors creating new growth opportunities that fall under our North Star? Are there opportunities to divest non-core businesses? 
• Is there a compelling business case, measurement and governance model for the transformation strategy as costs are being cut? Will this transformation help drive growth during a recession? And beyond?  
• Given market changes, are the transformation vision and roadmap still relevant? Can it be executed faster? 

Organizational Mind and Body: Manage the Skillsets and Muscles Required for Change 

Within this environment of unknowns, it’s critical to understand how organizations will continue to drive momentum on transformational initiatives. That’s where the mind–the skillsets–and body–the operating model to support transformation–come in. In doing so, it’s essential for leaders to go beyond just thinking about processes for transformation.  

Leaders must understand their organization’s aptitude for change, which requires addressing past successes, underlying culture and the values that are going to introduce agility – particularly as leaders seek to accelerate transformation in this down market. 

Many organizations are already on this path, thanks to the pandemic. In a matter of months, they provided their workforces with new flexibility and upskilled them with digital collaboration tools, maintaining and even increasing productivity. Many organizations also expanded digital and online capacities to strengthen customer relationships and reconfigure supply chains. They did this by leaning into change and building organizational muscle. These organizations now know–as do their employees–that they can get through the storm and thrive. It gives them the confidence to do more in this environment, although the demands for organizational change will continue to evolve. 

In an uncertain, cost-sensitive market, leaders need to encourage unexpected, rapid solutions. Therefore cross-organizational collaboration is essential fuel for accelerated transformation, allowing leaders and teams to break down silos to creatively build new solutions for value – giving them the ability to do (exponentially) more with less.  

While this is still a challenge for most companies, our recent research finds that the more organizations promote this cross-functional work, the more successful they are. Employees see themselves as more productive and value the personal and professional growth that collaboration brings. 

Secondly, the organizational mind needs to be primed to succeed amid risk, especially in a recession. “When you reward employees for healthy risk-taking, there’s a willingness to try new things,” says Matthew Perry, former vice president of foodservice sales at Kellogg Company. This pro-risk perspective allowed Perry to establish notable food product innovations during the Great Recession – many of which developed from rapid ideation and experimentation. 

Perry believes succeeding in a down market requires empowering the workforce with new skillsets and growth opportunities. There are some clear actionable “mind” focused areas organizations can address to ensure employees are able to weather a down market environment:   

1. Reward employees with healthy risk-taking and willingness to try new ways of solving problems. This will be a stretch for some who might not be suited to this environment, but, with the right support, many will be more willing to try. 
2. Empower your workforce with new skillsets and personal growth opportunities that directly relate to the transformation at hand, making their role more relevant and connected to it. Additionally, make it clear that these skills encourage personal growth no matter what the ultimate outcome is. This is especially meaningful in tough times. 
3. Encourage employees to lean into collaborative and cross-disciplinary teamwork. This speaks to the “body” and allows teams to action and accelerate transformation. When the environment demands that all leaders do more with less, encouraging employees to lean into collaborative, cross-disciplinary teamwork is a win-win. 

Questions to Build the Organizational Mind and Body: 

• Do structures support transformation in an uncertain and fast-changing environment?  
• What skills do we need to get where we need to be? 
• Are teams and employees empowered to collaborate quickly to produce unexpected solutions in the face of market challenges? 
• Where can more agility, integration and experimentation be encouraged? How are hybrid work policies helping or hindering collaboration? 
• How are employees rewarded for actively stretching skillsets? For taking risks? 

Organizational Soul: Design Communication for Intentional Motivation, Connection and Comprehension 

Employees are every organization’s greatest resource. Teams who embrace and thrive during tumultuous times are key to transformational momentum. That’s why tracking and managing morale around transformation efforts is essential–the entire workforce is paying attention to what leaders say and what they do.

The past several years of change have often left employees too cynical to believe in transformational efforts. Couple this with informal information, and rumor mills go into overdrive, often based on real fears. “Will there be layoffs? Am I safe here?” It creates a significant barrier to realizing transformational goals. 

Communication is the best tool to emotionally manage change and build morale. We’ve found it’s essential to provide clear, consistent communication about the strategy, and it’s also important to honestly and transparently report how the transformation is going. Most of all, leaders must acknowledge all the people impacted by the change. Employees should feel connected and a part of it all. Taken together, this builds a culture of resiliency. 

Prophet’s recent research reveals a common trend: Accelerating transformation requires a motivated workforce with democratized decision-making. Leaders need to lean on mid-level and junior-level employees more heavily, meaning morale needs to be nurtured more carefully. 

Deepak Agarwal chief information officer at the School District of Palm Beach County, Florida, shares that leading the digital transformation of a 27 thousand employee school district wouldn’t have been possible without an emphasis on strong communication. From 2008 to 2012, thousands of employees needed to adopt an entirely new set of operational and educational tools. He believes that the COVID-19 era has created a greater need for communication.  

“Leaders need to ask how they can make employees’ work and lives better as they support and adopt transformation initiatives,” he says. 

Agarwal sees three interrelated ways he successfully motivates colleagues and teams: 

1. Leaders must provide strong communication systems and clear messaging about what changes are happening and when. Doing so will help employees engage during transformation. 
2. Create better knowledge management systems to educate employees and train them. 
3. Give employees better feedback tools so leaders can monitor how employees are feeling about the change.  

This approach allows employees to feel valued, valuable and motivated to drive transformation forward.   

Questions to Inspire Morale: 

• How well are transformation messages getting through? How thoroughly do all employees understand progress reports? 
• What is the process for making shifts in messaging when required? 
• What can leaders do differently to strengthen the purposeful connection between employees and the transformation? 

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