Hello and welcome to L.E.K. Look Forward into 2024.
L.E.K. Consulting’s annual analysis of the challenges and opportunities in the year ahead. In this short video, industrials partner at L.E.K.; Harpreet Singh outlines the key trends that industrials businesses have been facing and how will they shape up in 2024 and beyond.
2023 has been a mixed year for Industrial businesses.
There have been several challenges to navigate
-
Inflation levels continued to stay at stubbornly high level across geographies putting significant pressures on input costs
-
That inflationary environment also meant central banks continued to raise interest rates, making it difficult to service debt, progress large capital projects and M&A
-
Geopolitically, from US-China relationships to the continuing Ukraine war to the latest crisis in the Middle East, the world has continued to be more polarised. The rise of protectionism has been having significant impacts on business demand and supply chain configurations
In that somewhat gloomy environment, there have been a few green shoots.
-
For most end-markets, demand levels have stayed relatively stable
-
Supply chains and labour availability started to ease up improving businesses's ability to effectively serve customers
-
The advent of Gen-AI has meant businesses are starting to appropriately explore how AI more broadly can help optimise processes and create efficiencies
As we look forward, the next few years should provide a somewhat improving and more importantly an evolving business environment than we have historically been used to
-
Firstly, cost of doing business should start to come down but we may need to get used to a new normal
-
Inflation levels are expected to decline
-
Interest rates are also likely to fall but unlikely to get to down to the ultra-low levels of the past anytime soon
-
As a result large, riskier projects will continue to be challenging
-
Secondly, supply chains should continue to ease up..
-
..however, destocking will impact various parts of the industry has it has been already happening
-
…and the desire for more localised supply chains because of the geopolitical environment will put pressure on costs and decision making
-
-
Regulation is continuing to evolve - incentive programmes such as IRA and penalties such as EU ETS will continue to expand out
-
There is also increasing pressure from stakeholders to actually start showing some real progress and purposefulness to everything a business does
-
Fourthly, technology advancements will pave way for innovation and growth
-
AI applications will become a lot more mainstream and enable industrial businesses to increase efficiencies across their operations
-
Energy transition will continue to gain momentum and allow for new products and solutions
-
Investments in automation and technology innovation will grow as new applications and reshored production lines expand
We believe businesses have a real opportunity here to use the market backdrop and translate into step change value creation.
Requires consideration of 4 big topics
-
What's the strategic vision in a changing world environment - from the purpose of the organisation to tangible where to play priorities
-
How to rethink go-to-market models in an increasing tech-enabled world and deal with localised requirements
-
How to use the trends in technology to set-up their organisation for innovation and differentaiton, and leverage AI as part of that journey
-
How to rethink their operating models so they are agile, future-proof and financially efficient
We think these are exciting times for businesses if trends are leveraged appropriately.
