In 2012, many large companies expect to face significant challenges dealing with the increased volatility and elements of the "New Normal," according to new research from The Hackett Group. The study found that companies are heavily focused on improving accuracy and timeliness of information to enable improved decision-making, and on leveraging global standards, resources and organizational models as they struggle to "do more with less."
The Hackett Group's research also recommended that companies be prepared to adapt their business models and priorities in response to economic changes in regional global markets. This will require companies to fully understand the benefit that comes from adopting global standards and organizational models that allow optimal execution by leveraging both skill and scale more broadly. But the increased volatility in demand across global regions has also made it more critical than ever for companies to truly understand how each region should operate while still gaining the advantages that come from a global process operating platform.
The Hackett Group's Research Insight, 2012 Key Issues Agenda: The 'New Normal' Has Become the 'Now Normal', finds that CEOs and others are acknowledging that the "New Normal" has been largely accepted as the status quo. Increased volatility and uncertainty in demand, cost of raw materials and energy, and availability of talent show no signs of abating. Nearly one in five companies in The Hackett Group's study expect to see 25 percent or more volatility in these areas over the next two to three years.
Other elements of the "Now Normal" are also now quickly becoming standard operating procedure. Revenue growth and improved operating margins remains a priority, and the predominant opportunities for revenue growth lies in emerging markets outside of Europe and North America. The International Monetary Fund estimates that 61 percent of global GDP growth in 2012 will come from Brazil, Russia, India and China. Geographic barriers to doing business have been dramatically reduced, making globalization both the principal opportunity and threat to most organizations. Finally, technology and data integration are acting as both enablers and accelerants of disruptions of existing business operating models as well as within business services.
In key business services areas such as corporate finance, IT, HR, and procurement, The Hackett Group's research finds that the globalization trend will continue to accelerate in 2012 and beyond. If their current plans are successful, companies will more than triple the level of globalization in these key areas within two to three years. By that time, more than a third of all companies in the study said they would have achieved a global operating environment. The Hackett Group's assessment is that the required changes are much more challenging than organizations realize and that it will take most 5 to10 years to reach their desired goals. Companies will need to holistically revise their business models to incorporate the capabilities needed to adapt to local or regional economic changes within a global operating framework. Different regions of the world are likely to require different business responses as markets continue to shift.
In addition, these key business services areas will be required to do more with less and drive an effective 5- to 6-percent increase in productivity during 2012, significantly higher than the recent historical average of 1 to 3 percent annualized improvement. Combined with increased offshoring and automation, the result is almost certainly a continued jobless recovery in some business services areas, including corporate finance.
From a technology perspective, business services leaders are recognizing that technology infrastructure plays a key role in helping leadership act quickly in response to volatility and other "Now Normal" pressures. Some top priorities in this area speak to the issue of improving analysis and access, while others relate to investments that will deliver a better, more unified data set.
Talent management is another key concern for 2012, with executives stating that a clear priority is to work more closely with HR to understand where skills gaps exist today and defining and executing plans for attracting, developing and retaining key skills that will provide a competitive edge.
The full study is available free (with registration) by clicking here.
Source: The Hackett Group
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