Tech, talent and data insight key to riding out recession

Business chiefs are being urged to temper their overly optimistic predictions for budget increases with discipline and precision, prioritising investments that maximise revenue growth, profitability, and resilience while cutting spending in areas prone to waste and maintaining experiments with emerging technology.

So says a new 2023 Planning Guide Report from Forrester, which shows that despite global unrest, supply chain instability, soaring inflation, and the long shadow of the pandemic pointing to an economic slowdown, marketers also remain bullish.

In fact, most leaders in every function expect at least some increase in overall spending in the next 12 months; less than 10% expect a decrease.

Despite some high-profile hiring freezes and lay-offs at firms like Alibaba, Klarna, Meta, and Microsoft, leaders say they are unlikely to drop spending on talent – both internal hires and external services. In fact, on average, 60% expect to increase spending on personnel and 62% expect to increase spending on external services.

Leaders across functions do not want to slow down tech investments either, with 67% reporting expected budget increases in technology. Category standouts for the biggest expected increases are digital experience software, privacy tools, and cloud security.

The report states: “Kudos for heeding the lessons of the early days of the pandemic when those who boldly invested in digital innovation found success. Slashing budgets with a blunt instrument didn’t work in 2020, and it won’t work in 2023, either.

Forrester maintains there are a number of areas which businesses need to defend and ideally increase in 2023. These include:

• Customer insights and engagement. 2023 is unlikely to look like the 2020 shutdown or any past recession, rendering many assumptions about customers and their behaviour useless. Firms should invest in more relevant and reliable customer data to help sharpen their audience targeting strategy and shift budgets to higher-yielding tactics with proven financial value.

Businesses should also prioritise investments in “normalising” and augmenting data from disparate systems and sources as well as customer analytics and tools, like experience research platforms, that democratise and accelerate customer research.

Finally, recalibrate messaging to address new or evolving customer needs, focusing on post-sale experiences that drive loyalty, cross-sell, and upsell opportunities among existing customers.

• Technologies that improve customer experience and reduce costs. Unlike the pandemic-induced need for tech for new digital experiences and anywhere work, the current economic headwinds will demand more focus on tech tuned for optimisation and resilience, Forrester claims.

For example, cloud cost management and optimisation tools can help wrangle escalating cloud spend. But this does not mean firms should turn their back on digital experience innovation, the report insists, adding that they should keep pushing forward,but prioritise investments that also reduce operational costs.

Document extractions, robotic process automation (RPA), and agent assist apps can bolster well-designed self-service experiences with smart escalations to live agents that drive loyalty. And they save money, as self-service channels are less expensive than staffed ones.

• Security. Cyberattacks and data breaches do not stop with an economic slowdown, especially when geopolitical events and technology disruption continue to fuel a highly sophisticated threat landscape. Firms should prioritise security solutions that protect customer-facing and revenue-generating workloads as well as any infrastructure critical to health and safety.

• Talent and productivity. One possible upside of an economic slowdown is a cooling of the white-hot talent market. But job-hopping – especially among digital talent – is here to stay, the report predicts, with the best employees expecting a competitive salary and benefits plus the tools and technology to allow them to work anywhere, anytime.

Firms should not pull back on the talent acquisition and retention improvements they put in place this year, but balance them with a renewed focus on productivity.

On the other side of the equation, firms should take this opportunity to cut spending in areas prone to waste, including:

• Bloated software contracts. Economic uncertainty is destabilising some software markets as established firms struggle to live up to their valuations and new entrants struggle to survive. Businesses should this moment to renegotiate prices, optimise terms, and consolidate contracts.

While contracts with core enterprise apps are likely get regular scrutiny, firms should not overlook agreements with point solutions, such as voice of the customer. These offer potential savings by consolidating department-specific contracts and taking advantage of recent M&A activity.

• Low-quality data and innovation outsourcing. External partners will continue to play an important role in growth, but two key areas are ripe for deep cuts, the report maintains. Firstly, firms should streamline their third-party data partnerships to only those that add value to customer relationships and offer a futureproof solution.

Second, many firms have relied too heavily on partners for digital innovation – especially during the pandemic-induced digital sprint. Consider bringing more innovation in-house to solve two problems at once: freeing up budget and providing a creative outlet that will help retain talent.

• Underperforming markets and customers. While it seems obvious, leaders all too often continue their old habits and miss the opportunity to assess and document the markets that they should exit, pause on, or passively harvest — as well as activities that they should modify or drop. Use this moment to reallocate resources toward high-potential customers and market segments.

However, firms should not completely ignore buyers in those segments negatively impacted by economic challenges; implement lower-cost nurture programs instead. These will reduce current costs yet still position organisation to be first in line when they recover and are ready to spend again.

Even so, Forrester reckons firms should resist the temptation to eliminate all experimentation, especially when it comes to emerging technology. These experiments – and the creative muscle they build – create and sustain competitive differentiation and justify further investment, the report claims.

It recommends running small experiments in order to discover new opportunities without sacrificing precious budget. The areas it recommends include:

• Extended reality, the metaverse, and Web3. These interlinked – and arguably overhyped – technologies hold the promise of immersive experiences linked to token-based ecosystems that use cryptocurrencies and public blockchains.

Despite massive publicity and venture funding, these technologies still must overcome many hurdles in order to deliver on the integrated future they promise for consumers, Forrester insists, but adds that firms in consumer industries should experiment with metaverse precursor platforms like Roblox and Decentraland to open doors to new audiences now. And all industries should consider employee-facing experiments to drive collaboration, remote assistance, training, and recruitment.

• Privacy preserving technologies (PPTs) that protect data. PPTs like homomorphic encryption, multiparty computation, and federated privacy enable organisations to protect customers’ and employees’ personal data while processing it, such as when exploring personal data to build data models for AI or sharing sensitive personal data across the organization for analytics projects.

PPTs promise to unleash the potential of high-performance AI models while satisfying privacy, ethics, and other regulatory requirements, Forrester claims.

The report concludes: “Don’t bury your head in the sand: 2023 budget pressure will be intense, and blindly planning for modest spending increases across the board will backfire. To come out on top, you’ll need more discipline and precision to prioritise investments, trim waste intentionally, and place smart and bold investment bets.

“It’s true that the best way out of a downturn is to continue investing — but only if you pick the right areas. This includes targeted and coordinated investments in technology, talent, and insights that help drive customer value and will accelerate differentiation coming out of the downturn.”