Venkat Viswanathan is Founder and Chairman of LatentView Analytics, a marketing analytics and decision science company.
It was a hectic summer. From individual industries like retail and travel to the economy as a whole, we’ve seen unprecedented global events place new and intense pressures on businesses.
Geopolitical conflicts disrupted fuel supplies and grain shipments. High rates of inflation have lowered people’s living standards and caused much consumer upheaval across the world. Governments from the U.K. to Italy to the U.S. have seen recent leadership changes or will soon go through elections.
With so many interlacing challenges, it can be difficult to zoom out and understand the state of global business on a macro level. One of the prudent ways to get a grip on the situation is to study the behavior of the world’s largest companies—business titans whose decisions have follow-on effects for the rest of the economy.
Over the past few months, Fortune 500 companies have consistently taken certain specific approaches that point to some broad trends in the current economy. Here are five takeaways about the state of global business this summer and where things might be headed in the future:
1. There’s no stopping digital transformation.
The Covid-19 pandemic led to a dramatic acceleration in digital transformation efforts, and we’re all now familiar with McKinsey’s assessment that businesses achieved three to four years’ worth of progress in just a few months.
But even with the pandemic receding, it’s clear that the focus on digital innovation is here to stay. This trend is particularly evident in the boardrooms of America’s biggest companies, as more and more organizations turn to technology leaders—former CTOs and CIOs—to fill vacant CEO positions.
As CNBC reports, recent CEO hires at Microsoft, Twitter, IBM and Intel came up through technology leadership positions. Even companies with little to no technology identity are recognizing the role that digital innovation will play in their future success: Well-known grill manufacturer Weber appointed Alan Matula as their interim CEO in July, following decades of work in technology organizations.
2. Company culture is more important than ever.
This summer’s turmoil wasn’t limited to external pressures. For many organizations, burnout and turnover led to internal drama, and the concept of “quiet quitting”—doing the bare minimum to achieve a better work-life balance without being disciplined or fired—became one of the hottest topics in boardrooms and HR meetings across the world.
Quiet quitting follows on the heels of the “great resignation,” and despite the growing likelihood of a recession, businesses are still fiercely competing for talent with the unemployment rate at 3.7%. Fortune 500 companies recognize the importance of continuity to their business success, which is why more than 70% maintain mentoring programs and other activities to promote a culture of growth and development. As employment trends remain unpredictable, expect these leading companies to continue investing in an employee-centric culture.
3. Even those with strong results fear a recession.
Not every event this summer was bad news. Ford’s second-quarter earnings, reported in July, easily exceeded analyst expectations, while Costco’s strong results led the company to maintain subscription fees at current rates. But despite strong performance, many companies are still bracing for the worst. Macy’s earnings easily beat estimates, yet the company still lowered its guidance for the period to come.
Many large companies seem to be expecting the cost-of-living crisis to lead directly to a reduction in sales. After years of rampant growth, organizations are now preparing for an extended bear market.
4. Hybrid work options are a must-have.
While company culture plays a major role in employee retention, the current deciding factor for many skilled employees is whether they can maintain the flexibility to work from home that they enjoyed during the height of the pandemic. On the other hand, business executives are keen to see employees back in the office, as they believe it leads to improved efficiency and stronger growth prospects for young talent.
As a recent Fortune article highlighted, major companies like Marriott, Spotify and Capital One have invested heavily in upgrading their offices for the future of work. However, the most notable takeaway from that article isn’t the list of new amenities for in-person workers—it’s the fact that even these companies are only expecting employees to spend two or three days per week in the office. Hybrid work is here to stay, and Fortune 500 companies are responding accordingly.
5. Large retailers face inventory headaches.
During the early days of the pandemic, a tangled supply chain led to a wave of out-of-stock notices and shortages of popular products. Two years later, major retailers are facing a different challenge. The cost-of-living crisis led to a dramatic change in consumer behavior, with many shoppers reducing spontaneous spending to instead focus on the essentials. As a result, large retailers like Walmart and Target find themselves with mountains of unsold inventory taking up space in warehouses and on store shelves.
In the short term, these companies have had to slash prices to clear space for new products. In the long term, companies will need to keep an eye on how these retailers reorganize their logistics to maintain agility and resilience.
As summer turns to fall, the global economic and political situation seems unlikely to stabilize any time soon. Businesses must be willing and able to make quick decisions and adjustments, relying on their own data and analysis to stay ahead of the curve. All companies should continue to watch the choices of the world’s largest and most influential companies to determine how they will influence the rest of the economy.