How are winning businesses achieving growth in an economic downturn?

With low business confidence, driven by soaring inflation, rising interest rates, and a looming recession. It’s more important than ever to future-proof your business, unlock growth and seize new opportunities to emerge stronger with a more sustainable business. The year ahead will create opportunities for companies and investors who take the right approach, to keep thriving in 2023.

Achieving growth in an economic downturn

Uncertainty will drive caution and conservativism, and we will continue to see headlines of mass redundancies, scaleups running out of capital before becoming profitable, tightening access to capital, and declining valuations.

But it’s not all doom and gloom. Economic uncertainty can be challenging for businesses and investors, but they can also be an opportunity for innovation and the formation of great companies. As seen in previous shifts from abundance to austerity, businesses will adapt to changing conditions and find new ways to remain competitive and profitable. Leading to the creation of new business models, products, and services that are better suited to the economic conditions of the moment. The following four trends are built around this opportunity.

1. Accelerated pathway to profit to remain “default alive”

Scaling businesses will re-prioritise objectives to balance growth with profitability. Shortening runways and cautious investor sentiment will encourage efficiency and a clear pathway to profitability if ventures wish to remain “default alive”.

The winners won’t bunker down & cut costs but ensure the runway is used to reach profitability and grow sustainably.

2. Market Consolidation — Survival of the fittest

As with any ecosystem, when an abundance of resources dries up, survival of the fittest prevails. While some businesses will realise growth, others will run out of runway, creating opportunities for in-organic growth. Additionally, with technology and innovation continuing to disrupt industries, organisations are increasingly looking for opportunities to acquire the right capabilities and prevent their demise.

We predict M&A activity will pick up significantly in the year’s second half as options for investment or exit diminish.

3. Downturn Innovation

Economic downturns have historically always led to a rise in sustainable innovations. These innovations can be grouped into two main buckets.

Accelerated transformation: Businesses are forced to innovate and take bold strategic moves to survive. Innovation is focused on making things better, easier, and more affordable.
Customer driven: Game-changing technology-enabled offerings will emerge that address some of society’s challenges, tailored to changing customer expectations.

Historically, economic downturns deliver some of the most resilient new business models and companies; we expect this will be no different in 2023 and beyond.

4. The Next Tech Frontier

Key emerging technologies are reaching a maturity stage where the commercialisation and applicability to developing new business propositions will drive a new wave of innovation and growth. AI, Automation, VR/AR, blockchain, and others are moving out of the experimentation phase and into the hands of consumers, with disruptive new companies emerging that change the status quo.

Record amounts of dry powder will provide the fuel, ready for the spark to ignite the next blaze of disruptive innovation.

While these are uncertain times, they will come with an opportunity for those who are prepared and have the right strategies in place. While the risk appetite for investors and scaling businesses will reduce, it will mainly result in a repositioning of priorities. 2023 warrants caution; however, we are optimistic that great companies will rise, as history has proven during periods of economic austerity.

Considering the economic conditions, scaleups and investors should seek the right advisors to help understand, shape, and execute a sustainable growth trajectory. Tightrope works with scaling businesses and investors to unlock their untapped potential and shape their growth horizon through a multi-disciplinary team of strategists, designers, and creative technologists.

Read Tightrope’s growth trends report here, and reach out to plan an introduction.