Is Continuous Innovation the Key to Overcoming Economic Challenges?

A debate rages on about whether or not the global economy will have a soft landing.

While inflation rates in the U.S. show signs of slowing, the reality is more gloomy in the European Union. Likewise, economic powerhouses like China may experience some growth over the coming year but continue to face challenges brought on by unstable economic conditions and geopolitical tensions.

As this economic uncertainty continues to persist into 2023, many companies are left wondering whether or not to invest in new products and services.

In this article, we discuss the state of the global economy, the challenges of new investments, and the potential benefits for companies that choose to embrace continuous innovation.

The State of the Global Economy in 2023

Though inflation and the cost of living are reaching peak heights in many regions across the world, a few key indicators suggest that the future may not be so grim.

In the European Union, inflation showed signs of slowing in November 2022, suggesting a possible downward trend in 2023. Yet, the reverse could be true as well — inflation could rebound in 2023 thanks largely to volatile energy and food prices. Overall, Europe is one of the most at-risk regions for continued economic headwinds moving into the new year.

As for major Asian economies like China and Japan, inflation is considered to be close to an end.

A more recent Deloitte January 2023 Economic Update makes the following predictions for 2023:

• The U.S. is likely to avoid a recession thanks to declining energy prices, steady employment growth, and decreasing supply chain issues.
• Europe is likely to experience a recession due to both real wages and real consumer spending falling while energy prices remain elevated. Energy prices will be the key player driving a European recession.
• China is expected to experience a modest economic rebound, though the nation still faces major challenges with COVID-19 restrictions and weakened global demand.

Certain factors like the war in Europe, climate change, and the crypto market may have major impacts on the global economy that are too early to predict.

How Economic Uncertainty Impacts Investments in Products and Services

As the debate rages on about how the global economy will land in 2023, so does the debate on whether or not to invest in new products and services.

Companies that choose to invest in new products and services now will have a substantial strategic advantage in Q2 in the event of stronger economic conditions. Yet, if economic conditions worsen, investments in new products and services could prove to be a costly error.

J.P. Morgan Research reports that, though the global economy is not at “imminent risk” of recession, the global economy is expected to grow at an exceedingly slow pace of roughly 1.3% in 2023.

In terms of which products and services we can expect companies to pay close attention to, digital transformation (DX) and IT services continue to dominate multiple global markets.

Across the globe, companies spent $4.43 trillion (USD) on IT services in 2022 and are expected to spend $4.66 trillion on these services throughout 2023. Increased spending on various IT segments — such as artificial intelligence, process automation, and cloud migrations — is driving the growth of DX, particularly in the banking industry.

Digital-centric products and solutions are likely to be a topic of focus for businesses across industries as economic conditions continue to fluctuate. With the right digital approach to investing in new products and services, companies could even achieve greater resilience in the face of economic uncertainty.

What Happens to Investments if Conditions Worsen?

If the worst-case scenario comes true and the global economy sinks lower, this could mean bad news for companies that have invested in new products and services.

Investments may be stalled or lost if conditions worsen. This would have a major impact not just on the global economy but on individual businesses, as companies scramble to recuperate revenues lost on failed products or services.

What these types of concerns reveal to us is the importance of making smart investments. Simply buying into the latest trend is not enough in 2023 — businesses must take a cautious and nuanced approach to investing in new products and services that accounts for the possibility of worsened economic conditions.

Determining What to Invest in is Key

Businesses should not sink their funds into the first trendy products or services they come across. Instead, when investing in new products and services, it is crucial to take the time to assess and determine what is truly a worthwhile investment — and what is not.

Here are 3 pointers for determining viable investments in 2023:

1. Time-Proof Investments

One of the most advantageous ways to make the most out of investments in 2023 is to choose something valuable in either the products or services markets — but how do we determine what is valuable?

A valuable product or service that is time-proofed against the challenges of economic uncertainty comes down to assessing competitors and consumer demand. This step in the process should precede new investments and be considered during the product development and engineering phases.

Time-proofing an investment ultimately requires in-depth research and analysis.

However, in-depth research can be a complex task that requires the undivided attention of a business team, as well as significant time and resource investments. This can be hard to provide when also working to develop and launch a new product or service.

This leads us directly to our second pointer — lowering costs with offshore, onshore, and nearshore managed services.

2. Lower Costs by Utilizing Managed Services

It is vital to cut costs wherever possible without losing value or quality.

Leveraging outsourcing for resources and talent is an excellent approach to cutting costs in this way. With the help of offshore, nearshore, and onshore managed services partners, a business can more easily develop, market, and launch new products and services without spending significant amounts of capital on these investments.

For instance, a company that relies on internal product and service development teams can end up weighed down by the need to onboard new talent and secure the necessary resources.

By contrast, a company that utilizes managed services can get to work on launching new investments quickly and efficiently. Managed services enable a business team to spend more time researching and analyzing new products and services, rather than focusing on the developmental stages.

3. Analyze Trends for Long-Term Value

In both of the pointers above, we touch on the importance of research and analysis when choosing new products and services to invest in.

During times of economic uncertainty, businesses that pull ahead of their competitors are those that find ways to lead without bleeding out — as in, not spending all of a company’s capital and resources on new products and services while still focusing on continuous innovation.

To accomplish this, businesses must analyze current trends and measure their long-term value.

For example, the cryptocurrency and blockchain markets are two of the biggest trends of 2022 and are likely to continue their seismic growth into 2023. Yet, the volatility and regulatory uncertainty of these markets make them risky investments that could result in either major pay-offs or major losses.

Comparatively, another top trend of 2022 was the use of robotic process automation (RPA). Unlike cryptocurrency, RPA is not nearly as volatile an investment and offers tremendous long-term value beyond just the potential to increase revenue. With RPA, a business can not only boost its efficiency and lower operational costs, but also offer new value and services to customers as well.

Though companies must consider the short-term potential an investment has to offer, it is equally if not more important to determine the longevity of an investment’s value.

Measuring a product or service for its long-term value is key. Finding the right products and services to invest in that are likely to maintain exceptional resilience throughout economic headwinds is the best way for companies to ensure their profitability and flexibility in the coming year.

Final Thoughts: Exadel Helps Future-Proof Your Business

At Exadel, we believe that continuous innovation is essential for future-proofing your business.

We offer a wide range of expertise that span across both product and service development, including product engineering, staff augmentation, digital transformation, and more.

Contact the Exadel team today to learn more about how we can help your business make smarter investments that give you the competitive edge needed to cut through economic uncertainty.

Author: Terry Boyland