And what of 2023? Key concerns and recommendations for SMEs

Raúl Castellón

In two months, another year will come to a close. The first global pandemic of the 21st century continues to have repercussions, Europe can see the smoke rising from a large-scale armed conflict on its doorstep, the British Empire has gone into hiding to lick the wounds inflicted by Brexit still in its early days, and many other wild beasts are showing their teeth in the bushes. 
 
But as the experts say, it is important to go down to the front line and look into the eyes of each and every company that is working to maintain a certain semblance of normality. I will ask a straight question, as I have done in the title of this article. What preparations should be made for a company to face 2023? 
 
Clearly, there are no universal answers, but there are a number of threatening factors in the environment we all share. Highlighting these may encourage us to reflect and to set a course as we stand at the ship's wheel. Because one thing is certain; we will have to keep sailing. So let us look to the horizon: 

  • Climate change is a fact that is impossible to ignore. Some hardened deniers continue to peddle their absurd opinions, but most people now accept its existence, the only points of discussion being its magnitude and timescale.  
     
    This change affects our globalized economies on all levels: poor harvests, climate refugees, the destruction of infrastructure, water wars, etc. 
     
    No territory, organization or enterprise can claim it will be immune to this disaster, although the effects on each company will depend on its location, its resilience and the national and international relations that shape its business. 
     
    It is vital for companies to engage in self-examination and to equip themselves with analytical tools, in order to determine the impact on their value chain and the ways in which they can protect themselves; they must strengthen key aspects of their business, developing contingency plans and monitoring mechanisms that will set off alarms. We have all seen those American films in which the defense readiness condition increases from DEFCON 5 to DEFCON 1, with a series of actions being swiftly taken as the level of threat escalates. So a system like this. 
     
  • A turbulent geopolitical environment on the doorstep: Our world is multipolar. The past focus on the tension between the Russians and the Americans and the Iron Curtain has become obsolete. Today, the US is performing a balancing act, trying to sustain a hegemony it no longer has, while China has yet to act as a world power, although it now has large expanses of land and control of key raw materials both in Africa and Latin America. 
     
    In this period of transition, the world has lost its points of reference, and no one appears to be setting the rules. The geostrategic balance of power is in a constant state of flux. Globalization, hitherto sacrosanct, is foundering, and taking long-term decisions is nothing short of impossible. 
     
    More than ever, we must equip ourselves with 21st century tools in the field of both hard and soft skills, if we are to weather the storm. We must train and learn. Train and teach our own. 
  • The energy and raw material markets have gone mad. It would be an oversimplification to say they are unstable and unpredictable. Nothing seems to make sense, and few companies – regardless of whether they work with physical products or services – can escape the effects of this madness. Raw materials fail to arrive, they are subject to uncontrolled price fluctuations, service cannot be guaranteed, and some firms close temporarily because they cannot pay their electricity bills. 
     
    Never before had we heard so much about the Nord Stream, the Baltic Pipe, the Sila Sibiri or the Medgaz pipeline. Over breakfast, we fuss over the World Container Index and congestion in the ports of Shanghai and Wuhan. And never before have we been so powerless to do anything about it. Perhaps the biggest mistake we have made has been globalizing everything – remember, during the pandemic even the face masks came from the other side of the world. But this ship cannot go backwards, so solutions will have to be found.  
     
  • Money is becoming more expensive every day. Because money has always been cowardly and reacts very badly to uncertainty. US and European fiscal policies have committed to a hike in interest rates in a bid to curb rampant inflation. Even funding, which was the only “cheap" resource for companies, is becoming complicated. Not to mention the price of milk, flour and practically any staple item in the shopping basket.  

In light of all this, what should we do? And what about SMEs, which represent 70% of employment in Catalonia and 66% in Spain, what should they do? They, in fact, are better equipped than others to navigate such troubled waters. 
 
We are talking about small, but agile companies, with their decision-making center very close to the reality of the market, capable of changing direction in record time and acting with a view to both the short and the medium term. They can avoid the icebergs, which "the Titanics” find it harder to do. 
 
And although it is difficult to offer advice in such a situation, here goes:  

  • We have to shield ourselves. When oceans get rough, good navigators batten down the hatches and keep their eyes wide open, a firm hold on the helm and their feet on the ground, noting the slightest changes in the swell and the wind. Critical resources – the talent of the team, access to funding, key raw materials, energy autonomy, etc. – must be secured and put out of harm's way, because if they are lacking or they vary, the chances of shipwreck will increase, compromising the results on which our future depends. 
     
  • Versatility is essential. The strength of the wind changes, the ship can list without warning, and the wind can also disappear suddenly, leaving the vessel stranded in dead calm waters, which is what sailors most feared in the days before engines. The capacity to deal with change and transform it into opportunities will be key. And SMEs are good at this. Because they are light and find it easier to innovate. “More of the same” and “wait and see” are not viable strategies. Perhaps this is the time for revolution, as the great scientist Jorge Wagensberg saw things, when he said “Changing the answer is Evolution and changing the question is Revolution”. The change of paradigm is so huge that, as companies, we must re-establish our relationship with stakeholders and tackle business with new tools that will ensure our survival.  
  • “Keep going, keep going, don't stop”, in the words of the chorus of one of those summer hits we have danced to. For many companies, in this post-pandemic world, 2022 has been a year of excellent results. The problem is that the reasons for this are not very clear. A mixture of the urge to “escape” after the restrictions of confinement and markets' fear of uncertainty two months from now and beyond has had a tsunami-like effect on all patterns of consumption and, as a result, all patterns of production and commercialization. 
     
    We must not be paralyzed by fear. Because more than likely than not, the uncertainty that generates this fear is here to stay. We must learn to navigate in new waters, where fish still swim, but where the arts of fishing at our disposal are no longer effective. As Picasso said, albeit in a different context, inspiration has to find you working. 
     
  • Stop-breathe‐reflect. Values must be redefined. Those values that are mentioned so often on companies' websites, such as mission, vision and purpose. Those that have frequently flowed from the pens of consultants or communication agencies and which we barely remember. Values are very serious things. And generating value is not possible without commitment. 
     
    Let us not forget that planet B does not exist, so we will have to take care of the one we have, acting accordingly in our approach to projects, in the respect we show the planet, in the ongoing training that enables us to retain talent, in adopting a long-term view and in working as a team. 

Stormy weather is on the way. And during the storm there are many sudden changes and many blind spots, but you can also make out spaces that were previously hidden. New waters, new equipment, motivated crews and a first-class captain, who is both brave and careful. 
 
Happy sailing everyone. May your ship bring you safely into port. 
 
Raul Castellón, Professor at Esade Business School and Director of the Program for Owner-Directors 

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