As we enter 2023, business investment trends are likely to be shaped by ongoing economic uncertainty and technological disruption. However, there remain several key areas of opportunity for smart capital allocation. In particular, sustainability, digital transformation, and rising interest rates will drive investment priorities. Companies that align their strategy and spending with these themes stand to benefit. This article will explore the top business investment themes in 2023 and how executives can capitalize on emerging trends.
Sustainability becomes an investment imperative
Sustainability will be one of the biggest business investment trends in 2023. Stakeholder pressure and tightening regulations around issues like carbon emissions make ‘going green’ a strategic priority. According to Deloitte, sustainability-related investment by corporations could double in 2023. Key areas of focus will include renewable energy, electric vehicles, responsible sourcing, and ‘net zero’ transformations. Early adopters stand to gain a competitive advantage and favor with increasingly sustainability-minded investors and customers.
Digital transformation accelerates
COVID-19 propelled digitization by years, and companies will continue modernizing their tech stack in 2023. Key digital investment priorities include cloud computing, AI/ML, cybersecurity, e-commerce capabilities, and automation. While digital transformation requires upfront investment, the long-term benefits are profound, including increased agility, reduced costs, improved customer experience, and new revenue streams. Companies that postpone digital upgrades risk falling behind. According to IDC, direct digital transformation investment will approach $7.4 trillion between 2020 and 2023.
Mergers and acquisitions rebound
Merger and acquisition (M&A) activity slowed during pandemic uncertainty, but is poised to recover in 2023 as companies look externally to secure capabilities and market share. PwC anticipates a rise in both megadeals (over $5 billion) and middle-market deals as corporations and private equity firms pursue growth. Hot sectors for M&A include technology, health care, financial services, and renewable energy. Companies will also seek geographic expansion through cross-border deals. Executives should explore both buy-and-build strategies and potential divestitures to spur growth.
Innovation and R&D get prioritized
With competition intensifying in many sectors, business leaders recognize they cannot cost-cut their way to growth. Instead, they are prioritizing investment in innovation and R&D to develop new products, services and business models. Key areas of technology investment include biotech, semiconductors, 5G, space technology, and the Internet of Things. While China leads in R&D spending, US investment is on the rise after the CHIPS Act earmarked $52 billion to rebuild domestic semiconductor manufacturing.
Reshoring becomes cost-competitive
Supply chain turmoil and geopolitical tensions have exposed the risks of over-reliance on extended global supply chains. As a result, many companies are exploring reshoring in 2023 – bringing manufacturing and services back to domestic or nearshore locations. Rising offshore wages and reduced domestic energy costs make reshoring cost-competitive for more sectors. According to Kearney, companies that optimize their footprint rather than wholesale reshoring can reduce supply chain costs by 10-30%. This requires careful analysis of spend and strategic investment.
In 2023 business investment trends will be shaped by sustainability, digitalization, M&A activity, innovation, and reshoring. Agile executives who align capital allocation with these themes can secure competitive advantage. But investment strategies must be backed by thoughtful analysis, not knee-jerk reactions.