What started with euphoria over high valuations and seemingly endless growth expectations ended with market-cap compaction and layoffs as a new reality sank in for the tech sector last year. Thanks to inflation and rising interest rates, the sector’s predominant ‘growth at all costs’ mentality suddenly gave way to a necessary push for profits – a shift that brought huge implications for the whole tech ecosystem.
But changing economic conditions weren’t the only issue tech leaders have had to contend with in the past year. Many organizations continued to grapple with how to manage demands for flexibility and control over work location in the ongoing battle to get back to the office. Suddenly, what worked before no longer does, and it’s transforming how leaders choose to show up and move forward.
The bottom line? With the end of free money the tech landscape has changed — for better or for worse depending on your point of view – and tech leaders need to change with it. Here are three trends shaping tech leadership this year and beyond:
Adopting a sustainable approach to growth and profitability
When rising interest rates put an end to a growth trendline that had lasted over a decade, it marked the end of the free-flowing venture capital many in Silicon Valley had taken for granted. As Wall Street began to prioritize profitability over growth, the tide effectively went out, leaving many companies – particularly those chasing and projecting growth above everything else that matters in business – exposed.
Now, as the market downturn veers toward a potential recession, fiscal and operational management will go from important to critical. But the companies that will thrive in 2023 are those that are able to focus on the core of value creation for their customers, building strategically on their strengths and turning them into opportunities. Tech companies that typically survive recessions and come out stronger use times like these as an opportunity to regroup and refocus, and even to double-down on their advantages so that they’re ready when consumer spending rebounds.
Forrester predicts 80% of companies will pivot innovation efforts from creativity to resilience this year – focusing initiatives on modernizing business processes, automation, supply risk management and employee experience. However you navigate changing economic times, one thing’s certain: a synthesized approach to growth, operational rigor and profitability will be essential.
Leadership presence in a hybrid world
It’s been two years since the pandemic put us into emergency remote work mode, giving many workers a taste of flexibility, convenience and opportunity that’s been tough to give up. Some leaders have taken a hard line on forcing employees back to the office. And while I firmly believe that nothing can replace the energy that comes from being together in person, I also understand (and benefit from) the flexibility enabled by remote work.
The contracting economy may work against remote workers in the short term, but it’s tough to ignore the fact that the way we work has fundamentally changed. And hybrid models still leave something to be desired when it comes to building connection and community. Finding other ways to harness the benefits of in-person presence in this new normal is becoming essential to building genuine connections with employees and customers.
For leaders, that requires creativity and vision. How are you going to build the connections and bonds required to lead your organizations through this change? There’s no one clear answer – I believe it’s going to be a mix of offsite events, engaging onsites and a greater awareness of when and how in-person work creates community and strong bonds.
I also believe there are better questions than the ‘hybrid vs. in-person’ false binary. As the battle for top tech talent rages on in spite of tech sector cutbacks, what we should be asking ourselves is what is the best way for all of us to do our best work?
There are going to be tradeoffs, including spending on company offsites and human touchpoints, but ultimately it’s up to leaders to figure this out for their teams.
Leading the way forward in the face of crisis
While the last year has resulted in a true level set for tech companies, it’s also been a forced reality check for everyone who works in the sector. A decade or more of tech glorification marked by a notable absence of tough questions from investors and the media covering the industry gave room for questionable behavior. Now the pendulum has swung the other way to a full-blown ‘tech-lash’.
Tech leaders who weren’t used to being questioned have had to make a choice in how they react to the current landscape. You can position yourself against the change — e.g. pushing a ‘hardcore’ work culture – or you can be responsive. In the end, customers get to decide which companies they want to do business with, and employees get to choose where they want to work. Tech leaders are responsible for framing the ‘why’ for their teams and their customers, and in a time of big change like this, these core assumptions and values will get tested. Under this kind of pressure, some teams and leaders will simply buckle and break.
Of course, not everyone is bemoaning the end of the unquestioned era of tech and its unsupportable valuations. Many believe that the elimination of ‘free money’ isn’t entirely a bad thing. A recent survey shows that 61% of leaders are optimistic that the recession will have a positive impact on their organization. That there’s still growth to be had and hugely valuable technology companies to be built, is a given, though it’s more likely to come to those who are intentional about how they lead.
As predictions continue to roll in as to how this will all play out, the only certainty right now is that a shift in course is necessary.