2023 – a concerted focus on controllable elements, especially operations

2023 presented challenging earnings releases for many companies as economic headwinds persisted. Throughout 2023, our extensive observations of corporate messaging across our client base, their respective peers and the broader corporate universe highlighted one central theme for many: a concerted focus on controllable elements, especially operations.

The ensuing outcomes have been investment narratives heavily geared around the articulation of execution related to operational excellence programmes, cost containment initiatives and the re-evaluation of resource management, all with the intent of future-proofing and enabling transitions within a rapidly evolving market and macro environment.

Dissecting five key messaging themes for 2024

As we go into 2024, this means that many companies have created operational structures that are demonstrably more efficient, if not substantially leaner. The critical question today is whether the respective markets will enter a normalisation period – from a supply chain, macro volatility and talent acquisition perspective, amongst others – or if the “waiting game” will persist. While we foresee some 2023 dynamics persisting in the short term, from a messaging perspective, we would anticipate a shift towards more structural equity storytelling building blocks. As such, we would expect the following key themes to feature in the year ahead:

  • Visibility remains limited. Scenario planning and agile steering models will remain essential tools to manage ongoing uncertainty across the board. Geopolitical volatility will be of particular concern given its potential economic repercussions, beginning with events in Taiwan last weekend.
  • Balance sheet preservation will remain a key focus in the short term. Companies have taken and will continue to take extra time, even in quarterly reporting, to focus in detail on the strength of their balance sheets and cash generation capabilities.
  • A glimpse of light at the end of the tunnel? The current consensus is that inflation is normalising, led by the US. Topics such as tight labour markets and supply chain stabilisation are expected to continue to dominate the full-year earnings cycle, but a shift in messaging is anticipated for those companies operating in markets where stabilisation is most in effect.
  • Spotlight on specific business enablers. Elements that result in resilience and competitive advantage, led by digitalisation and operational “controllables”, have been at the fore in 2023. In 2024, other topics that support operating leverage, such as automation and labour productivity, are expected to get greater airtime.
  • Sustainability reporting that measures what really matters. Whilst the ongoing application of the European Corporate Sustainability Reporting Directive will draw the attention of investors from a reporting standpoint, decarbonisation and social agendas will be of particular scrutiny in understanding ongoing transitions and their future impact. 
A nuanced interplay between defensive and progressive storyboards

While some sectors and companies may see a resurgence in growth and operational leverage, others will continue to find strategic value in prioritising balance sheet resilience. The former will no doubt have latitude to shift their investor relations narratives to the long term, while the latter will need to craft compelling counterpoints to navigate continued periods of market inertia – we will undoubtedly see initial clues as to what’s in store in the year ahead during the forthcoming reporting cycles.

As strategic management consultants, we are much more focused on the imperatives of scenario planning and messaging than making predictions; however, we see that this nuanced interplay between the defensive and the progressive is set to be an essential facet driving the equity markets in 2024.