The U.S. economy continues to stretch out its longest growth streak on record, but complicating the outlook are concerns about a global economic slowdown, uncertainties around tariffs and political upheaval. While smaller businesses tend to be less exposed than their larger counterparts to macroeconomic and geopolitical events, no business is immune from the effects of market dynamics, social and economic trends, and technological innovation. As we head into the unknown of 2020, we’d like to emphasize the importance of understanding the factors that are reasonably knowable or predictable, rather than trying to guess the “unknowables.” With this in mind, we’d like to point out a few business and market trends that might help your planning for 2020 or prompt you to think differently about specific areas of your business. Whether you are in good shape or not, whether you are readying for fast growth or aiming to hold steady, consider the following trends that are likely to influence your business growth.
- Understand and leverage the younger generation, which will account for an increasingly significant part of your customer base and workforce. Chances are, you’ve been aware of and even geared your business specifically towards millennial customers. However, the next generation, Gen Z, will soon account for 40% of all consumers by next year and influence hundreds of billions of dollars of spending annually. This group of individuals—largely born between 1995 and 2010—are digital natives whose lives have been exposed to the internet and social networks, and who tend to have specific attitudes and beliefs that influence consumer behavior. As described by McKinsey & Co., businesses should be attuned to the particular ways this generation views spending: “consumption as access rather than possession, consumption as an expression of individual identity, and consumption as a matter of ethical concern.”
Companies also should think about how to hire and engage talent as millennials continue to claim a larger share of the workforce and as Gen Z’ers start to enter it. Millennials are expected to account for about half of the American labor force by next year. Businesses could expect to see more technology, apps and innovative platforms to cater to this segment of their employee base. Other potential changes to business operations could include greater collaboration, as well as increased efforts to be good corporate citizens, driven by the younger generations’ focus on doing well by doing good.
- The gig economy continues to grow. In 2018 about 36% of workers had a “gig” work arrangement in some capacity or another. This figure is expected to surpass 40% next year. The gig economy runs a wide spectrum of industries, job types and pay scales. Its growth is reflective of both the desire of workers to harness flexibility in their jobs and the demand from employers who benefit from having non-traditional, short-term and independent working relationships. We can also see that gig work is valued by economies when we consider the numerous and sizeable industries that empower it, including ride sharing, food delivery, education and payment processing.
While assessments of the gig economy vary—some say it is a trend that supports entrepreneurship, while some see it as a deterioration of the social contract between employers and workers—the truth is that it’s a growing trend, and technology has virtually made this the new normal for many individuals. Small businesses might find opportunity amid this growth. For one thing, employment setup might change. A business might do away with traditional 9-5 jobs and outsource certain tasks to online marketplaces that provide access to pools of gig-based professionals who might present better return-on-investment than hiring a full-time employee.
- Sustainability will matter more. With global concern around the environment coming into sharper focus, companies are amping up green practices, such as transforming their supply chains to reduce carbon emissions and cutting down on plastic usage. Businesses will see growing pressure from consumers who seek accountability and transparency in regard to ethical sourcing and provenance of product. This means companies will be increasingly responsible for helping the customer understand what environmentally friendly choices they have made.
Sustainability goes beyond just the environment. As the relevance of the term ESG—environmental, social, and governance factors—has grown exponentially in recent years, being a “sustainable business” also means being conscious of and engaging in practices to serve its community, as well as working toward sound corporate governance and management. In this sense, small businesses can expect to incorporate ESG-minded activities into its corporate culture; create guidelines and policies that incorporate ESG factors into business decisions; and communicate its intentionality and commitment to these issues clearly to employees, customers and investors.
Competition in the marketplace is always fierce, no matter what new year we’re heading into. As the business environment and customer interests continuously change, adapting to these trends can be crucial for the success of any business. These trends we discuss above, a few of only many that are taking shape today, are likely to have considerable impact on business growth. Though the exact implications and timing are difficult to predict, they are reasonably knowable and understandable trends, based on studies, surveys and observations of marketplaces. It’s more difficult—essentially impossible—to tell where macroeconomics may be headed, especially given election year in the U.S. in 2020, but concentrating on the knowable elements and establishing a sound guidepost can inform business decisions and keep the operation focused on its mission.