What can we learn from the past?
Following the last decade of low interest rates and inflation, the past year has come as somewhat of a shock to the financial system, with inflation (possibly) peaking at double digit levels. Until recently, these levels of high inflation had been confined to periods of yesteryear, making the inflationary spike now more painful, for businesses and consumers alike.
The underlying reasons for this include a combination of post Covid-19 demand, geo-political tensions, fiscal and monetary stimulus, and supply change shortages. There is a no doubt in years to come further analysis will shed light on the decisions and events that brought us to this point. Even if inflation is on the decline, the reverberations will still be felt well beyond 2023. Given that is the case, what can we learn from previous inflationary periods?
The decisions and events that drove inflation in the 1970’s and even more recently in 2009, historically may rhyme but they are certainly not the same. One of the main issues for businesses previously was the lack of availability or awareness on how to harness data, to understand the bigger picture and thus adapt to an ever-changing landscape at pace. Today, there are always going to be forces that will remain outside of a business leaders’ control, which underlines the importance to identify what outcomes can be influenced with data driven insights.
The continual evolution of the information age offers the ability to leverage data, technology & AI in ways never seen before. In recent years (pre-inflation) it had often been evangelised for its potential to drive growth and reduce costs for businesses, with a “disinflationary” benefit to the broader economy. The truth now is, it can no longer be seen as a potential opportunity but a business imperative that must be embraced, to survive today and thrive going forward.
Businesses regardless of size or industry will be affected, some more than others. However, what is in no doubt is, that all businesses would benefit in acting on one or more the 6 areas highlighted below. Not only will this help an individual business, but the collective accumulated efforts of all businesses should not be underestimated in their ability to lift the entire economy in these challenging times.