What entrepreneurial businesses should look out for in 2024

Business leaders are still trying to escape the rollercoaster of constant strategic reprioritization.

In brief

• 2023 was challenging, but 2024 will likely remain unchanged with a highly demanding economic, geopolitical and technological landscape.
• Planning ahead, talent is topping the agenda, followed by investing in operations and technology, as well as focusing on customer centricity.
• To be prepared for 2024 and beyond, leading businesses will need to think ahead, remain agile, and ensure a balanced approach to growth. 

Over the past year, entrepreneurial businesses have had to navigate a challenging and fast-changing economic and geopolitical landscape. Global GDP declined from 3% in 2022 to 2.6% in 2023, according to the World Bank’s Global Economic Prospects report¹. Meanwhile, inflation remains high and interest rates are elevated, increasing companies’ cost of capital, as well as their payroll expenses and input costs. In addition, current geopolitical tensions have caused significant supply chain challenges and operating uncertainties.

At the start of last year, many businesses were struggling to escape the rollercoaster of constant strategic reprioritization, and maintain a focus on the factors likely to prove most critical to their long-term success. 

So, how are entrepreneurial businesses responding to the challenges in the current landscape?

Outlook for 2024

If 2023 was challenging for entrepreneurial businesses, then 2024 looks set to bring more of the same. In fact, it could potentially present an even more demanding economic and geopolitical context. 

Growth prospects remain sluggish, with the World Bank’s Global Economic Prospects report² predicting a global fall in GDP growth to 2.4%. Nevertheless, the growth outlook varies by region, with growth forecasts to be much lower in the EU and the US than in Asia, for example. Inflation is expected to ease, but interest rates are likely to remain high. China, the world’s second-largest economy, is wrestling with real estate sector challenges and heading off the prospect of deflation. 

There is also a possibility that an escalation of geopolitical tensions could have a highly disruptive impact on the global economy and put further pressure on already-strained supply chains. Economic volatility may be exacerbated by the series of national elections set to sweep the world during 2024. More than half the world’s population will head to the polls this year, representing nearly 60% of global GDP. 

1. The people agenda

Talent remains the number one priority for entrepreneurial businesses in 2024, just as in 2023. Entrepreneurial businesses are focused on aligning their resource requirements with their future strategic objectives. In practice, this means they are looking for talent with digital skills and competencies, including skills in data analytics, as well as leadership capabilities. So, they are strongly focused on recruiting, managing and retaining talent, as well as upskilling their workforce. 

Last year, many businesses experienced firsthand the difficulties involved with recruiting and retaining the right talent. So, a strategy to become an employer of choice in their chosen markets is one of the fastest-rising priorities for entrepreneurial businesses. Other priorities include improving the performance management of individuals and teams and embedding a culture of continuous feedback. 

A stronger focus on performance management and feedback processes by entrepreneurial businesses are also indicators of plans to lower their cost base and reduce the expense of human capital where possible. The October 2023 CEO Outlook Pulse highlights that the vast majority of CEOs (93%) are making changes to their talent strategy to manage costs. And while most aim to do so without reducing headcount, 36% of CEOs are restructuring or reducing the employee base. Others are taking a mixture of actions to reduce costs, including reducing bonuses and shifting to contract work. 

Labor markets remain tight in many major economies, however. So, CEOs will have to carefully assess the risks of reducing employee-related costs at a time when their ability to attract and retain talent is restricted, particularly in high-demand technical and technology roles. Fundamentally, entrepreneurial businesses must position themselves to deal with cyclical market challenges, while understanding structural changes in employee priorities around total rewards and hybrid work. Legacy talent strategy models were not built for the new and dynamic environment that entrepreneurial businesses are currently operating in. 

2. Optimizing the cost base and increasing operational efficiency, enabled by investment in technology such as AI

A focus on actively optimizing the operating cost base was already high on entrepreneurial businesses’ agendas in 2023 due to rising inflation and interest rates. In light of continued slow growth and the generally volatile economic landscape, it has become an even greater priority in 2024. It is clear that in this challenging environment, companies need to operate sustainably, cost-efficiently and adaptability to thrive. 

Higher costs of capital and increased pressure on efficiency are forcing entrepreneurial business leaders to reset their assumptions. They understand that, going forward, transformations will increasingly need to be funded by internal sources, rather than external funding, and this will be mainly achieved through performance improvement. This reflects how the environment has shifted from one of growth at any cost, fueled by ultra-cheap money and elevated liquidity, to a new paradigm of sustainable investment, with a clear path to profitability or value creation. 

Our research shows that entrepreneurial businesses are prioritizing aligning their operational strategy across functional silos, improving internal cross-functional collaboration and teaming, and introducing associated key performance indicators and incentives. Continuous improvement is therefore a key focus area for entrepreneurial businesses, as is reviewing and improving the company’s working capital position. 

Over the next two years, entrepreneurial businesses are aiming to significantly increase the efficiency of their operations by further automating, digitalizing and simplifying their overall operations. They also want to support new digital business models by making better use of technologies such as AI, blockchain and robotic process automation.  

AI and data management are key investment areas for entrepreneurial businesses as they look to retain their competitiveness. Seven out of 10 CEOs surveyed for the October 2023 CEO Outlook Pulse acknowledged that their business must act now on GenAI to avoid giving their competitors a strategic advantage. Nevertheless, a similar percentage (68%) reported being stymied by uncertainty in this space, making it challenging to respond at speed. They are grappling with numerous AI-related challenges — from being overwhelmed by potential use cases and establishing a robust data architecture to developing a cohesive strategy. 

Some of the quickest gains from AI deployment are efficiency and productivity improvements that can boost the prospects of slower-growth companies. Given the pace of developments, CEOs of entrepreneurial businesses need to quickly understand the implications of GenAI for their business, operations, people, industry and end markets if they are to keep up with competitors.

3. Customer centricity, pricing and innovation

Entrepreneurial businesses are acutely conscious of the customers’ rapidly changing needs and wants, as well as their buying patterns. So, a key priority for them in 2024 is improving their capabilities to better understand these developments. That involves improving the processes and technology that enable the gathering of valuable customer feedback and making better use of analytics. AI, for instance, can enable the analysis of enormous volumes of data in real-time, giving business leaders new insight into customer behaviors. Enhancing the company’s analytical capabilities will facilitate improved market segmentation, create more specific sales activity for groups of customers, and provide a more tailored customer experience. 

Another fast-rising customer-related priority is the development of deeper, long-term customer relationships. This is being achieved through enhanced loyalty programs and retention management, as well as cross-selling and upselling programs. 

Having struggled with the rapid inflation rates and a subsequent increase in cost of goods sold during 2023, entrepreneurial businesses are prioritizing a new approach to pricing in 2024. This comes after they recovered margins in 2023 by adopting relatively straightforward price increases. Under their new pricing approach, entrepreneurial businesses are using improved competitive and market intelligence to enable better pricing decisions and more effective sales programs, as well as a more frequent review of prices and margins by customer segment. They are also adopting new pricing strategies such as developing an intelligent, dynamic pricing approach for specific customer segments. An increasing number of companies are turning to so-called customer lifetime value models to transform their sales, pricing and retention strategies. 

Additionally, there is a strong focus on improving the consistency of customer experience across all channels and touchpoints and aligning the brand promise with the customer experience. As a result, and in line with changing customer needs and expectations, entrepreneurial businesses are reevaluating and reshaping their product and service portfolios through innovation and engagement in strategic alliances and partnerships. 

While it is not yet a "Top 5" priority, inorganic growth is one of the fastest-rising business priorities in the 2023 strategic growth plans analyzed. Entrepreneurial businesses are looking to make the right preparations for potential acquisitions, which includes building a good M&A team, growing their acquisition pipeline, as well as their alliance and partnership pipeline, and developing a robust capital allocation plan that is aligned to the business strategy. 

Weathering the storm

It’s been clear for some time that uncertainty and change are the new constants for business leaders. EY research into the growth journeys of more than 1,000 market leading companies has shown that maintaining a balance between short term priorities and long-term value creation is crucial when it comes to achieving accelerated and sustainable growth over the years.  

High-performing entrepreneurial businesses today seem to:

Know what’s coming

While overall growth may be decelerating, each business has a unique trajectory. Leading businesses are thinking ahead, monitoring and planning for what might be coming, and getting prepared. They have undertaken scenario analysis and planning, including analysis of geopolitical, economic, technological, ecosystem and climate developments among other concerns. They have also analyzed their own financial and customer demand scenarios to get a clearer view of the future, to prepare for what might be coming down the line.

Create or maintain the necessary balance in growth driver capabilities while being focused on long-term value creation for all stakeholders

It’s a careful balance, but the ability to control costs without sacrificing long-term sustainable growth is key. Entrepreneurial businesses that are resilient, can anticipate what might be coming, and respond in an agile way, will be less likely to engage in constant reprioritization. 

Leading companies take an extra step, however. They regularly assess their capabilities and determine which are lacking and which are needed to achieve their growth ambitions. In doing so, they make conscious decisions to establish a balanced approach to growth.