This year, our DLA Piper Tech Index is global, and captures the views of an even wider cross section of organizations working in the technology space. The report itself contains fascinating and granular findings on a range of important topics, and we consider here the key points relevant for CGFR organizations – a sector well-known to be experiencing the challenges of technological disruption, but also harnessing the rewards it can bring.
- Overall buoyancy. This year’s overall tech score is 71*. This is the highest we’ve recorded (higher than 68 last year) and is relatively consistent across all global regions. Two-thirds of our respondents are expecting to see their revenues increase in the coming 12 months with 36% saying they expect turnover to grow by more than 6% in that period. There is general buoyancy in the sector – but this should not act to hide more specific concerns being felt by many of our CGFR clients which are discussed below.
*This score is derived from a diffusion index that considers the proportion of positive, negative, and neutral responses of interviewees. The results are presented as a scorecard for each monitored business area, as well as an overall index. See the main report for more details.
- Unstable geopolitical environments. The overall score of 71 is brought down to 53 when looking at respondents’ views on increasingly fractious geopolitical events. This will also be of deep concern to our CGFR clients, who are often particularly reliant on global supply chain resiliency. Leadership across respondents said that a key lesson learned from the pandemic period was the importance of staying agile. This agility will be important over this year and beyond, with around half of the world’s populations going to the polls, and with globalization and sanctioned regimes still hot topics.
- AI dominance: Artificial Intelligence is of course a major focus, with 63% of respondents seeing it as a key area for potential growth. CGFR organizations can leverage AI to enhance customer experiences and optimize supply chains. Consumer-focused brands will be thinking carefully about how and when to use AI effectively, while ensuring their message remains relatable and relevant for end customers. That said, it’s clear we are still in the early days of AI and respondents are waiting to see what the next big wave will be – sector businesses are having to reconcile the desire to embrace new technologies and not fall behind competitors with financial pressures and wanting to avoid investing on a use case that may not work out in the long term. See our blog post by Suman Khurana and Imran Syed on Generative AI in CGFR for more information.
- Cybercrime: Cybercrime is becoming more frequent and sophisticated, often powered by AI. We’ve even seen attackers actively approaching regulators (or threatening to do so) to report companies and ‘ransomware as a service’ lowers the barriers to entry for cyber criminals. Only 49% of respondents say they have strong digital security measures in place such as anti-virus software and firewalls and just 45% conduct regular risk assessments. That means over half, in both cases, don’t – a stark finding, particularly with the advent of cybersecurity focused regulation like NIS2 and the EU’s Digital Decade (see further guidance on that here). For CGFR organizations who hold payment details and other valuable personal information, getting the basics right will remain important. Organizations need rigorous governance policies and procedures properly disseminated through the entire organization and supply chain, continuous training, effective reporting and threat escalation lines, as well as regular tabletop exercises to model and prepare for attacks.
- Digital transformation: Companies need to embrace technological change to stay competitive. This is crucial for retail businesses aiming to improve e-commerce experiences and streamline operations. Consumer brands, particularly those in e-commerce, need to be aware of the often high expectations of their customers in this space – from online shopping experiences through to payment methods, to efficient supply chain and delivery models. Brands will be need to take a wide and continuing view of the market to avoid being left behind, whilst still prioritizing brand authenticity and user experience.
- Data monetization: The report discusses the challenges and opportunities of data monetization, which is vital for consumer goods companies looking to leverage customer data for personalized marketing and improved product offerings. This must be balanced against maintaining the trust of customers, and complying with regulatory constraints (see section below). It is unsurprising, then, that less than a third of respondents say they are currently making full use of data monetization in their operations. CFGR organizations that not only hold these crown jewels safe, but also leverage them (legally) to convert that value into sales, will be at the forefront here.
- Views on regulation: Following the introduction of the GDPR regime in the EU, which wrong-footed many organizations at first, we are seeing a raft of new or proposed regulation creating new frameworks around AI, cybersecurity, data governance and ESG reporting. Speaking to our CGFR clients, many are challenged by this increasing patchwork of sometimes overlapping regulation.
- A final word about sustainability and ESG. This is at the forefront of the CGFR’s sectors mind. During previous global turbulence (e.g. the 2008 financial crisis), ESG fell down the priority list. Our survey actually shows a clear trend in the opposite direction. While public companies are often well ahead of the curve, clients in mid-cap businesses and smaller enterprises are now striving to understand the likely future path of regulation and how ESG fits into their strategic business plans. This trend continues to gather pace, even though the ESG debate has become highly politicized, sometimes being associated with the “woke” agenda. Respondents also rebuff temptation to ‘green hush’ in the face of increasing regulation (see here for our Environmental Advertising Claims Guide). Respondents almost unanimously say they’ve started taking action to address environmental sustainability. Ultimately, technology can play a critical role in enhancing sustainability, improving performance across all aspects of ESG initiatives by providing access to crucial data points.
While technology will continue to be a disruptor in the CGFR market, representing significant challenges, it can also deliver significant rewards.
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