Next in TMT: Capitalizing on 2023 challenges

How to seize this moment to recalibrate for success

A potential recession. Increased regulatory scrutiny. New challenges in China. After years of dizzying growth, technology, media and telecommunication (TMT) companies are facing strong headwinds.

But there are still plenty of reasons to feel confident: TMT companies have ample opportunity to transform their businesses with the right strategies and canny investments. This is a moment to reset and recalibrate. This sector historically has thrived on disruption. Today’s volatile market demands just that sort of proactive and creative response — one that will enable companies to become even more agile and better positioned to reap tomorrow’s benefits.

Pivotal trends in 2023 fall into five main categories:

Customer transformation

Inflation has sharply reduced the amount of money consumers are willing to spend, making them choosier than ever when they do open their wallets. Value is still their top priority, but increasingly they also want online services tailored to their personal preferences. Moreover, they expect the brands they purchase to reflect their values — in transparent ESG reports, for example — and they are unforgiving when their standards are not met. More than half of US consumers, and especially young adults, said they would drop a company they liked after several bad experiences. All of this makes understanding your customers in granular detail, and correctly predicting their behavior, essential to your company’s growth. To that end, artificial intelligence, used with privacy in mind, can help track consumer engagement across platforms. And while it’s important to connect with customers via their varied devices, a human touch is still vital to building loyalty: a third of people say that positive interactions with a company’s employees goes a long way toward determining whether they will patronize a brand again.

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Doing business in China

Nearly every multinational company that sells goods or services to Chinese customers can be affected by China’s new data privacy laws. According to guidance issued by the Cyberspace Administration of China, beginning March 1, 2023, all businesses that process, handle or transfer Chinese customers’ data outside of China must get government approval — a process that includes a mandatory security assessment. Compliance will likely be especially difficult for organizations that handle sensitive infrastructure-related information. Companies can take several routes to manage these requirements and avoid costly fines. Alternatively, some businesses may opt to unwind their operations in the country or separate their China operations from the rest of their global operations; other businesses, particularly those with supply chain dependency, are continuing to diversify their sources of supply and assess alternatives. As China’s evolving regulatory environment trends toward more restrictions, the key question companies need to ask now is, how much risk is tolerable?

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Navigating risk and regulation

In the United States, TMT companies face an increasingly complex regulatory landscape as well. To remain competitive, it’s essential to carefully monitor developments in four areas to help identify risks and opportunities:

Antitrust: Being proactive and thinking like a regulator are key to thriving in an environment primed to be less friendly to technology M&A. Observing recent regulatory trends and developing a comprehensive view of the competitive dynamics in your primary marketplace will allow you to craft a company narrative and compile data to validate your position — before regulators raise concerns.
Data privacy: From artificial intelligence to content moderation to digital markets, navigating global regulations requires a keen eye for detail and the ability to steer a course through divergent policies and standards. The same applies within the US, as states implement new and varied measures to protect consumer information.
Environmental, social and corporate governance (ESG): The US Securities and Exchange Commission (SEC), in addition to European regulators, has proposed new rules for climate-change disclosures, and while those rules have not yet taken effect, the message is clear: ESG reporting will soon be mandatory. It’s time to frame your company’s story and seize the opportunity to highlight your mission and values — both for compliance and to connect with your stakeholders.
CHIPS and Science Act: Major federal subsidies have been allocated to support US semiconductor manufacturing with the aim of bolstering an industry viewed as essential to national and economic security. The funds, however, come with restrictions on expanding manufacturing in China or any countries deemed a threat to national security. Most of the funding is earmarked for the construction of American semiconductor fabrication plants and will be allocated within the next five years, so companies need to act quickly to determine whether pursuing federal funding is right for their business.

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Scaling efficiently

One key to successfully weather marketplace disruption is to develop short-term strategies designed to help increase efficiency. Consider the full range of options: Mergers and acquisitions may be lucrative tactics for companies with financial leverage — and they still may make sense, despite increased regulatory scrutiny. Others may lean on automation and cloud and digital solutions to restructure workflow and increase output. As we move beyond the pandemic, innovation and profit will depend on companies’ ability to effectively match talent to current needs. Determining which tactics are right for your business — and how best to weave them into your strategy — will help your company not only to pass through economic headwinds but also to emerge stronger.

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The metaverse and emerging trends

If we think of our current era of exponential change as a hurricane, TMT companies are the eye of the storm. We are on the cusp of web3, and business leaders across industries understand that: 82% of executives expect metaverse plans to be part of their business activities within three years. Emerging metaverse and blockchain technologies, once they are fully realized, have the potential to revolutionize how business is transacted. More immediately, leveraging extended-reality technologies in the workplace for training or onboarding can foster employee engagement, upskilling and innovation. Establishing trust with consumers in these new areas can be paramount and will likely require corporate transparency and authenticity. Engineering a seamless transition between online and in-person experiences — a so-called “mixed reality” — is precisely what can enable companies to reap the most benefit from participation in the web3 ecosystem.