The macro, the local, and everything in between: Understanding today’s industry dynamics

We’re three weeks into the new year, which has already delivered some surprises. Is inflation cooling? (Maybe.) Will Western economies avoid a recession? (Don’t bet on it.) Will ChatGPT replace CEOs (eh, no.) Companies everywhere are testing their plans for the coming year. The macro context is critical—but it’s also essential for leaders to reflect on the dynamics affecting their industry—and adjacent sectors. How will these forces expand or contract their set of opportunities? How will they raise the bar for the capabilities they need?

Based on our work across hundreds of large companies, we’ve looked at the dynamics in 11 major industries and their implications, from the capabilities you’ll need to build, to the growing digital priority some sectors face, to the implications for your net-zero transition:

Aerospace and defense. Space is the newest industry of all. As rocket launch and recovery and satellite deployment pass from governments to the private sector, new possibilities are opening up for business, including communications, R&D, and manufacturing. SpaceX’s Starlink has captivated the world with its satellite broadband network. In space, pharmacos can develop new cell cultures not possible on Earth. Chip makers are looking into building fabs in space. How will the space economy change the world?

Chemicals. After years of healthy growth, petrochemical companies might need to batten the hatches. Ructions in energy markets are pressuring margins; new capacity is coming online; and demand is slowing. Getting in front of these issues will require new ideas throughout the company, especially in operations, maintenance and turnaround, and procurement. Excellence in petrochemicals: What it will take to win.

Consumer packaged goods and Retail. In our view, inflation will be higher for longer, and consumer businesses need to move quickly to put the business on an inflation-ready footing. European grocers, for example, can get sharper on communicating value to customers, diversifying their supply base, and zero-basing their G&A spending. Consumer goods companies can finetune their pricing, redesign products for value, and tailor promotions to customers feeling the pinch. Learn more here: How retailers in Europe can navigate rising inflation and How Europe’s CPG leaders can navigate inflation.

Electric power and natural gas. The net-zero transition seems more disorderly than ever. How can countries and regions around the world simultaneously shift to low-carbon systems while also meeting the immediate needs of energy reliance and affordability? It’s the biggest puzzle of the year. Here’s your guide: The energy transition: A region-by-region agenda for near-term action.

Financial services: banking. Banks rebounded from the pandemic on the back of a sharp rise in net interest income, but the context has changed dramatically. Now several interrelated shocks—some geopolitical and others lingering economic and social effects of the pandemic—are widening the divide between leading and lagging banks. To close the gap, read McKinsey’s Global Annual Banking Review. 

Financial services: insurance. Inflation is just one of the forces buffeting life insurers, sharpening their longstanding strategic challenges. CEOs have a dizzying number of options available to them, including several ways they can “unbundle” the business to focus on the things they do best and outsource or sell other activities. Explore your options in Global Insurance Report 2023: Reimagining life insurance.

Healthcare. We estimate that healthcare profits will grow 4 percent in 2023. That’s a step down from earlier estimates of 6 percent. The industry faces difficult conditions, including inflation (of course) and labor shortages. But some segments will do better than others. Which ones? What to expect in US healthcare in 2023 and beyond.

Life sciences. The sector is often considered recession-proof. But is it? The evidence is mixed, and less than a quarter of execs we surveyed said their companies are ready for one. To succeed, companies need to both boost margins and continue to grow—a tricky business—while also building various forms of resilience into their operations. Our guide is here: Resilience in life sciences: Emerging stronger from the downturn.

Logistics. The supply-chain problems that have plagued many sectors have been a boon to shipping companies; they’re coming off a couple years of vigorous demand and unprecedented growth. The next phase may not be so kind. Economic recession would be painful; rising operational costs and crew shortages won’t help. What comes next?  How to transform your shipping company.

Real estate. The pandemic created a tectonic shift in where, when, and how we work. The industry is working hard to adjust. So are the companies that lease office space.  We checked out the possibilities for two kinds of companies: Reimagining the future of financial-service headquarters, Designing the workplace of tomorrow: Lessons from life sciences.

Technology. Remember the phrase “software is eating the world”? Guess what: the world is biting back. Software companies have had it all their way for years; now, companies in every sector are turning themselves into coders and developers; they’re embedding software at the core, building new businesses, and spinning off proprietary software assets. It’s incredible but true: Every company is a software company.  

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The macroeconomy and some other forces affect every sector. But each sector’s dynamics are specific. We hope we’ve captured these well; let me know what you think. Perhaps the one consistent theme across all these perspectives is the need to balance offense and defense. Leaders who manage their resources closely while also looking for long-term potential (rather than short-term fixes) will win when the downturn shifts to recovery.