The business year ahead: MIT experts on what to expect in 2019

Part of what makes MIT Sloan professors and lecturers leaders in their fields is their ability to scan the horizon and make sense of what’s ahead. Here’s what seven experts advise businesses to keep an eye on in 2019.

Human capital management

Sharmila Chatterjee, MIT Sloan senior lecturer in marketing, said in 2019 she’ll be watching the continuing digital transformation of business and its impact on human capital.

While repetitive, low-value-add activities can be streamlined with the help of technology, human employees remain critical to companies’ missions.

“Before making big cutbacks in personnel when making technological investments, it will be good to think carefully and take a step back,” Chatterjee said. “One of the biggest mistakes will be cutting the human interface too quickly.”

B2B pricing opportunities

As for business opportunities in 2019, there is a lot of “upside potential” in pricing in B2B markets, Chatterjee said. Pricing is often treated as an afterthought, she said, but it shouldn’t be. Even firms that aren’t able to engage in value-pricing due to customer expectations and competition should consider value-selling — that is, quantifying the value of their offering in dollar metrics and communicating this delivered value to customers.

“Value-selling should be the goal,” Chatterjee said. “You want to get an equitable or just return on the value you are delivering, so that you can invest the appropriate resources in your business to be a leader, and innovate, and do the best possible to ultimately benefit the customer.” 

Software security and ‘tail spend’

What keeps MIT Sloan lecturer Lou Shipley up at night? Software security — or the lack thereof.

“Every day we read about another breach,” said Shipley, who lectures on technology, innovation, entrepreneurship, and strategic management. In 2019, he advised, “watch the software security market to see big innovations to help companies secure their software.”

Software as a whole will continue to dominate markets, Shipley said. Look for more startups focusing on how to help developers drive software development productivity, he said. “I am especially interested in companies focusing on the 'citizen developer,' a term used to describe how software development impacts the entire organization — marketing, sales, finance, and of course engineering,” Shipley said.

When it comes to spending in 2019, savvy business leaders concerned with spending visibility, cost reduction, and other efficiencies should focus on their procurement “tail spend” — that is, smaller purchases that don’t make it onto a company’s management radar, Shipley advised.

SEC reforms and tariff policy

One of the biggest sources of financial uncertainty in 2019 will be international tariff policy and its impact on product demand, predicted Chester Spatt, a Golub-distinguished visiting professor of finance at MIT Sloan. That uncertainty is likely to limit investments in new facilities — both domestic and overseas.

“The SEC has proposed a significant natural experiment to help understand the impact and distortions created by the fine structure of fees and rebates,” Spatt said. “The SEC also is likely to revisit and may undertake significant reforms to modernize the proxy process in such areas as communication, the voting process, and the role of voting advisers to asset managers.”

Improving trading structure would increase marketing liquidity, reduce the cost of capital, and improve capital formation, Spatt said. Easier funding is, of course, important to business leaders, as is a modernized proxy system.

Brexit fallout

MIT Sloan economist John Van Reenen has his eye trained on how the United Kingdom’s separation from the European Union will shake out.

Van Reenen, who is based in the U.K., said in a recent blog post that Brexit will lead to an economic loss that will hurt the country’s poor and middle class. And the country is already starting to see the effects of apprehension over what would happen if it splits from the bloc without a deal in place.

“The economics of Brexit are very simple. Being outside the EU inevitably means higher costs of doing business with our nearest neighbors — so there will be less trade, and less trade will make us poorer,” Van Reenen wrote. “This will be hugely painful if there is a disorderly ‘No Deal;’ it will hurt to a lesser degree with a softer approach,” Van Reenen wrote. “The formal amounts that the U.K. pays into the EU disappear in the rounding error compared with these economic losses.”

Van Reenen is watching for the groundswell of popular sentiment, percolating on social media and manifesting itself in street marches, which he expects might lead to a second vote on Brexit.

However it shakes out, Brexit is just one incarnation of a regional wave of nationalism and opposition to global cooperation on trade, climate, and terrorism, that will see businesses having to find ways to adapt, he predicts.

Retail workforce

In the retail industry, MIT Sloan professor of operations management Zeynep Ton expects wages to rise and worker schedules to become more predictable in 2019. Businesses that don’t adopt those stances could find it hard to attract workers in a highly competitive job market.

“The labor market is very tight, and a lot of retailers that I speak to are competing for talent and having trouble finding the right people,” Ton said. “Those retailers that can create an environment where employees are productive and where they can contribute a lot to the company’s success will do fine.”

Those that can’t find ways to increase employee productivity will suffer. In such a tight labor market, employees who are dissatisfied with conditions at their current employer find it easy to move to one that can accommodate them better.

As retailers shift more toward digital and omnichannel business models, workers will also be expected to take on a wider range of tasks and responsibilities, and that will necessitate better compensation, Ton said, pointing out that many of these changes are being driven by local- and state-level legislation concerning wages and scheduling.

Attracting digital talent

The retail industry won’t be the only one facing a fight for top-tier talent. Tech industry organizations will also need to find ways to attract and retain the best and brightest in fields like artificial intelligence, cybersecurity, and data analytics, said Kristine Dery, a research scientist with the MIT Center for Information Systems Research.

“Large companies are going to continue to struggle to get the digital talent that they need to fulfill their strategies,” Dery said. “This is going to become an increasing challenge as the use of these new technologies become more prevalent.” 

Dery said organizations that want to come out on top will need to refine their employee experience. “Companies that really understand what it takes to create great fertile ground for this sort of talent to excel in are really reaping the benefits.”

To do that, companies need to continuously upgrade technology, design adaptive physical workspaces with their employee’s shifting needs and comfort in mind, and allow talent to pursue their interests and own projects. “It’s about creating the environment where it’s fun to play if you’re a really highly skilled digital worker,” Dery said.

Retirement financing and infrastructure funding

As the executive director of the Golub Center for Finance and Policy, Doug Criscitello has public policy on his mind.

One concern? The immense pressure put on U.S. government budgets by health and retirement benefits for public sector employees.

Criscitello said one financing option that’s caught his attention is reverse mortgages, which allow senior homeowners to access their equity. “Folks who are retired, frequently their greatest asset is the equity they have in their homes,” he said. “So being able to tap into that is not necessarily a bad idea.”

Criscitello said he’ll also be watching the horizon for a possible American economic downturn and what that will mean for governments already tightening their belts.

Balance-sheet liabilities, such as public sector retirement plans, and the need to improve public infrastructure have “exacerbated fiscal pressure, particularly at the state and local level,” Criscitello said.

An alternative option for funding infrastructure that’s gaining traction is public-private partnerships. While that kind of agreement can help move along the design, build, finance and operation of infrastructure, it’s also important to shed light on any taxpayer risk, Criscitello said.

 “I'm a true believer that our nation's infrastructure does need to be improved,” Criscitello said. “If ‘P3s’ are the way that's going to happen, let’s just make sure we have full transparency.”