Dealing With Disruption to Drive Success: Navigating the 2024 Technology Market

Demand for ‘War Time’ Leaders

It has been well written that growth at all costs in the tech sector is now ‘very 2022’. The move to a more sustainable, profit-focused operating model has been a key priority for almost every business we partner with, including many of the scale ups we’ve supported, where investors are demanding greater business discipline before investing. While there is a build-up of demand in both Private Equity (PE) and Venture Capital (VC), that investment can only be realised once a clearer path to sustainable profit is established.

The net effect, therefore, and the most notable change in 2023 that's continuing into 2024, is the marked increase in CEO changes and the subsequent mandates we have undertaken, which has increased by more than 200% from 2022. 

Focus has moved to leaders who demonstrate they can lead businesses during times of duress, when growth is hard to find, and driving value through other mechanisms is key. CEOs that prioritise near-term profitable growth, who possess transformational capability to fine-tune the business to achieve that goal, are in high demand. Areas like the go-to-market, product and the tech stack, customer success and implementation are all being overhauled to be more streamlined, with AI as another catalyst of this change.

Boards and investors are taking action to appoint leaders who can successfully operate under an even greater microscope of financial and operational scrutiny, whilst being able to pivot the business alongside profitable growth.

Boardroom-Ready CTOs & CPOs

In parallel, we've seen a shift in client requirements this year with an increased demand for technology and product leaders who are now ‘boardroom-ready’. These leaders still need to possess the necessary core skills, but increasingly, wider business acumen and excellent communication skills able to translate the complex to something boards can digest quickly, are no longer nice-to-haves but are prioritised in the hiring process.

The challenge lies in finding these evolved leaders; while the talent pool is growing, they are still in high demand but short supply. The balance of technical depth with strategic and commercial capability, and to operate and communicate at board level is the current hiring nirvana.

This change in priorities makes perfect sense when you draw parallels to the rise of the war time CEO. Any newly appointed CEO will examine the technical and product roadmap, prioritising near term profitable routes to success; and the CTO or CPO must be able to add to the strategy and most critically articulate the reason for the direction of travel. This is especially necessary right now, as boards and investors demand success much sooner. The upside, when it happens, is that the CEO is usually given the time to pivot the company and do so without interruption.

Big Tech and Private Equity Outlook

As outlined in a recent article, many prominent tech firms have taken a far more conservative approach to growth in international markets. Asia Pacific has been hit the hardest with widespread contraction in many countries by the major US tech vendors - and this trend looks set to continue for a while longer. India is the exception, with incredible ongoing growth and development within the tech market.

Once the elections are settled in the US in November and the Federal Reserve drops interest rates, there will be a clearer timeline for international re-investment. But for now, US firms appear to be prioritising home markets over international due to better economic conditions and a much greater ROI.

Our Technology Practice and Scale Up Collective has seen a recent and consistent influx of private equity engagements. While deal flow in PE was lower overall, most investors are on long term value creation journeys. While the current economic and geo-political headwinds have shifted exit horizons, valuation multiples and in some cases the overall investment thesis, PE still have to extract optimal value from existing assets to deliver the ROI to the funds.

This creates a knock-on effect in the organisation, with other leaders coming under scrutiny and subsequent leadership changes have occurred. We have seen this situation arise consistently this year, perhaps more than any other I can remember for some time.

Rebus: An Important Milestone

With greater focus than ever on diverse board perspectives, our work this year has helped towards creating more pathways for talented female leaders to reach the boardroom. Odgers Berndtson’s gender diversity initiative, Rebus - Balance the Board, led in conjunction with Google and London Business School, has passed a significant milestone of 200 mentors passing through the programme. There is still a long way to go, but we are extremely proud of the small part we are playing to balance the board and our thanks to all our mentors and mentees, both past and present.

Looking Ahead

For the remainder of 2024 and into 2025, we anticipate investors will continue to make leadership hiring changes recognising that people are the most critical element of any value creation journey. What may increase the competition later in 2024 for such leaders, will be US tech vendors coming back into international markets more aggressively, with increased hiring anticipated early in 2025.

Major transformative trends like AI will gather even greater momentum, with the role of Chief AI Officer becoming more prevalent in organisations as companies look to create a strategy and roadmap to benefit from AI, both internally from optimisation and augmentation and externally by monetising AI within a product and solution set.

Demand for leaders with AI expertise is already high and it will increase this year. However, the role of a CAIO will morph quickly, with organisations needing different skillsets based on their application of AI. Leaders who can wade through the noise, articulate a clear strategy for its purpose and bring together the organisation under a coherent AI strategy will be needed by almost every organisation. The concept of digital governance will become mission critical, as organisations realise where there is opportunity, there is also a proliferation of legislative and regulatory change. Robust governance and preparedness become essential as part of AI adoption and deployment.

__________________________________________________________

Get in touch. Follow the links below to discover more, or contact our dedicated leadership experts from your local Odgers Berndtson office here.