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New Zealand Businesses Shift Focus From Survival To Growth

  • Business optimism ticks cautiously upwards despite fragile environment
  • Over half of businesses choosing to absorb cost increases
  • Hybrid hangover hits some but employees still looking for flexibility
  • Savvy use of technology required to get ahead

New Zealand’s business sector appears to be turning away from survival mode and towards growth, according to 2degrees’ latest Shaping Business Study.

Commissioned by 2degrees and conducted by research company Perceptive, the survey of over 700 employing business decision-makers around Aotearoa shows that despite the mindset being somewhat fragile, the number of businesses who are “thriving” (doing better than ever) has increased since last year, and levels of optimism are starting to tick upwards.

Andrew Fairgray, Chief Business Officer of 2degrees, says the report shows the importance for businesses to adapt in an inflationary, digital-first environment.

“In order for New Zealand’s business sector to reach its potential, we need to learn from the success of others over time, which is why we’re so proud to support and share this research. As we review the fifth year of Shaping Business, it is encouraging to see a growing number of businesses not just surviving but beginning to thrive.

“We are seeing that businesses are feeling the rise of operational costs, but instead of sitting still, they are looking to move forward. The businesses managing to thrive are those that are finding innovative ways to increase productivity, rethinking cost savings and investing in digital skills.”

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Business optimism moves up incrementally

After years of disruption and economic challenges, business leaders’ sentiment has cautiously increased this year. The percentage of business leaders identifying their businesses as thriving has slightly increased to 18 per cent, up from 17 per cent in 2023.

Business leaders are also feeling increasingly positive about the future, with 34 per cent saying they feel more optimistic than this time last year, up from 32 per cent. The number of business leaders anticipating revenue growth in the next year has also increased, up to 53 per cent from 50 per cent in 2023.

Continuing a longstanding trend in the study, larger businesses and newer businesses are leading the charge in this positive outlook, with higher levels across these measures of future outlook.

Creative solutions to cost pressures

While inflationary pressures are easing, the vast majority of businesses continue to see operating costs increase and are looking to find savings in creative ways. Eighty per cent of business decision makers say their running costs have increased in the past 12 months, below last year’s figure (87%) but still well above the 53 per cent who said so back in 2021.

As costs continue to increase, businesses are seeing their margins squeezed, and less than half (48%) of business decision-makers are planning to increase their prices in the next year.

As a result, 72 per cent are looking for way to reduce costs in the coming year, and not just by reducing headcount. While some are looking to reduce the size of their staff, the report shows that the biggest way decision makers are looking to reduce costs is through moving to new suppliers (38).

Hybrid hangover hits some businesses

As the hybrid working model matures, opinions are beginning to diverge on its impact on productivity. Among businesses with a hybrid model, 51 per cent of leaders view it as a productivity booster, while 49% believe it either detracts from productivity or has no effect.

Despite differing opinions on productivity, flexible work is recognised as a key factor in attracting and retaining top talent, and 37 per cent of business leaders say they have introduced flexible working as a means to attract talent.

While some leaders are starting to feel the “hybrid hangover,” only 17% of businesses with a hybrid model have increased the amount of time their staff are required to spend in the office, and 39 per cent have decreased it.

Digital skills are required to get ahead

As the business world gets to grips with another technological revolution with AI, businesses making the best use of technology continue to thrive. Those that aren’t are being left behind, with 23 per cent of business leaders saying they lack the digital skills that need to get ahead, up from 19% last year. The key barriers to acquiring these skills include a lack of time (34%), and difficulties in finding skilled technology help, which has seen a 10 per cent increase from 2023.

The report also shows that effective use of technology continues to correlate to overall business performance, with 68% of "thriving" businesses reporting that digital technology improves their productivity, compared to only 50% of "surviving" businesses.

Fairgray says the Study shows the need for businesses to make sure their technology is working for them. “Technology should boost what your business is already doing, and improve the results it gets,” he says. “It’s very easy to pile up lots of shiny tools, but in this environment, it’s never been more important to take a step back and make sure that they are delivering.”

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