How top CFOs see 2024 unfolding and what they’re doing about GenAI

In the US, the long-predicted recession has never materialized, with third-quarter growth expected to be strong, Daco said. However, consumer spending is slowing, and student debt payments are restarting amid autoworker strikes and rising energy prices. So while Daco predicts moderating growth through the beginning of 2024, he foresees a gradual reacceleration for the rest of the year.

“We’re looking at a slower first half in 2024,” said a CFO of a home improvement company. A CFO of a global retailer added: “I think there’s a lot of uncertainty about what’s coming ahead in Q1 with consumers experiencing more pressure on share of wallet.” Another said: “The opportunities in 2024 are more margin expansion and looking at improved processes and efficiencies rather than growth.”

“Looking to 2024, we’ll normalize to the mid-single digits,” added a CFO of a major airline. “In the last 90 days, the lower-end consumer has softened.” The CFO of a major financial institution noted a similar trend: “We’re seeing spend per customer slowing at the lower end. They’ve depleted excess savings from the pandemic. We’re starting to see higher revolve rates on the credit side.”

Daco pointed out that this environment is showing different outlooks across sectors, with some sectors seeing a more positive outlook in 2024. One CFO of a major health care company said, “Overall, we’ve seen good utilization trends in the health care market and unlike a lot of businesses, ours is just not driven by macroeconomics.”

Behind these outlooks are two related variables — inflation and interest rates — and the resulting “pricing fatigue” from consumers, affirmed by CFOs at financial services companies. “It is somewhat more difficult to take price today than a year ago,” another CFO noted. In their businesses, most CFOs are expecting moderating inflation and taking action in the face of higher lending costs.

In 2024, do you anticipate________?

In light of the increasing cost of debt, which of these actions you are undertaking?

Although energy prices are on the upswing again, Daco has seen disinflation momentum, aside from some of the stickier service sector categories. Getting back to 2% inflation by 2024 is still a possibility. “We’re still in an environment that is undersupplied on a number of fronts, like in real estate and labor,” he noted. “In manufacturing, in the broad set of conditions we’re facing, where supply is an issue, any marginal increase in demand creates upward pressure.” This outlook is supported by the collective views of CFOs in the room. While two-thirds expect higher prices in 2024, the pace of increase is expected to slow down compared against 2023, bringing down inflation rates.

The ultimate question now is when will the Fed cut rates? “We’re expecting that the Fed is done with tightening, but that does not mean that interest rates are coming down fast,” Daco said. “They took the elevator up and will likely take the escalator down.” His prediction: maybe 75 basis points (bps) in cuts for 2024, beginning in June, then 100 to 125 bps in 2025. “We’re not going to have long-term rates like they were before the pandemic,” he concluded.

“There’s no doubt that the speed at which interest rates increased has been harmful … but 5% rates aren’t that unusual historically,” a CFO of a major business service provider said. “Do we settle into something that looks like pre-2008?”

The internet existed long before it had easy-to-use consumer-facing uses. Similarly, AI and machine learning are not new concepts — Lakhani notes that most organizations today have AI somewhere in their plumbing, developed over the past 20 years. But today, generative AI (GenAI) has exploded onto the scene to be just as transformational, through a simple interface that greatly reduces the learning curve for new users.

“My perspective is that the bigger barrier right now on adoption is that very smart people use it as search tool instead of as a thinking tool,” he said. “The worry I have with this tool is that we’ll all do chatbots and be happy with it, instead of thinking about them transformatively.”

All CFOs in the roundtable indicated they are doing something about GenAI, whether early experimentation or full implementation of capabilities. CFOs have been using the technology for detecting fraud, prepping for investor calls and gauging analyst sentiment, and recommending next best actions in customer journeys. “We started experimenting on mega-cases with productivity and revenue improvements,” one CFO said. “We’re trying to get our arms around how the supposed benefits are not arriving as quickly as anticipated.”

Where is your company on the Gen AI journey spectrum?

Lakhani and Diasio stressed that plugging GenAI into existing systems and processes likely will not deliver the optimum results. Lakhani likened it to the transition to the automobile: pouring asphalt onto horse paths is not the best way to build roads — cities needed to develop a grid plan. Diasio elaborated on that mindset with a real-world client example.

“One of our clients makes fashion accessories, and they have new releases every quarter,” he said. “The original ask was: how do you develop a system for a designer to ask for designs? It was a querying tool. Instead, after discussions, we helped develop a system that mines social media data to understand influencers and what’s trending, compared against the 34 characteristics of what this company produced. Then it enabled 3-D modeling and A/B testing. That’s a continuous process rather than every quarter.”