Bruce Ogilvie, chairman of Alliance Entertainment, has to balance investments in technology, eyeing rising costs like wages and freight expenses while not having many obvious sources of increased revenue.
Alliance Entertainment distributes movies, music, video games, and collectibles for big suppliers like Microsoft, Lego, and Nintendo, sold to big-box retailers like Walmart, Target, and Best Buy. The company generates a little over $1 billion in revenue annually, which makes it a category leader in a physical media market worth only $10 billion.
“We’re in a declining industry,” says Ogilvie. “Because we are a distributor, we have to control our costs.”
Alliance is just one of many companies wrestling with a range of disruptive forces, from AI to inflation to geopolitical tensions. Leaders from a range of businesses came together to discuss the shifting landscape at a Fortune virtual conversation with other C-Suite executives, hosted with global consulting firm BCG.
Ogilvie says his company has somewhat benefited from moderating labor costs increases, though shipping costs continue to rise, he says. But the biggest variable in expenses Alliance confronts each year are healthcare costs. “Medical costs are through the roof,” says Ogilvie. “That’s a big problem for us. Every year, we always think we budget enough….and every year, we fall short in that area.”
Rising expenses
Jim McCann, founder and chairman of 1-800-Flowers.com, is also seeing a steady rise in expenses. Prior to the pandemic, the e-commerce flowers and gift provider would plan for 2.5% to 3% increases in health care, freight, labor, and other expenses. But that’s since bumped up to as much as 6% annually.
Like Alliance Entertainment, 1-800-Flowers has been investing in new technologies like artificial intelligence to give their businesses a lift. “We see an increase in expenses in the near term,” says McCann. “But we are optimistic that at the other side of that bump in the road, we’ll see better service to our consumers and more efficiently done.”
Inflation is still a concern, warns Paul Goydan, a managing director and senior partner at BCG.
Most leaders are focusing on efficiency, especially given some pockets of workforce shortages in the labor market, elevated salaries, and an uncertain future about immigration filling in gaps in the workforce, Goydan sayd, summing up the C-suite thinking from his firm’s clients.
AI, meanwhile, is generating a lot of excitement and some big productivity gains for certain tasks like customer service and marketing, but the return on investment overall isn’t as clear as business leaders had hoped, Goydan says.
There’s more clarity about the Federal Reserve’s successful efforts to cool down inflation while avoiding a recession. And while the results of the latest presidential election offer some certainty, geopolitics are less clear. There are concerns about tariffs and international trade wars, and choppy economic climates in Asia and some European economies.
“It’s both a lack of uncertainty resolved in the last year, but I feel like the world came to put more uncertainty back on the table,” says Goydan.
Just this week, the consumer-price index of goods and services increased by 2.7%, the latest indication that efforts to bring down inflation remain choppy. There are also broad fears inflation could accelerate further if President-elect Donald Trump’s administration moves forward with widespread tariffs.
C-suite leaders say they are seeing some divergence in the data. Oil prices have been steady since October and look fairly oversupplied in 2025, Bloomberg reports, but data shows that costs remain high for other expenses like healthcare.
Geopolitical threats
John DiLullo, CEO of cybersecurity company Deepwatch, warned that tariffs, geopolitics, and the threat of mass deportations are all trending toward more inflation. But he also cited cyberthreats as a big hit to business, citing estimates that warn cybercrime costs the world $8 trillion annually.
“We see all of these driving costs up,” says DiLullo. “We are going to have to be very, very careful about managing costs.”
Medical tech provider Enovis, which focuses on orthopedics, is similarly keeping an eye on macroeconomic and geopolitical factors. “We’re an industry that has healthy long-term growth drivers,” says Matt Trerotola, CEO of Enovis. “We’re well prepared to be resilient and we’re bullish on our market.”
The C-suite leaders also discussed their investments in AI. Alliance is using the technology for inventory forecasting, Deepwater uses AI to make customer center agents happier and more efficient, and it’s being used to automate supply chain processes at Trinity Industries, which leases and manufactures railcars.
Trinity relies on a close relationship with software company Palantir, which has helped the manufacturer organize data and improve writing code, engineering, and other parts of the business. “They’re training my people,” says Jean Savage, CEO of Trinity. “I’m not just dependent on them. They’re giving us that skill set.”
BCG has closely collaborated with OpenAI to create customized large language models that can ingest decades worth of the firm’s data in a secure environment to be used in PowerPoint presentations and other business documents.
Goydan says AI can also speed up training for new talents, but also concedes to some failures. An AI tool built to write customer research for clients was less accurate than a trained human consultant who relied on a template. “We killed AI in that use case,” says data.
But, BCG remains encouraged about what’s ahead, especially given the company’s knowledge-based focus that pairs well with large language models. “I think we're really just scratching the surface,” says Goydan.
