“Two-thirds of CEOs say that agility is the new currency of business and that if they don’t adapt, their business will become irrelevant”
CEOs are faced with a stark choice. In the face of unparalleled environmental, economic and technological change, they are looking to grow their businesses by creating the organizational agility to disrupt existing business models and challenge long-held market orthodoxies.
According to the fifth KPMG International Global CEO Outlook, just over half of CEOs are confident they will succeed but are realistic, with 53 percent projecting cautious three-year growth of up to 2 percent (down from 55 percent in 2018). KPMG Sri Lanka took initiatives to include Sri Lanka for the first time in this survey and 15 of our top CEOs were interviewed for this survey bringing the local context and trends into the survey for the first time. The CEOs were chosen depending on the size and systematic national importance of the corporates they head and were selected by an independent agency specializing in global market research.
As with 2018, the CEOs are maintaining a positive three-year growth outlook for the global economy, although this has slightly fallen from 67 to 62 percent over the last 12 months. This confidence is also shown by their commitment to hiring, with 36 percent of CEOs projecting to add more than six percent to their workforce in the next three years.
“A successful CEO now needs to be an agile CEO,” said Bill Thomas, Global Chairman, and KPMG International. “Succeeding in a world of volatility and uncertainty requires different leadership skills, particularly in large, multi-national organizations. It’s no longer a question of simply defending your position and using a scale to maintain a competitive advantage. Today, CEOs need to be comfortable disrupting their business models by forging new strategic partnerships, considering alternate M&A strategies and increasing the skills of their workforces.”
Climate change driving a multi-risk operating environment
CEOs named climate change the biggest risk to their organization’s growth, the first time in five years it was rated a top concern compared to technological, territorial, cyber and operational risks. But with only a small margin between each of them, it paints a picture of a complex and ever-shifting risk landscape.
The innovation disconnect
A majority of CEOs (84 percent) believe a ‘fail-fast’ culture is required in today’s marketplace, in which lessons from failures are learned quickly, yet only 56 percent say that kind of culture is in place in their organization. Eight out of ten CEOs (84 percent) are looking to change the makeup of their leadership teams to disrupt the status quo.
‘Disruption is a modern-day constant’, says Reyaz Mihular, Managing Partner KPMG in Sri Lanka and Chairman MESA region on the topic of digital disruption. Technological advancements in areas such as artificial intelligence, augmented reality, autonomous vehicles and drones, data analytics, cloud computing, and blockchain to name a few, are among recent disruptors. As a result, there is an increasing emphasis around digitization and customer experience which are now strategic priorities for most businesses.
Cybersecurity to innovation
Cyber continues to be high on the CEO agenda, despite falling from the second highest risk last year to fourth this year. In 2019, a larger group of CEOs (69 percent vs 55 percent in 2018) say a robust cybersecurity strategy is critical to driving trust with key stakeholders and most (71 percent) view information security as a key factor in their broader innovation strategy.
Acquiring expertise through M&A
For many CEOs, M&A presents the best opportunity to upgrade digital capabilities with pace. A proactive M&A strategy is on the agenda for 84 percent of CEOs who have a moderate or high M&A appetite for the next three years. Driving this appetite is the ability of M&A to transform a business model faster than organic growth.
When asked to prioritize between buying new technology or developing their workforce to improve their organization’s resilience, CEOs favored technology two to one (68 vs 32 percent).
AI experts take note
Artificial intelligence (AI) is on the minds of CEOs, yet only 16 percent have implemented AI and automation programs. A further 31 percent are still at the pilot stage, while 53 percent admit to undertaking a limited AI implementation. Yet 65 percent of CEOs believe the inclusion of AI and automation will create more jobs than it eliminates.
Continues Bill Thomas, “All together, this year’s survey is telling us that we’ve entered a new era of leadership. Agility comes from balancing a CEO’s instinct with having confidence in what the data is telling you. Strategic decisions require data that has bias removed. It’s no longer enough to seek “big” data, instead, CEOs must use technology to uncover quality data. Only through this will they create the organizational resilience to drive growth.”