To navigate unprecedented uncertainty, CEOs must create organizations with a new type of resiliency.
By KPMG
Research indicates that given today’s dynamic risk landscape, concerns over global economic growth indicators, and the ongoing pressure to disrupt, CEOs are focused on building a new organizational resiliency.
Dynamic risk landscape
According to our research, in 2019 environmental and climate change is viewed as the biggest threat to growth over the next three years, climbing from its fourth-placed position in 2018. This is closely followed by disruptive technology risk and the threats posed by a return to territorialism.
Societal concerns over climate change mean that stakeholders—from customers to regulators—are pu ing in- creasing pressure on business organizations and their leaders to respond. Over three-quarters of CEOs (76%) told us that their organization’s growth will depend on their ability to navigate the shift to a low-carbon, clean-technology economy.
Conflicting global outlook
The 2019 Global CEO Outlook uncovers increasing concern about the health of the global economy.
While CEOs are confident in the underlying fundamentals and growth prospects of their businesses over the next three years, this confidence is not matched by their views on the global economic outlook.
Nearly all CEOs (94%) said they are confident in their company’s growth prospects over the next three years. This drops to 62% for those who are confident in the global economy, a 5% point drop in confidence since 2018. Indeed, in four of the largest economies—Australia, the UK, France, and China—less than half of CEOs are confident in the global economy.
New competitive edge
Complacency can be fatal in today’s dynamic markets. Business models that have lasted for decades are now under increasing threat as a result of digital disruption.
Our findings show that chief executives recognize that the rules of the game have changed, and a new resilience is required. A significant majority (71%) said that their company’s growth relies on their ability to challenge and disrupt any business norm.
We also saw a significant increase in CEOs saying that their company is actively disrupting their sector rather than waiting to be disrupted. In 2018, 54% said they were on the disruptive front foot; in 2019, the number increased to 63%.
Leading in uncertain times
To build a resilient organization that capitalizes on disruption, CEOs are creating and sustaining a culture of innovation, rethinking their operating model, and rebooting their current leadership teams. Our research shows a significant disconnect between the culture of innovation that CEOs aspire to and what currently exists in their organizations.
We found that 84% of CEOs said they want their employees to feel empowered to innovate, without worrying about the negative consequences for them if an initiative fails. However, only 56% said their organization currently has a culture where ‘failing fast’ innovation initiatives, regardless of their success, are celebrated.
Agile or irrelevant
The pressure is on organizations to act with agility. Change is accelerating, as the demands of key stakeholders—from customers to regulators—shift and evolve with increasing frequency. Constant technological innovation—from automation to cognitive computing—is threatening long-established business models. CEOs recognize the danger of being too slow and cumbersome in a fast-moving age. Over two-thirds (67%) believe that acting with agility is the new currency of business and that if they are too slow they will become irrelevant.
Implementing agile approaches at an individual project level is relatively straightforward, but one-off initiatives will not usually have an enterprise-wide impact. This requires a fundamental rethink of the company’s operating model.
C-Suite reboot
C-level roles have already changed significantly over the past years, as CEOs respond to new demands. The established direct reports of the CEO—such as CFO and CMO—have been joined by new C-suite capabilities, from Chief Analytics Officers to Chief Digital Officers.
However, while CEOs have added more firepower to their leadership teams, they are not stopping there. A significant majority of CEOs (84%) said that they are actively transforming their leadership team to build resilience.
