CEOs have known for a long time that they must embrace change and uncertainty. But none have been trained to navigate the many multidimensional, evolving, and overlapping disruptions we see at the beginning of 2022.
Take the forces that are redefining competition in virtually every industry: climate change, the rise of artificial intelligence and other emerging technologies, the increase in cyber attacks, and the mounting demands for greater diversity, equity, and inclusion. Then consider the macroeconomic uncertainties and tectonic shifts in the business landscape triggered by the pandemic—severe supply-chain bottlenecks, the transition to remote and flexible work, and dramatic changes in consumer behavior.
In the face of so many complex challenges, where should CEOs focus? How can they take the lead on crucial societal issues and position their companies for excellent performance? We asked BCG experts what should be at the top of the CEO agenda for 2022. Here’s what they had to say.
Tackling Climate Change
To Win the Race to Net Zero, Be Early and Bold
When it comes to how CEOs should think about climate action, I like to quote Anna Borg, the CEO of Vattenfall: “To be early might be challenging, but to be too late will be devastating.”
The world is embarking on one of the biggest transformations in history—the abandonment of fossil fuels. Environmental policymaking, technological development, and shifts in consumer and investor sentiment are all accelerating. But many of us still underestimate the immediacy, pace, and extent of these changes.
For CEOs, it’s time to move—to commit to leading this transformation. Many leaders who were quick to see opportunities in past big global shifts secured windfalls for companies that are still thriving today. Many of those who only saw risks did not survive or their companies have still not recovered.
Indicators suggest the same holds true for environmental sustainability. Research by the World Economic Forum and BCG shows that companies that lead on climate hire better people. They manage to cut costs or generate premiums through emission reduction. They have lower regulatory risk. They pay less for financing. They are—on average—valued higher by the markets. On the flip side, I don’t know of many companies that have lost competitiveness by reducing emissions too ambitiously.
Companies that move early also manage to move their industries. Although talk of collective action was all the rage at the COP26 climate summit, a lot of progress in recent years has actually come through good old competition. When one company plows ahead of its competitors, the rest feel compelled to follow.
This is a time like no other for bold leadership. If you don’t already have an ambitious commitment, make one. And be aware that in many industries, leadership means committing to more than what science demands. If you do have one, focus on delivering—by transforming your portfolio and your operations and engaging your supply chain.
Getting the Most from Artificial Intelligence
Understand AI’s Full Potential Before Moving Forward
We are at a major turning point in artificial intelligence. CEOs know that it’s important and are ready to make serious investments. But many don’t really understand what to do with it. To borrow a French saying, it’s like giving a knife to a chicken. Not surprisingly, only around 10% of companies say that they see significant financial returns on their AI investments, according to a recent study we at BCG conducted with MIT Sloan Management Review.
I think the most urgent agenda item for CEOs is to understand AI’s full potential—and what it can do for their business models.
Four basic capabilities make AI exceptionally powerful—especially when connected in new bionic systems with humans. AI can process massive amounts of data in real time. It can provide ultra-granular predictions. It can continuously and autonomously learn and improve. And it can be scaled up at almost zero marginal cost. When combined effectively with human judgment and creativity, AI can revolutionize almost any business process and operating model.
I’ll give you an example from a telecom company we are working with. Telcos typically push out products to consumers through broad marketing campaigns. With AI, they can market to segments of one to deliver the right product, at the right time, through the right channel. Rather than selling to a segmented but faceless customer group, telcos can offer truly individualized packages of services and devices based on data analysis of a household’s needs, usage, and interests. They can also increase their share of wallet by improving the individual’s satisfaction, loyalty, and openness to upselling. We have found that this switch in marketing can boost a telco’s revenue by 10% while cutting costs by 20%. This is massive!
As Spiderman wisely told the world, with great power comes great responsibility. AI is a powerful technology, but it’s just a technology. It requires human oversight to ensure it is not abused or does not lead to potentially adverse, unexpected outcomes. Companies need to make sure developers and executives use AI responsibly and in line with their values. This means it’s urgent that CEOs and executive committees understand the full potential and risks of AI.
Read the full article at https://www.bcg.com/en-mx/publications/2022/c-suite-executive-priorities-2022.
