IBM just released the 2008 Global CEO Study. IBM has been conducting such studies every two years for the last several years by interviewing hundreds of CEO’s around the world.
Four years ago, the 2004 study found that CEOs were emerging from the depressed business environment caused by the bursting of the dot com bubble, and were beginning to shift their priorities from cost cutting to driving profitable growth and strengthening overall financial performance.
The overriding theme of the 2006 Global CEO Study was innovation. CEOs were starting to recognize that innovation cannot be treated as just a marketing initiative and delegated down in the organization. They realized that their organizations had to make fundamental changes to respond to the significant external forces all around them. They were learning how difficult it was to drive change in the organization. Therefore, to be successful, innovation had to be orchestrated from the top, with the CEO personally leading the charge.
The Enterprise of the Future is the key theme of the 2008 CEO Study. The study is based on face-to-face interviews with 1130 CEOs in 40 countries across 32 industries. They are distributed fairly evenly around the world, with roughly one third each from the Americas, EMEA and AP.
There were no major surprises or unexpected findings in the study. I think that it is the best so far because the points made are very sharp, clear and written in simple language.
The CEO interviews identified five core traits for the enterprise of the future:
- Coping with change: Organizations are bombarded by change, and many are struggling to keep up
- Surpassing customer expectations: CEOs view increasingly demanding customers not as a threat, but as an opportunity to differentiate
- Global integrated business designs: Nearly all CEOs are adapting their business models, with two-thirds implementing extensive innovations
- Disruptive, innovative enterprise and industry models: CEOs are moving aggressively toward global business designs, deeply changing capabilities and partnering more extensively
- Corporate social responsibility: The next generation of socially minded customers, workers and investors are carefully watching a company’s every move
These themes have been appearing over the last few years as companies and nations around the world have embraced innovation. While the findings are not new, it is good to see quantitative evidence of that we have all been hearing anecdotally. The full report includes a lot of information, and additional conclusions.
For example, almost half of the CEOs rated market factors and people skills as the top external forces with the greatest impact on their organizations. Next comes technological changes, which about one third of CEOs identified as a major force they have to deal with.
83% of CEOs said that change was needed in their organization, and 61% felt comfortable managing these changes based on past successes. The equivalent numbers for the 2006 study were 65% and 57% respectively. Thus, the number of CEOs who feel change is critical to their companies has gone from 65% to 83% in two year, and the gap between their capability and the challenge ahead, that is, their level of discomfort, is widening – 22% now versus 8% in 2006. This is not surprising, given that CEOs are increasingly bombarded by faster, broader and more uncertain change.
Two thirds of CEOs see major opportunities in the rising prosperity and purchasing power around the world. They plan to increase their investments to benefit from this trend, especially in the growing markets in emerging economies.
Over three quarters of CEOs see the rise of increasingly informed and collaborative customers as a chance to differentiate their products and services. It gives their companies an opportunity to better reach out to these customers, learn about them, and target their offerings to address, – and hopefully surpass, – their expectations. The best companies are leveraging the rise of better informed and collaborative customers to identify new markets, new business relationships, and new products and services.
A large majority of CEOs are planning major changes to their business to capitalize on the rising levels of globalization. The study revealed that CEOs are planning deep changes in their organizational capabilities and skill mix, as well as extensive partnering to help them quickly reach new markets and customers. They are implementing new business design, including globalizing their brands and offerings, optimizing their operations around the world, and driving a company culture that views diversity as a key competitive advantage in a rapidly globalizing world.
Without a doubt, CEOs have generally become more sophisticated in dealing with innovation since the 2006 study. Two thirds said that they are implementing extensive innovations in their companies, especially around their business models. They are rethinking their basic enterprise model, including a strong focus on collaboration, both with outside partners as well within their own companies. They are becoming more focused, looking hard at which processes are best done in-house, and which should be done with partners. The better performing companies are also driving innovation in industry models, aiming to redefine existing markets, move into new industries, and perhaps create entirely new industries which they can shape and lead.
The newest finding uncovered by the 2008 study is the rise of corporate social responsibility. Eighteen percent of CEOs are now focusing on environmental issues, double the number from two years ago. This percentage will surely increase over the next several years. The number is lowest in the Americas, where only 12% of CEOs cited environmental issues as an area of focus, compared with 21% in both EMEA and AP. The majority of CEOs see the rise of corporate social responsibility as an opportunity, not a threat. They view it as a way to become better aligned with the concerns of society, and thus help attract top talent to the company, enhance its brand around the world and break into new markets.
To me, the key message that comes through loud and clear in the 2008 IBM CEO Global Study is that the key success factor for the enterprise of the future is talented people. Successful companies must be able to attract and retain top talent, both at the top of the organization – starting with the CEO – and across the organization – where employees and partners around the world have to quickly deal with the requirements of rapidly changing markets.
Technology, without a doubt, is indispensable. It is necessary, but far from sufficient. Above all, the study revealed the dramatic increase in the number of CEOs who see important change ahead. It highlights how the organization’s ability to absorb and manage change will be the key distinction between winning and losing companies in the global economy.
