Strong desire but limited capability

Feb 25 2004 by Brian Amble Print This Article

The corporate obsession with cost-cutting appears to be at an end, according to a major new global survey of CEOs, with economic recovery gathering speed and corporations focussing once again on growth and investment opportunities.

But despite the re-emergence of such opportunities, CEOs are a worried bunch, with a lack of responsiveness, skills, capabilities and leadership within their organisations topping their list of concerns.

The Global CEO Study 2004 from IBM and the Economist Intelligence Unit is the largest survey ever undertaken based on face-to-face interviews, with responses from 456 CEOs worldwide.

The research found that the primary objective for eight out of ten CEOs has shifted from cost-cutting to revenue growth.

Many CEOs also say that cost containment measures they have put in place over the last two years are now sufficient and given a more positive view of economic trends, they're focusing more aggressively on growth and investment opportunities.

This new growth view was reflected by CEOs across all industries and around the world. Two-thirds of CEOs expect growth to come from new products they'll develop over the next five years, with more than half expecting to enter new markets in search of growth opportunities. Asia and China in particular were cited as key new markets for revenue growth.

Nine out of ten of CEOs expect to transform their enterprise to become more responsive, particularly to customer demand, within the next five years. More than half expect to be engaged in significant company-wide transformation initiatives within two years.

But even as they reach for growth, it is apparent that many CEOs are facing significant problems within their organisations. Most believe, for example, that their companies are not agile enough to identify and chase new market opportunities.

Eight out of ten cited the ability to respond rapidly to changing market forces as a high priority in the next few years. But only 13 per cent of CEOs rated their organisations as "very responsive" to changing business conditions, while fewer than one in ten feel that their companies are responsive to their top three threats.

In terms of becoming more responsive, the target most often cited by CEOs was the customer. More than six out of ten feel they need to do a better job capturing and understanding customer information rapidly in order to make swift business decisions. A similar number pointed to the ability to respond to customer dynamics in real-time.

More than half predict greater customisation of products by specific customer segments, with most CEOs focusing on significantly increasing customer input on the development of new and better products.

"We have a history of not being flexible," complained the CEO of a leading chemical company. "We have 4,000 employees worldwide and we need to be reorganized to be more responsive."

A further barrier to change is insufficient of internal skills, capabilities and leadership to manage the necessary transition, areas in which six out of ten CEOs feel their organisation is lacking.

Indeed to date, fewer than 10 per cent of CEOs rate their company's record of change management as having been very successful. More than half believe that they do not have the requisite skills to move into new markets and capture emerging growth opportunities. As a result, 75 per cent of CEOs believe that employee education will become a critical success factor.

A bank CEO in Europe noted that his company "cannot find candidates with the specific skills required to run our business - hence we must train all new recruits."

As a result of these concerns, people skills are also moving up the agenda and are now considered more important than such perennial factors as technology, globalisation and regulatory concerns. All these issues ranked higher on the CEO radar than environmental, socio-economic or geo-political issues.

Dr Abigail Tierney, co-author of the survey at IBM, said that the results point to a recognition that we are now at a turning point economically and that CEOs need to strengthen their companies to make the most of it.

But according to IBM's Ginni Rometty, CEOs also feel that "they are at a crossroads where there is strong desire but limited capability."

"Most CEOs feel that significant deficiencies in skills and capabilities, both inside and outside their organisation, may threaten the growth agenda," she said.