The Romanian CEOs think there are three main global trends that will impact their companies in the next few years, according to the 17th edition of the PwC Global CEO Survey. Almost all believe that technological breakthroughs will have a major impact. More than half of respondents state that they will feel the impact of demographic changes, as well as resource shortages and climate change. Also, urbanisation is one of the global trends that will reshape businesses.
According to the findings of the 2014 CEO Survey in Romania, 92% of the CEOS have mentioned technological breakthroughs as one of the three main global trends that will transform their companies in the next five years. The percentage is higher than the Global and European ones (81%). Both climate change and resource shortages have been mentioned by 51% of the Romanian CEOs, while urbanisation was mentioned by 47% of them.
“There is a wide consensus among the Romanian CEOs about the role of technological breakthorughs in reshaping their companies in the next few years. On the background of a stronger feeling that the future started yesterday, innovation is the most important opportunity for growth. And innovation is not just about manufacturing techniques or developing new services, but also about ways to approach and attract clients”, stated Vasile Iuga, Country Managing Partner, PwC România.
This is the fourth consecutive year when PwC Romania launches a separate edition based on the answers of an increasing number of local CEOs who joined our initiative. PwC gathered valuable insight on their views and on their strategy when it comes to tackling opportunities for growth, or to dealing with challenges of local and global economies.
This year’s edition of the Global CEO Survey was released earlier this year within the World Economic Forum at Davos and it presents the perspective of more than 1344 CEOs worldwide on the current economic situation and their take on building a stronger foundation for future growth.
Organisations often don’t grasp the true financial impact of an economic crime until after it has happened — sometimes well after. As in previous years, The Global Economic Crime Survey underscores that the cost of fraud — both in financial and non-financial terms — is significant.
Nearly one in five (18%) organisations suffering fraud experienced a financial impact of between US$1 million and US$100 million. And the percentage of respondents reporting losses in excess of US$100 doubled, from one to two percent.
These large losses may be connected to the reported increase in incidents of bribery and corruption — frauds which can be especially costly to organisations, with regulatory fines, legal fees and remedial expenses easily reaching billions of dollars.
But economic loss is not the only concern that companies face when combating fraud. Survey respondents pointed at damage to employee morale, corporate and brand reputation, and business relations as some of the most severe non-financial impacts of economic crime.
When taking into account the secondary damage, the true cost of an incidence of economic crime can be long lasting. Consider the long chain of adverse events can follow a single, high-profile incident of economic crime:
lost revenues, as customers look for other business partners;
delayed entry to new markets due to regulatory issues;
a battered stock price; and
declining productivity and morale.
Fortunately, top management appear to understand the importance of collateral impacts: the 2014 Global CEO Survey reports that half of chief executives (a sharp increase from 37% just a year ago) see a “lack of trust in business” as a key marketplace issue, with significant majorities recognizing that business has a wider role to play in society than just building shareholder value.
Communications industry CEOs are concerned about their company’s ability to keep up with the speed of technological change. And they’re looking to strategic alliances or joint ventures to propel growth, as shows the recently released CEO Survey.
Innovation still on top of CEO’s agenda
Communications industry CEOs know they need to innovate. Product/service innovation was selected by 41% of communications respondents when asked what they see as the main opportunity to grow their business (as compared with 35% of respondents from the global sample). And 49% of Communications industry CEOs said developing an innovation ecosystem that supports growth is a priority over the next three years.
Restructuring is top priority
In the last twelve months 62% of Communications industry CEOs entered into a strategic alliance or joint venture, compared with 34% from the global sample. More activity is on the horizon: 54% of Communications CEOs say they plan to enter into a new strategic alliance or joint venture in the coming twelve months.
Planning time horizon
When asked “what is your current planning time horizon?” 56% of communications industry CEOs answered “three years”. The industry is changing too quickly to predict what will happen in just five years.
Still confident on growth
72% of Communications industry CEOs are somewhat or very confident about their company’s prospects for revenue growth over the next twelve months. However, when asked about their confidence level about their company’s prospects for growth over the next three years, a stunning 90% said they are somewhat or very confident.
Considering the conclusion of this report, here are some cross-industry questions that would help us plan for the future:
What does the “right” innovation strategy for my own business look like? Do we want to keep everything in house? Create an incubator? Develop a JV?
The control-oriented management style that’s well suited for traditional connectivity services clashes with the fast-paced decision-making requirements of innovation today. So how can we best organize the business to foster innovation?
The market’s expectation of “anything, everywhere, anytime” combined with shifting profit pools across the content, application, services, and network value chains requires an examination of relevance in this rapidly evolving ecosystem. What is our response to these market changes?
PwC released earlier this year, within the World Economic Forum at Davos, the 15th edition of the Global CEO Survey 2012, a report that analyzes the views and forecasts of over 1,200 CEOs from around the world, making it one of the most important instruments for testing the future trends of the global economy. This year is the second time that PwC Romania launches a separate edition based on the answers of local CEOs, thus providing local business leaders with the opportunity to share their vision, priorities and concerns regarding the evolution of the local and global economy.
PwC Romania has the pleasure to invite you to the launch of the results for Romania from the 15th edition of the Global CEO Survey 2012. The launch will take place within an event organised jointly with Ziarul Financiar, CEO Survey – Economic Perspectives and Labour Market Tendencies in Romania in 2012, scheduled for 28 May, at Radisson Blu Hotel (Atlas Hall) in Bucharest, starting with 9:00 am. Please find the agenda below:
Agenda of the event:
9.00 – 9.30 Welcome coffee and networking
9.30 – 9.40 Introductory address Sorin Pîslaru, Head Editor, Ziarul Financiar
9.40 – 10.00 Keynote speech Mariana Câmpeanu, Minister of Labour, Family and Social Protection
10.00 – 10.30 Presentation of the main results of Romania CEO Survey – Vasile Iuga, Country Managing Partner, PwC Romania
10.30 – 12.30 Round table and Q&A attended by Mariana Câmpeanu, Vasile Iuga, Sorin Mândrutescu, CEO Oracle Romania and President of AmCham Romania , Robert Arsene, CEO Agricover, Dan Şucu, CEO Mobexpert, and Sorin Pîslaru, Ziarul Financiar
Each year I’m looking for the Global CEO Survey with great interest. Specifically this year I’m interested to see how risk management is affected by the global economic challenges. Communications CEOs are more worried not only about the global economic outlook, but also about several related risks. As the report shows, 45% are extremely concerned about the risk of economic volatility (versus 32% of the total sample). Similarly, 40% are extremely concerned about the measures highly indebted governments are taking to cut their fiscal deficits (versus 27%). Conversely, they’re more relaxed about the prospect of inflation. Only 19% of communications CEOs are somewhat concerned on this score (versus 31%).
Disruptive change is a constant feature of the communications industry and the results from this year’s survey indicate that CEOs see little sign of the pace and scale of change diminishing in the future. The rapid emergence and adoption of new technologies, devices and channels —from smartphones to tablets and Twitter to Groupon – can create overnight stars and catch the unprepared off guard. So it’s hardly surprising that 36% of communications CEOs are planning to make fundamental strategic changes in the next 12 months, compared to 13% across the rest of the survey population.
So how do communications CEOs propose to deal with these challenges?
They’re planning various strategic changes covering a wide range of financial and organisational areas over the next 12 months. Capital investment decisions and capital structuring activities feature prominently in their plans, for example: 31% intend to make major alterations to the former and 29% to the latter (versus 19% and 14%, respectively, of the total sample). And 29% expect to make major alterations in the way they manage risk, whereas the overall average is just 17%.
As well as changing their approach to investment and risk, communications CEOs say they’re likely to continue cutting costs. A full 90% have already implemented cost-reduction initiatives in the past 12 months, which is significantly more than the 75% who’ve done so in our entire survey sample. And 48% expect to outsource a business process or function in the next 12 months (compared to the overall average of 33%). Of course, outsourcing may be motivated by the need to reduce costs, but it’s also a component of the major organisational changes that two-fifths of communications CEOs expect to make in 2012.
Not surprisingly, since new technologies play such a key role in the sector, many communications CEOs are reconsidering how best to manage innovation, too. Communications CEOs are repositioning their portfolios to focus on developing new products and services, and fine-tuning existing products and services. But 60% also intend to adopt new business models in response to a fast-changing environment.
Predictably, perhaps, many communications CEOs are pinning their hopes for future growth on the emerging markets rather than the developed markets—as, indeed, are their peers in other sectors. And while most CEOs with plans to expand abroad are focusing on China, communications CEOs prefer Brazil: 26% believe it will be a key growth market in the next 12 months (versus 15%).
The full report on Communications CEO survey is available here.
A recent PwC survey found that that innovation is high on the executive agenda in virtually every industry. In all, 78% of CEOs surveyed believe innovation will generate “significant” new revenue and cost reduction opportunities over the next three years. But it is highest for those where technology is changing customer expectations. In both the pharmaceutical and entertainment and media sectors, for example, more than 40% of CEOs believe their greatest opportunities for growth come from spawning new products and services.
Additionally, the survey found that CEOs are re-thinking their approach to innovation and increasingly seeking to collaborate with outside partners and in markets other than where they are based. For example, a majority of entertainment and media CEOs said they expect to co-develop new products and services.
The innovation process generally has four phases:
Discovery: Identifying and sourcing ideas and problems that are the basis for future innovation. Sources may include employees as well as customers, suppliers, partners and other external organisations.
Incubation: Refining, developing and testing good ideas to see if they are technically feasible and make business sense.
Acceleration: Establishing pilot programs to test commercial feasibility.
Scale: Integrating the innovation into the company; commercialisation and mass marketing.
However, the drive for innovation must arise from the CEO and other executive leadership by creating a culture that is open to new ideas and systematic in its approach to their development.
Therefore, the study also identifies 7 misconceptions about the innovation process:
Innovation can be delegated.Not so. The drive to innovate begins at the top. If the CEO doesn’t protect and reward the process, it will fail.
Middle Management is the ally of innovation. Managers are not natural champions of innovation. They to reject new ideas in favor of efficiency.
Innovative people work for the money. Establishing a culture that embeds innovation in the organisation will attract and retain creative talent.
Innovation is a lucky accident.Successful innovation most often results from a disciplined process that sorts through many ideas.
The more open the innovation process, the less disciplined.Advances in collaborative tools, like social networking, are accelerating open innovation.
Businesses know how much innovation they need. Leaders must calculate their potential for inorganic growth to determine their need to innovate.
Innovation can’t be measured.Leadership needs to identify its ROII (Return on Innovation Investment).
Government leadership in building infrastructure is critical for competitiveness. A majority of CEOs identified the priority for the governments of all countries outside of Western Europe and Japan, where infrastructure is well developed, and of China – where the government allocated almost US$600 billion of stimulus spending for infrastructure projects over the past two years, according to PwC’s 14 Annual CEO Survey.
The role of private capital in financing infrastructure is unavoidable: an estimated US$3 trillion per year needs to be spent on infrastructure across the globe in the coming decades, according to a recent report from the World Economic Forum.
However, businesses can provide more than cash: they have expertise, and the abilities to execute and manage risks. This is part of what makes PPPs attractive. As Berthold Leetfink, Deputy Secretary General of the Ministry of Economics, Agriculture and Innovation in the Netherlands told PwC, “At least for the Netherlands, and I think for many other countries, planning and building infrastructure is very much in the hands of government. But it’s obvious that the private sector has a lot of knowledge in terms of building cheaply, efficiently or in a more environmentally friendly way.” As an example, a PPP project in 2009 to connect a 12-mile regional rapid transit line in Vancouver (Canada Line) was completed several months ahead of schedule.
Needless to say, businesses also have a key expectation for their governments: to tackle fiscal deficits to restore stability to the markets in a way that is mindful of the fragile environment for global growth. Public revenues are of course expected to be part of the equation: a majority of CEOs expect taxes will rise, led by 65% of CEOs in Asia and 70% in Latin America.
“What competitive intelligence? We are in the middle of a crizes, we need to survive!” That may be the statement of many executives today, and it seems that competitive advantage is nothing but an elusive goal. The results of a recent McKinsey survey suggest one reason: just 53% of executives characterize their companies’ strategies as emphasizing the creation of relative advantage over competitors; the rest say their strategies are better described as matching industry best practices and delivering operational imperatives. In other words – this is nothing but a buzzword for stakeholders to make them feel safe.
What I even find more interesting is that only 33% say their companies’ strategies rest on novel data and insights not available to competitors, rather than widely available data. We are more or less used to see companies (especially the big ones) as having some “CIA” teams in charge with competitive intelligence but it seems that this is only true in some of them. What we don’t know from McKinsey’s survey is how many of those 33% are large multinationals and how many are not.
However, there may be one likely explanation of this fact that wouldn’t be affected by the size of the company or the existence of such intelligence units: the widespread availability of information and adoption of sophisticated strategy frameworks creates an impression that “everyone knows what we know and is probably analyzing the data in the same ways we are.” Yet if strategists question their ability to see something that no one else does, the question that raises is how reach are the powerful insight that are most likely to differentiate them from competitors?
Another astonishing result: only 12% of surveyed executives place novel insights in strategy among the top three influencers of financial performance. The financial crisis of 2008 and the recession that followed revealed weaknesses in many strategies and forced many companies to confront choices and trade-offs they put off in boom years. Not surprisingly, 56% report that their companies are making strategic decisions more frequently than before. This increased speed may make it difficult for some companies to analyze each decision in detail. However, a shift toward shorter planning cycles only increases the need to focus on the timeless aspects of strategy that can drive competitive advantage.
And this brings us back to our main question: is competitive intelligence a buzzword or does it bring a genuine value to the company and its financial performance?
A recent PwC report – Talent Mobility 2020 shows that in the next 10 years companies will have a greater need to deploy their talent around the world, and as a consequence, international assignment levels and overall mobility will increase significantly. Having access to the best talent continues to be a challenge for CEOs and business leaders – with 97% of CEOs in PwC’s annual global CEO survey saying that having the right talent is the most critical factor for their business growth. In addition, 79% of CEOs said they would be changing their strategies for managing talent as a result of the downturn – and 55% said they would look to change their approach to global mobility including international secondments. In the wake of a foreseeable upturn, the winners and losers of the next decade will be defined by those who are able to attract, retain, and deploy their key talent globally. The sentiments outlined above are well aligned with PwC’s key findings:
• Assignee levels have increased by 25% over the last decade; PwC predicts a further 50% growth in assignments by 2020. There will be more assignees, more business travel, more virtual tools, and especially more quick, short-term, and commuter assignments.
• The growing importance of emerging markets will create a significant shift in mobility patterns, as skilled employees from emerging markets increasingly operate across their home continent and beyond, creating greater diversity in the global talent pool.
• Mobility strategies will need to become more sophisticated and complex as organizations meet growing deployment demands, while simultaneously managing the very different needs and expectations of three generations of workers.
• Governments and regulators will accept the economic benefits of talent mobility to stimulate economic growth. This acceptance will lead to greater collaboration between governments and businesses, and within the business community, to remove some of the barriers to mobility around the world.
• The millennial generation will view overseas assignments as a rite of passage, an outlook that will change the way workers and organizations approach overseas opportunities in the future.
• Organizations will adopt “destination pay and local plus” remuneration methodologies as compensation levels across some skill sets and industries will begin to harmonise across the globe.
• Technology will play a key role in global working arrangements and help to support compliance obligations; however technology will not erode the need to have people deployed “on the ground”.
The nature of overseas assignments has changed significantly since the 1970s. Businesses, like the population, seam to continue adjusting their operations, nature and geographic location of the workforce, as well as their fundamental structure and roles.
How an organisation responds to these rapid changes will be critical. Business and mobilisation strategies will need to progress quickly to keep ahead of both changes in the organisation’s geographic landscape, and the further increases in assignee numbers that will result. The winners of 2020 will be those companies that adjust their strategies now.