Four concerns that keep CEOs awake at night

Author: Bob Moritz , Chairman, PwC International Ltd. Bob Moritz photo

Since we conducted our first CEO survey twenty years ago, the world has reshaped itself faster than we can reshape ourselves: from a massive increase in trade and financial flows and global online traffic to improved living standards.

Inequality among countries has decreased, and one billion people have emerged from extreme poverty. Artificial intelligence, blockchain, 3-D printing, the Internet of Things, and drones are just some of the emerging technologies that are already transforming our world. A higher level of interconnectivity has raised engagement with stakeholders and forced society to think about how information is accessed and consumed. Increased transparency demands a new way of communicating, a higher level of accountability, an elevated approach to leadership, and indeed, a deeper focus on trust, purpose, and the inherent human connection that has brought us closer together.

In this uncharted territory—predicted by few and now reality for all—how can CEOs transform today’s challenges into tomorrow’s opportunities? Our just-released 20th annual CEO Survey delves into global business leaders’ strategies for success in uncertain and shifting circumstances:

1. Being ready to flex in a world of flux

Brexit and the U.S. presidential election are two recent examples of how difficult it’s become to predict the future. Unsurprisingly, CEOs ranked uncertain economic growth and geopolitical uncertainty among their top concerns.

With globalization shifting to a multi-dimensional tug-of-war among power centers, economic growth, and geopolitical threats, most CEOs are now dealing with multiple value systems, frameworks, and trading blocs. Forces like rising income inequality and accelerating digital connectivity are causing rifts and new alliances. After decades when global trade growth greatly outpaced the growth of global GDP, 58% of CEOs told us it’s becoming more difficult to balance global competition and protectionist tendencies.

So how do CEOs create sustainable businesses when it’s only getting tougher to see what is coming around the bend? CEOs are focusing on strengthening their corporate purpose and collaborating with government to tackle systemic change. CEOs are also looking at a different mix of markets for expansion opportunities around the world.

2. Building (not busting) trust

As we become more interconnected and interdependent, concern about a business trust gap has grown: 58% of CEOs worry that lack of trust in business could harm their company’s growth, up significantly from 37% in 2013. This breakdown in public confidence creates risks for individual companies, but also political, economic, and social systems around the globe.

As with just about everything, technology plays a role here too. A significant number of the CEOs we surveyed are convinced that gaining and retaining trust is harder in the digital era. Notably, they also emphasize the growing importance of establishing a strong corporate purpose and reflecting that purpose in their organizational values, culture, and behavior--recognizing that the definition of trust has changed—specifically, expanded. Today, for example, to counter the risks stemming from the inevitable data breaches and cybersecurity issues, a company based on integrity and transparency will be strongly positioned to speak directly to its customers and stakeholders--both present and future--outlining all that was done and will be done to preserve data privacy.

The days where the CEO of a company was rarely accessible to the end customer or was able to get sanitized feedback are gone, as are the days where the consumer had little sight into how a product was produced and a supply chain crafted. Today, executive teams need to fully grasp the ethical and moral implications of their decisions, and communicate their actions with integrity. Trust has become an equalizing force, moving power from top-down to peer-to-peer.

This means that while trust is an increasingly challenging issue, organizations that succeed in earning and retaining trust have much to gain. When businesses effectively articulate their purpose, act transparently, and stand by their values, trust and success can go hand in hand. Sustained execution is key.

One fact is indisputable: the role of business in society has never been more important. Hand-wringing over uncertainty will not lead to success. But leaders who step up to collaborate across sectors, borders, and markets and the public at large will forge ahead.

3. Tackling the talent challenge day

The competition for talent is as fierce as ever, as the global population ages, the nature of work changes, and companies look for the skills they need to grow – now and in the future. 77% of the CEOs we surveyed voiced concern that skills shortages could hinder their organization’s growth, and 52% plan to hire more employees over the next year.

Despite greater automation in the workforce, CEOs realize they can’t rely on digital skills alone. To innovate, they need good problem-solvers and people with creative skills and high emotional intelligence. These are also the hardest skills to find. As LRN’s Dov Seidman explains it, companies and leaders that recognize and put the human connection at the center of their strategy will be the enduring winners. Indeed, “machines can be programmed to do the next thing right. But only humans can do the next right thing.” In a recent New York Times article, Thomas Friedman also writes “The technological revolution of the 21st century is as consequential as the scientific revolution, argued Seidman, and it is “forcing us to answer a most profound question — one we’ve never had to ask before: ‘What does it mean to be human in the age of intelligent machines?’”

To find these employees, CEOs are increasingly tapping into a more diverse hiring pool—and looking across borders. They are also focused on the structure and future of work, including the “gig economy,” with 28% of CEOs relying more heavily on temporary workers. A laser focus on delivering results, a drive to find the right skills, and ability to execute are what distinguish the CEOs that have higher confidence in their companies that we see in this survey.

4. Reimagining the leadership model

All of the above require CEOs to rethink the role of business in society, and engage with multiple players including those in government to create viable solutions. For example, many CEOs told us they struggle to define the extent of their company’s social obligations and to prioritize long- over short-term performance due to greater emphasis on shareholder value. And the events of the past year have shown us that companies that ignore people power risk stymying their growth.

Giving and receiving feedback, collaborating widely, and leveraging more decentralized decision-making will all be core attributes for successful leaders as C-suites expand and boardrooms diversify. Executives who embrace this changing paradigm may well blaze a trail that reintroduces the human factor and a sense of inclusiveness, fueling growth along the way, creating opportunity, and developing a meaningful relationship with the public.

Interestingly, CEOs are relatively optimistic amid the upheaval. Compared to last year, a higher percentage of CEOs said they are very confident about their organization’s 12-month revenue outlook (38% up from 35% last year). This positivity indicates that many CEOs have grown accustomed to navigating stormy, uncertain seas and are increasingly focused on opportunities created by unpredictable circumstances.

Leaders that live their values and scale them will create organizations with the resilience to navigate this complex, rapid-fire, disruptive world.

This story originally appeared on the WEF ‘Best of Davos 2017’

From 2009, Bob led PwC US as its chairman and senior partner. During his tenure, the US firm focused on increasing quality service and enhancing its brand and reputation by developing and retaining key talent and expanding its capabilities across all areas of the business. Bob speaks widely on, and is a champion for, diversity and inclusion in the workforce as well as being an advocate for workplace flexibility. Read more


Had enough yet? More disruption on the way in 2017

Author: Dana Mcilwain, CAO & Global Operations Leader, PwC International Ltd. Dana_McIIwain

As we move on from 2016, I’ve been reflecting on events from across the globe over the last 12 months that highlight dynamic societal discourses on topics ranging from economic policies to tax reform to immigration and national security. The words that spring to mind are unpredictability, change, upheaval and disruption. Anyone in the business of making predictions for 2017 may be looking at changing their career path!

We’re marking 20 years of PwC’s global CEO survey with the launch today of an interactive timeline looking back at the defining events and technology breakthroughs of the past two decades. Looking at the frequency and scale of tech developments (and this timeline shows just the tip of the iceberg), it’s no surprise to me that corporate leaders all over the world continue to tell us that they’re grappling with forces of disruption affecting all parts of their business.

I spend a lot of time talking with our clients about how megatrends like demographic and social change, shifts in global economic power, rapid urbanisation and – often, most acutely of all – technological breakthroughs are disrupting and changing the very rules of the industry they operate in. What’s increasingly becoming apparent is that industries aren’t just being disrupted, they’re being completely upended and reshaped at their very core. The walls between suppliers, producers and consumers and even between whole industries are moving, transforming and even, in some cases, coming right down. And technological change is driving the transformation of the business landscape.

In fact, four in five CEOs surveyed in our recent executive Pulse panel think the production technologies their companies use will change in the next five years – this rises to 90% of CEOs in Asia Pac companies. And three quarters cite investing in or acquiring new technologies as the most important strategy for managing disruptions faced.

CEO20 timeline

In this year’s CEO survey (due for release in Davos on January 16) we asked CEOs to what extent technology has changed competition in their industry over the last 20 years and the last 5 years – and how they think it will change competition over the coming 5 years. Although the final results aren’t in yet, my guess is that CEOs will tell us that tech in the next 5 years and beyond will be even more disruptive to their industry than even in the last five. So it’s not only that the pace of change continues unabated, but that it may actually be accelerating.

Strategic planning has moved on from being an annual event to become an iterative dialogue across the C-Suite. CEOs must continuously look at how the forces of technological breakthroughs are affecting their sector, how far those forces will disrupt their industry in the next five to ten years, what the future might look like for their business, and most importantly, what they might need to transform today to continue to thrive tomorrow.

So, disruption continues to be a way of life. The future is unpredictable. But history shows us that the companies that can prepare themselves for more than one future have the best chance of navigating the uncertainties ahead.

Dana Mcilwain is the Chief Administrative Officer and Operations Leader for the PwC Network. Dana’s primary responsibility is to ensure the PwC Network is Fit for Growth by teaming to drive strategic planning and investments; strategic cost management; strategic combinations and integrations; and technology enablement. Read more.


Six Principles for Creating a Brexit Business Strategy

Author: David Lancefield, Partner, PwC UK David-Lancefield

Following Brexit, the British government and the E.U. will spend the next several years negotiating a divorce that balances their economic, political, and social interests. The terms of exit and the trade deals that will follow will be unprecedented in their complexity, and there are no clear rules to follow. Nor is there a certain timetable. The negotiations were supposed to be concluded in two years, but the High Court’s recent decision mandating that Parliament must be involved, and the ongoing Supreme Court hearing, calls that into question.

As a leader of private enterprise, you can build an effective post-Brexit strategy around these basic principles in the meantime:

1. Develop a course of action that will be robust under many scenarios. Scenario planning will help you chart a course. First, think about the possible big-picture effects. Then take an existing element of your business and think through all the possible ways it could be affected by those larger changes. Consolidate your alternative futures into a few scenarios that demonstrate how this situation could evolve. They should all be mutually exclusive and have a counterintuitive aspect, something you can learn from. Consider the unintended consequences of actions that are relevant to your business. Then look into the impact each alternative future could have on your company, highlighting risks or opportunities involved.

Finally, instead of devising a separate response for each scenario, consider these questions: What strategy could we adopt that would be robust under any scenario? What investments could we make now to ensure that whatever scenario comes to pass, we will be glad we made that choice? And what can we do now to influence the development of the preferred scenario?

2. Rethink your global footprint.The aftershocks of the Brexit vote provide an opening to launch soul-searching exercises to examine the map of countries where you manufacture and sell your portfolio of goods and services. These exercises can also help you reconsider cost allocation, to adjust expenses to match your new global needs. Focus on strategic objectives: making the most of your capabilities, ensuring access to markets where your capabilities can help you stand out, managing regulators, finding suitable labor pools, and providing opportunities for innovation.

3. Encourage a diversity of perspectives within your company. Employees will hold a wide range of views about the risks of your post-Brexit strategy and the direction your company should take. This diversity of perspective is a strength of your enterprise. Give a large group of trusted managers and employees the task of developing a course of action in Europe and the U.K. Then encourage them to question one another’s biases and assumptions.

Draw in people with a range of experiences, professional backgrounds, interests, and expertise. Include advisors with deep sets of intelligence in areas as diverse as economic development, political engagement, devolution, immigration policy, industry trends, and customer data. Ask open questions to make sure that responses are not exclusively what people believe management wants to hear.

4. As a leader, be transparent and choose your words carefully.In difficult periods, executives must be cautious about what they say and the stances they take. Express sincere compassion and be on guard against statements that may ruffle feathers throughout the organization. Allow people to communicate their views freely. If people express fear or concern, offer tangible aid whenever possible. Avoid language that can be perceived as callous or threatening; even low-key statements such as “We’re thinking differently about next year’s budget” could be heard in a menacing way. Be self-aware when interacting with customers, suppliers, and shareholders.

5. Develop your company’s “foreign policy.”Multinational companies will have to become adept at navigating the changing regulations, consumer preferences, and cultural mores in regional and local markets. If you move into foreign territories that have their own evolving post-Brexit characteristics, you will need to integrate your company with the local society and government, capabilities you may need to build. Use your expertise in your current business locations to collect on-the-ground intelligence that can inform strategies designed to minimize risk. Instituting a well-resourced corporate foreign policy can buoy your localization strategy.

Your thoughtful engagement of issues related to Brexit, trade barriers, and globalization is critical. The Japanese government, and some U.S. officials have encouraged businesses to speak out publicly about Brexit, even if it takes them out of their comfort zone. This type of unprecedented encouragement may lead some companies to take positions on Brexit or other geopolitical issues before they have developed true diplomatic skills. More prowess with a foreign policy will lead to a more powerful impact.

6. Prepare for further expressions of public antipathy to the establishment. Recognize the public’s ongoing resentment of income inequality — and of generous executive pay and high dividends. Your employees will be worried about pension deficits and the potential impact of economic uncertainty on their job and wage prospects. We may also see the rise of conscious capitalism, more attuned to the needs of the people business serves and employs. Pay attention to attitudes about immigration. Borders will be tighter, and moving people across them will be harder, in terms of both managing the regulations and navigating public opinion. If migration of labor is part of your business model, you’ll have to consider these issues now.

By taking these steps, you can keep your business healthy while also addressing post-Brexit political and social issues. This process can catalyze innovation and growth even amidst turbulence. You will gain new insight into your distinctive identity, your capabilities, and your people. You’ll align your company with the devolution of power that appears to be occurring in many countries. Indeed, one of the surprising long-term results of Brexit may be a higher level of connectivity among citizens, government, business, the environment, and society at large.

For more insights, check out Business Beyond Brexit in strategy+business.

David shapes the strategic and commercial decisions taken by companies in the context of growth, restructuring and regulation. He focuses on the media and entertainment sector, working with organisations to transform their organisation and services for the digital age. Read more


Game changing auditor's reports: More insight and information than ever before

 Author: Bob Moritz , Chairman, PwC International Ltd. Bob Moritz

As auditors, we’re proud of the contribution we’re making to build trust in companies’ financial reports and, by extension, the capital markets. But much of what we do in our audits, including the types of issues we’ve addressed and the judgments we make, has not been transparent to shareholders and other users.

This is starting to change.

At the end of 2016, the International Auditing and Assurance Standards Board’s (IAASB) revised auditor reporting standards come into effect. And over the next couple of years, auditors around the world will begin issuing new style reports as they are implemented by national standard setters and regulators.  The new audit reports will be more informative, discursive and insightful— shedding light on the areas that were of most significance in the audit of the financial statements, why they were significant and how the audit addressed them.

We believe these new enhanced auditor’s reports are truly game-changing for both shareholders and the auditing profession.  They will undoubtedly stimulate enhanced conversations among auditors, companies, audit committees, shareholders and regulators.

Auditors in the UK and Netherlands have been issuing enhanced audit reports that go beyond the traditional auditor’s report for a couple of years already. It’s a move that’s been greeted with enthusiasm by the shareholder community in those countries. They say that they have found the insights into key matters addressed in the audit both interesting and informative. Some have even referred to it as a “sea change”. Auditor reporting standards

As auditors, we will need to hit the ground running. We’ve invested a great deal of time and effort to make sure we’re ready to pick up the challenge – from early experimentation with the “art of the possible”, to leveraging what we’ve learned in the UK and Netherlands with others across our network, to training and inspiring our teams and putting appropriate quality controls in place. And, all along that journey, we’ve been bringing audit committees and management in our clients along and preparing them for the change.

This will, however, be as new to management, audit committees and users as it is to auditors. We will all be on a learning curve. I ask that stakeholders in the audit give us feedback, good or bad, so that we can continue to improve the quality of our reports. It is really important that we get this right

We are excited that the type of insights that, in the past, may have been shared with the audit committee and management are now being shared more and more with the broader group of users of our reports. This gives us the opportunity to demonstrate more transparently the relevance of audit, and that, in turn, can help to reinforce confidence in its value.

This is not just a change in audit standards or a compliance exercise - it’s an opportunity.  It’s one we intend to embrace.

Find out more about the new auditor's report.

From 2009, Bob led PwC US as its chairman and senior partner. During his tenure, the US firm focused on increasing quality service and enhancing its brand and reputation by developing and retaining key talent and expanding its capabilities across all areas of the business. Bob speaks widely on, and is a champion for, diversity and inclusion in the workforce as well as being an advocate for workplace flexibility. Read more


What industry will your company be part of in the future?

Author: Norbert Schwieters, Global Consumer and Industrial Products & Services Leader Norbert Schwieters_landscape.jpg.pwcimage.200.252

Companies are in constant change. It’s a maxim of business. They have to in order to stay competitive and being on top of that is a key part of the CEO brief.

But what about whole industries? We tend to think of industrial orders and classifications as more fixed. Are we in an era where that is changing?  Is technological change creating historic shifts in industry footprints? And what does it mean for the CEO?

Parts of the industrial order are already changing. The telecoms CEO of yesteryear is now more likely to be presiding over a company that is firmly part of the entertainment industry. Technology companies are no longer far up the value chain but just as likely to be shaking up sectors such a retailing or transportation.

Is this process accelerating and bringing about more deep-rooted shifts? Changes in the old industrial order are now being felt in industries that have been relatively unchanged for most of their history. After more than a hundred years of being in the business of selling cars, automotive companies are eyeing a future where they’re no longer selling a car but facilitating and personalising ‘on demand’ mobility.  The century-old electric utility industry is at the nexus of a developing ecosystem that starts with smart homes but stretches out to embrace a diverse range of vital infrastructure.

Bringing down the walls

Technology is changing the industry mindset of how companies see themselves. In a new report from PwC, Bringing Down the Walls, we look at how the boundaries between suppliers, producers and consumers and, in some cases, between whole industries are shifting.  The pace of technological change is opening up the prospect of a new industrial order and we look at how that is affecting a diverse range of industries.

Of course, recent political events remind us that predicting the future is a hazardous business. If it’s difficult to foresee even near-term events in elections where the choices are two-way then who’d be a CEO trying to look much further ahead, balancing a complex multi-dimensional set of variables across industries.  So what should a CEO be focused on?

PwC prefaces its ‘future in sight’ series with the maxim “the trick to seeing the future…is to know where to look for it.” In the case of the industries of today, there is one big obvious force that is shaping their future direction and that is the technological shockwave that is sweeping through industries connecting them through the industrial internet of things as well as transforming how they produce/consume energy and deal with new customer demands.

Many are terming the impact of the many and various technologies that are accelerating apace as a new industrial revolution. But what is very different is that, while earlier industrial revolutions were driven by technological advances that were focused initially at least on the production side, many of the advances currently occurring are ones that simultaneously embrace consumers, producers and suppliers.

The result is that the technological shockwave is being amplified and given momentum by customer, producer and supplier behaviour and expectations.  A key issue for CEOs that flows from this is to consider whether your company has got an outcomes focus or is it still stuck in a physical product mindset? Many of the changes we are seeing arise because products are being replaced by outcomes. Customers are interacting less with industries and product sectors based on the physicality of their product, but on the outcomes, convenience and value they can offer, bringing about profound implications for the industry mindset you need to adopt.

Norbert Schwieters leads PwC's Global Consumer and Industrial Products & Services group. He's also the Global Energy, Utilities & Mining Leader and heads up the Energy industry team in Germany. Read more



Are you playing the new game of global tech?

Authors: Brad Silver, Global TICE Leader and Dr. Florian Gröne, Advisor to Executives for Strategy&

You run a major technology company that sells a standard line of computer hardware and networking equipment to large enterprises. But sales are falling and margins are contracting. Why? You look around and realize that you can simply no longer get the high prices for your products that you could in the past. In fact, some of them are verging on becoming commodities.

 Yet your competitors seem to be doing just fine. Why is that?

Some competitors appear to be playing a very different game, offering an increasingly wide range of innovative and profitable services to accompany their traditional product lineups. Others focus more narrowly on a specific product category and they’re beating you through their specialization. And still others have gone on buying binges, purchasing smaller outfits that enable them to build complete platforms.

How can you compete? This is the problem facing many companies in the information and communications technology (ICT) industry. Strategy&, PwC’s strategy consulting business, has long followed the product and services categories in its annual study of the ICT 50—hardware and infrastructure, software and Internet, IT services, and telecommunications—have been superseded. Convergence is now the name of the game, as the old categories blur, and new entrants elbow their way into tech markets.

New Strategies for a Converging Industry 

Thanks to the consumerization of IT, increased demand for mobility, and the rise of the cloud, companies are less dependent on traditional products and services offered by the ICT industry. In 2015, for example, more than 68% of corporate investments in IT were made outside the IT department—up from 47% a year earlier, according to the latest PwC Digital IQ study.

As a result, traditional sources of value for IT products and services suppliers—computing infrastructure, connectivity, enterprise-grade software—no longer provide tech companies with reliable sources of growth. Now, they must look further afield for new sources of revenue and profits. 

Many ICT companies are refining their competitive models, choosing identities that play to their distinctive strengths as they go to market. Through the ICT50 research, Strategy& uncovered five distinct identities that ICT companies are adopting: ICT 50 image vF

  • The Innovator consistently develops and launches new and creative products or services to the market through heavy investment in R&D.
  • The Consolidator leads its category by acquiring other companies to create a platform or product lineup that could not be assembled otherwise.
  • The Value Player uses economies of scale, labor arbitrage, and standardized delivery models to provide low-cost IT products and services.
  • The Solutions Customizer addresses the specific needs of customers through solution consulting, outsourcing and implementation services.
  • The Category Leader builds a dominant position in a particular product or services category.

 Illustration by Lars Leetaru

See “The New Game of Global Tech” for a full list of the ICT 50 companies and their related identities.

Have any of these identities proven particularly successful in the ICT marketplace? Yes. Innovators, for instance, have captured the largest percentage of the industry’s revenues and a huge share of the market, but their growth has slowed recently as their businesses have matured. Consolidators are also doing well, capturing high margins as they invest in R&D through the companies they buy. On the other hand, Category Leaders have seen weak revenue growth, and appear to rely too heavily on their traditional cash cows.

It’s critical to understand that any of the five identities can be winners—but none of them guarantee success. Additionally, a company that has long followed a Value Player strategy, for instance, would be hard-pressed to suddenly develop capabilities needed to succeed as an Innovator.

Think in terms of your company’s current strengths—its most distinctive capabilities and most successful products and services—as well as the capabilities your company will need to build in the future. Don’t forget that your chosen identity must be continually fine-tuned and updated to leverage the new technologies and meet the new demands of the ever-changing ICT industry.

Brad silver

 Brad leads PwC’s Global Technology, InfoComm, and Entertainment & Media practice, a role in which he oversees PwC’s Technology, Media & Telecommunications (TMT) clients across the PwC network. In this capacity, PwC provides services to over 90% of Fortune Global 500 TMT companies.

    Connect with Brad on LinkedIn  

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Florian GroneDr. Florian Gröne is an advisor to executives in the communications, media, and high-technology sectors for Strategy&, PwC's strategy consulting group. Based in New York, he is a principal with PwC U.S. He has more than 15 years of professional and consulting experience, focused on digital business and technology strategy.

Connect with Florian on LinkedIn

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Why a bigger boardroom can make for a better boardroom

Richard-oldfield (1)

Auhtor: Richard Oldfield, Global Markets and Services Leader

We’ve been speaking to more than our fair share of CEOs across the globe this month in the run-up to the 20th anniversary of our Annual Global CEO Survey. It’s got me thinking about how the role of the CEO and their team have changed in that time. Over the years, I’ve been lucky to work with the boards of many companies. And I’ve been struck by the fact that, as time has passed, the shape of the board has changed entirely.

Whereas once the board executive team was an elite group consisting of the CEO, the CFO and the COO. It’s now expanded to include a number of other senior leaders with a diverse range of skill-sets. A typical board could now include a chief commercial officer, chief risk officer, chief marketing officer, chief technology officer, chief compliance officer and a chief sustainability officer. And I wouldn’t be at all surprised if a chief robotics officer and a chief purpose officer join them before too long.

Of course, it’s not just me who has noticed that the C-suite has expanded. Research from Harvard Business Review found that the size of the executive team (defined as the number of positions reporting directly to the CEO) “has doubled, rising from about five in the mid-1980s to almost 10 in the mid-2000s”. My guess that this proliferation of executives is a response to the rapidly shifting business environment, particularly the march of globalisation and the widespread industry disruption unleashed by advances in technology. As agile and innovative start-ups seek to overturn existing business models, corporate survival increasingly depends on a CEO’s ability to draw on an arsenal of skills.

20 years inside the mind of the CEO

Customers also are having a profound impact and businesses increasingly look for ways to use big data to access valuable insight into customer behaviours. Given the challenges associated with unlocking the power of data, in particular, it is unsurprising that the CEO’s partner of choice is fast becoming the ‘digital C-suite’, consisting of the chief data officer, chief digital officer and chief information officer. By 2019, 90 percent of major organisations will have a chief data officer (CDO), yet only half will be hailed a success according to Gartner. Experian has found that 70 percent of chief data officers already report directly to CEOs.

The rise of the digital C-suite helps to explain why COOs are set to become a rare breed. Research by executive search firm Crist Kolder Associates in 2016 found that just 30% of S&P and Fortune 500 companies employ a COO, down from a high of 48% in 2000. In the past the COO was often regarded as the second-in-line – and natural successor – to the CEO. Today, the increased complexity and digitalisation of operations has led to other leaders with more relevant skills taking on some of what were the COO’s traditional responsibilities.

So, what does the expansion of the C-suite ultimately mean for the CEO? It certainly makes the role an even bigger management job than it already was – there are significant challenges associated with leading a large group of ambitious and highly capable direct reports. Perhaps tomorrow’s CEO will need to become the Chief ‘enablement’ officer for a whole new (more fluid) ecosystem of CXOs ready to harness the power of the crowd.

Richard Oldfield leads all market-facing activities, initiatives, and strategy. Prior to his current role, Richard was a member of the UK Executive Board for five years during which he was Head of Clients and Markets and latterly Head of Strategy and Communications.  Richard also led the UK firm’s Banking and Capital Markets Assurance practice and sat on the Assurance Leadership team. Read more



Innovation above all else

Author: Clifford Tompsett, Head of the Global IPO Centre Clifford Tompsett

The Top 100 is into its 4th year, and it continues to render valuable insights. This year again, those companies who feature in the rankings are, on the whole, companies with a truly global reach and consumer base. There are very few exclusively domestic companies present.

These top companies manage to transform themselves relentlessly to remain relevant, effective and resilient, even as the world transforms at what seems like an ever-quickening pace. The proof of this? This year, 91 companies remained in the top 100.

But there were some interesting changes. Overall market capitalisation decreased significantly for the first time since 2009 – arguably the height of the global financial crisis. China and Europe, the former so long an engine of growth, now appear to be driving the decrease, while the US grinds on, adding $314bn to the total market cap this year.

The Top 100 results come alive when you compare them with FutureBrand Index – a global perception ranking of the top 100 companies by market cap.

It seems that the companies driving value are the same that are at the leading edge of technological innovation: companies like Google/Alphabet, Apple and Samsung. Innovatio above all else

These companies continually demonstrate their resilience, responding to changing demands and leaping into buoyant, fast-developing sectors like wellbeing, tracking and education – a long reach from their original raison d’etre. And they are being followed by companies like Nike – a sportswear retailer that now has much broader ambitions. Many companies are eyeing this space as profitable.

And those companies are all looking towards one area in particular. Seamlessness. Research tells us that consumers are keen on seamlessness of experience – they want the technology they invest in to do and be more, and to connect previously different areas of their lives. The results of both indices bear this out.

Seamlessness has steadily grown as a future brand driver since 2014 and the technology sector as a whole is growing – it now leads the market in terms of capitalisation. Amazon’s entry into the FutureBrand top ten is also indicative of consumers’ desire for increased efficiencies.

Interestingly, two of the assessment criteria for companies (called future brand drivers) - ‘would work for them’ and ‘resource management’ – are the least important drivers now, but are growing. This, along with freezing or falling measures such as ‘purpose’ and ‘thought’ leadership suggests that whether companies’ are attractive employers (regardless of whether you intend to work for them) and whether they are clear about what resources they use and how they use them are becoming better measures for consumers.

Companies should pay close attention to analyses like this. We have seen a number of high-profile cases in the news recently about companies who are struggling with scrutiny of one kind or another. Ethical buying – previously thought of as a niche market – is becoming more widespread. Increasing numbers of customers are evaluating their investment on the basis of more than just direct buyer/seller interactions.

Similarly, clear explanations of resource management are becoming more desirable. This is a huge reporting challenge and it will be interesting to see whether companies themselves can come up with ways of painting a picture of their resource use.

A comparison of the Top 100 and FutureBrand Index provides a unique window into the present and possible futures of the market. What can we tell absolutely? That customers value innovation above all, and that for companies to move ahead, they will have to find new ways to meet consumer needs, while continuing to address widely held and solid values.

FutureBrand is an SEC-restricted entity. The FutureBrand Index data is publicly available. It is in the ordinary course of business for FutureBrand to publish the information on their website and in the ordinary course of business for PwC to have an interest in and analyse this kind of data. PwC has not paid a fee for their data and there is no joint business relationship.

Clifford leads PwC’s Global IPO Centre in London, which advises overseas companies, particularly with operations in the emerging markets, on capital market transactions.  Clifford joined PwC in 1979 and became a partner in 1991.  he has many years of experience of working on capital market transactions and has led the Reporting Accountant work on many large IPOs of both UK and overseas companies, many in the energy and mining sectors. Read more



Success and succession: addressing strategic planning for family businesses

Authors: Stephanie Hyde, Global Entrepreneurial & Private Business Leader and Peter Bartels, Global Family Business Leader

We’re launching our eighth Family Business Survey today – with over 2,800 participants it’s a fascinating and truly global picture of one of the most important and vibrant business sectors. The ambition, resilience, and drive of family firms never fail to impress, and the world needs more of them. But it also needs more of them to succeed for the very long term. The number of family businesses that make it beyond the third generation is still stuck at around 12% - meaning that too many bright, ambitious and innovative firms aren’t turning all that great potential into a sustainable, successful business across the generations.

ST and PB FBS launch blog image

So why is this happening? Problems with the succession process are one obvious answer, and one we’ve focused on in both this, and previous, surveys. It’s a particular feature of the family business model, and often proves to be a serious fault-line too. But as this year’s report shows, it’s becoming more and more clear that succession is only one example (though a major one) of a much deeper issue.  The real problem is what we’re calling the ‘missing middle’: businesses that think in generations are not planning well enough for the medium term.  This means having a clear strategic plan that links where the business is now to the long-term and where it could be.

Two statistics from this year’s survey illustrate what this means in practice. For the last few surveys, family firms have been making about a quarter of their sales overseas, while confidently predicting that exports will be closer to a third of sales within five years. And yet the actual level of international sales is still stuck at around 25%. In 2012, 67% told us they were trading internationally, and 74% expected to be doing so in five years. But four years on, the numbers are almost the same. Something is holding these businesses back. It’s not determination or diligence they lack, but a robust and professional strategic plan.

We look at this in much more detail in the survey and at the ongoing professionalisation agenda which we focused on in 2014, which is still a work-in-progress for many family firms. But the big message this year is very clear: family businesses have the qualities they need to succeed, and they’re more than capable of carrying out a strategic plan once they have one. It’s the process of putting that plan together in the first place that’s the missing piece. The good news is that with the right tools and skills, and some discipline, the ‘missing middle’ gap is easily filled. In our experience, families often benefit from the help of non-family members, such as the professional CEO, to bridge the gap or indeed the next gen.  And outside advisers can also play a critical role. Increasingly family firms are thinking strategically about the skills they need in their boards and hiring truly independent board directors who will help provide the challenge and strategic perspective needed.

We want to see far more than 12% of family firms succeeding past their third generation, and with this survey we aim to shine a light on the opportunity family firms have to achieve this.

Stephanie HydeStephanie sits on the PwC Global Leadership Team as Entrepreneurial and Private Business Leader and is also a member of the PwC UK Executive Board, as Head of Regions. The Global Entrepreneurial and Private Business segment works with over 100,000 businesses, and contributes over 20% of PwC’s global revenues. Starting with the firm in 1995, Stephanie became a partner in 2006 and joined the Executive Board in 2011. Read more

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  Peter BartelsPeter Bartels has been a Member of the Board of PwC Germany since 1 July 2010 and is in charge of the business units "Family Businesses and Middle Market" and "Public Services". Before being appointed to the Board, he headed the business unit "Valuation and Strategy". Read more

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Attracting and keeping the most talented millennials

Author: Partner & Global Information Leader, Global AIESEC ChampionPhilip Sladdin

There’s no doubt that CEOs and their organisations are facing a challenging cocktail of new business opportunities and disruptive change from technological developments as well as increasing economic woes in many developed and emerging markets. As one CEO put it recently: ‘The past is no longer a good predictor of the future…’, and success increasingly depends on an organisation’s ability to adapt, reskill and deploy people rapidly, to wherever the next opportunity might be. I believe strongly that the main focus and attention of organisations today should be to invest in people.

 PwC has partnered with AIESEC – the world’s largest youth-run organisation - for 43 years and we asked this key group of millennials earlier this year about their views of the future and key trends, using the same questions we asked CEOs in our 19th Annual Global CEO Survey. We compared and contrasted the perspectives of both millennials and CEOs, exploring the differences and gaps in the wider talent debate. The results, showcased in our Tomorrow’s leaders today piece, have prompted me to question whether organisations are really doing enough to respond to the needs of millennials and to be in an ideal position to attract, and keep, the most talented individuals.

It is predicted that Millennials will constitute roughly 55% of the workforce by 2020. Looking ahead, the challenge this will bring provides a “call to action” for us all. According to Tomorrow’s leaders today, this is what we need to know if we want to attract and retain these talented individuals: What do young leaders want

  1. They see their career as a portfolio of experiences rather than a ladder to be climbed in a single organisation. Only 18% plan to stay in their current role for the long term;
  2. Working culture and values are very important; millennials want to be proud of their employer and feel that their company’s values should match their own;
  3. It’s important to remember that millennials have been interacting with technology from a very young age;
  4. They put a much greater emphasis than CEOs on opportunities to work internationally (21% vs 7%);
  5. And, they are far less interested in pay and incentives than CEOs (10% versus 33%).

On the other hand, our 19th Annual CEO Survey People and Purpose cut showed that businesses and their leaders are facing pressing questions about their future talent pipelines and people strategy. The biggest challenge for CEOs is in understanding what their customers and employees value, how that’s changing over time, and how their organisation can meet those expectations. Our survey shows that they’ve realised that shared values and a sense of purpose are becoming critical to talent strategy. But where to start is the big question.

So, we should all be asking ourselves if our organisations have what it takes to be an employer of choice for the next generation. As Tomorrow’s leaders today highlights:

  • Are we in touch with what millennials and Gen Z want?
  • We may have the right values, but are we walking the talk? Authenticity is key.
  • Does our behaviour as a business match up to the claims in our environmental and social reports?
  • How is our business going to embrace the new model of leadership for the 21st century?

I hope my comments and reflections, based on my experience in working with young people through AIESEC, help you to reflect on your readiness to welcome the new generation and, more importantly, make changes to your approach that will set you on the right path towards reaping the rewards from what are going to be very interesting times ahead.

Philip Sladdin, a partner in PwC Germany, is responsible for the PwC network's internal reporting to client and leadership teams globally. He is also the PwC Global AIESEC Champion and the sponsor of the PwC - AIESEC Partnership, a member of the Supervisory Group of AIESEC International and the Chair of the Premium Partners Group, a role he took over in 2014. Qualifying as a Chartered Accountant in England and Wales in 1990, Philip's career has included auditing large and small clients in the UK and Germany, including those in the financial sector. Following a successful relocation to Frankfurt in 1998, he has held a number of pan-European finance and strategy roles in PwC as well as being globally responsible for data privacy and protection in the PwC network.