02/05/2016

Beyond GDP, beyond profit: Measuring business success today

Author: Patrick Lenain, OECD  Patrick-photo

We face a great puzzle. We are living through a period of rapid technological change, which is creating many new opportunities. Yet there is widespread feeling that this has not translated into better lives, and popular discontent is noticeable. This has led to scepticism about traditional ways to measure economic data, and statisticians are now revising their frameworks to assess life satisfaction. CEOs also need to go beyond traditional financial benchmarks to assess corporate performance, as they agreed in PwC’s recent annual survey.

Beyond GDP: How to measure wellbeing?

Take GDP – the traditional way to measure economic progress. It has increased in most countries, which should translate in higher incomes and greater happiness. In the United States, annual GDP per household after inflation is about US$4,200 higher than before the crisis. Yet, life satisfaction has not improved in parallel, as reported by the latest World Happiness Report published by the United Nations sustainable development solutions network. Happiness has also stagnated in Canada and the United Kingdom, despite good economic performance.

In part, this reflects rising income inequality, which translates in stagnant incomes for the middle class. But there is more. It also reflects the lack of attention to what matters for most families. The OECD now publishes non-monetary indicators of well-being – such as health, jobs, housing, education and pollution. They show that American households often struggle with their work-life balance due to long working hours and commuting time, and limited access to employer benefits such as sick and parental leave.

Well-being is high in the United States, apart for work and life balance

Patrick'a blog

 

Source: OECD Better Life Index, 2015 and Economic Survey of the United States, 2014.
Note: 0 = lowest OECD ranking; 10 = top OECD ranking

Beyond financial performance: How to measure business impact on society?

Businesses are also looking into new ways to measure their impact on society. Take, for example, the environmental footprint of business activity. Environmental degradation is worrying – global warming, rising sea levels, water stress, air quality – and no business can ignore it. Next to financial reports, most companies now report their environmental footprint. Corporate information about environmental sustainability need to be trustworthy because breaching this trust can severely harm shareholder value – witness the problems experienced by several carmakers with allegations that they used “cheat software” to hide high levels of air pollutants.

Environmental reports are a good first step, and more can be done. Businesses impact society in many other ways – tax payments, labour earnings, employee benefits, working conditions, talent diversity and social investments. Facebook CEO Mark Zuckerberg is contributing to the debate on equality and social mobility, while companies such as GE, Intel and Exxon Mobil are promoting common education standards in US schools.

This matters increasingly for investors. Norway’s Global Pension Fund selects its investments based on business ethics. Private pension funds pay increasing attention to business conduct. Morningstar will soon rate mutual funds according to environmental, social and governance standards. Focusing on non-financial aspects of corporate performance, CEOs can improve long-term shareholder value.

Patrick Lenain leads OECD country economic studies. He has extensive experience in providing advice to governments of a variety of countries in Europe, Asia, Latin America and the United States. He is also Adjunct Professor of Economics in Paris and a regular guest speaker on global challenges.

02/02/2016

Delivering on strategy through organisational purpose, design and culture

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

In our new book Strategy That Works we look at the strategic approach of the world’s most successful companies. What they have in common is that they consistently close the gap between strategy and execution, which entails committing to an identity, developing a distinctive value proposition and identifying the few differentiating capabilities that allow them to deliver on this ‘way to play’. In order for businesses to determine that all-important identity - their organisational purpose - and how to deliver on it, management needs to gain a much better understanding of stakeholder interests. Failure to deliver on these expectations can lead to loss of trust.

This is especially true in a world undergoing transformation, where stakeholders’ views are dramatically shifting.

One of things that struck me when I looked at what CEOs told us in our Annual Global CEO Survey is just how divergent they think the world is becoming. Many see differing political, economic, financial, legal and trade models – and most of all, they’re seeing multiple beliefs and value systems.

Customers and other stakeholders are changing more than ever and are increasingly expecting businesses to pay attention to a wider range of needs across society. In five years’ time, 44% of CEOs think their customers will seek out organisations that address these needs – compared to just 27% today. Likewise CEOs think that top talent will in future increasingly want to work with organisations that share their social values, and that more investors will seek ethical investments. This helps explain why almost a quarter of CEOs told us their organisational purpose had changed in the past three years to reflect wider stakeholder expectations and why over half said they’re worried about lack of trust in business. 22229_TRUST_GRAPHIC_V4_272px_302px_th090615

As I described in Redesigning institutions (to rebuild trust), there are three fundamental design elements of a trustworthy organisation. The first is legitimacy, which includes how goals and authorities are aligned with stakeholder interests and wider ethical norms – the constitutional foundations of an institution. The second is effectiveness – how goals are delivered, including accountability, incentives and agility. And the third is evidence, which involves how reliably an organisation can prove how effectively it’s performing against its constitutional purpose.

Business leaders are up against many challenges as they try to translate their purpose into their organisational design and day-to-day operations, one of which is technology. It’s what most of the CEOs we surveyed said would transform stakeholder expectations and it’s the area in which the most CEOs are making major changes in response to those demands. As we move into a more digital world, important issues are being raised about what legitimacy, effectiveness and transparency mean – we explored some of the most challenging of these in Ten digital trust challenges.

What’s needed to address these and other challenges and to align strategy to transformation efforts is people. But while 90% of CEOs we polled say customers have the most impact on their strategy, considerably fewer (51%) say the same for employees. And while 41% of CEOs are changing workplace culture and behaviours in order to positively impact their talent strategies, it doesn’t seem to be making as big of a splash in their overall organisational efforts. Just 31% are making major adjustments to values, ethics and codes of conduct in response to stakeholder expectations – compared to 51% doing the same for their technology efforts.

Yet, as our Strategy That Works book makes clear, companies with a strong degree of alignment between their identity, value proposition, capabilities, and offerings see their culture as their greatest asset – and put it to work to deliver their strategic intent.

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

01/22/2016

The Unfinished Business of Gender Parity

Author: Dennis Nally, Chairman, PwC International Ltd. Dennis Nally

When it comes to the importance of gender equality in the workplace, the message has clearly gotten through to those at the top. Surveys – including those conducted by my own organization – consistently show that business leaders understand the need for equal treatment of men and women in the workforce.

Indeed, my own conversations with senior businesspeople around the world confirm that progress clearly is being made. The vast majority recognize the issue as imperative to their companies’ success and have implemented measures to promote gender parity in their organizations. And yet, for all the fine words, much more remains to be done before gender parity is actually achieved.
Read more in the full article, How to turn words into action on gender parity, published on the World Economic Forum website.

It’s only one year ago at the 2015 UN Women session at Davos, that UN Women unveiled the HeForShe IMPACT 10X10X10 initiative to galvanize momentum in advancing gender equality. Exactly a year later, PwC has already driven 40.000 pledges to be HeforShe. Please join us in this great initiative.

Dennis Nally leads the global network of PwC firms. He has extensive experience serving large multinational clients in a variety of industries, principally focusing on technology and life sciences. Dennis is also a frequent speaker and guest lecturer on issues affecting the professional services profession and the global capital markets. Read Dennis Nally's full biography.

01/21/2016

CEOs need to redefine their business success in a rapidly changing world

Author: Dennis Nally, Chairman, PwC International Ltd. Dennis Nally

It is always exciting to join a number of my PwC colleagues and engage with business leaders, politicians and academics from all over the world at the Annual Meeting of the World Economic Forum in Davos, Switzerland. The perfect setting to launch the results of PwC’s 19th Annual Global CEO Survey - ‘Redefining business success in a changing world’.  A media highlight in Davos, the Survey is a unique barometer of CEO attitudes worldwide.  We are very proud – and appreciative – of the over 1,400 CEOs who took the time to take part.

The results this year reveal a gloomy outlook.  CEOs see new risks on the horizon and anticipate a deteriorating global economy over the next twelve months. Two-thirds of CEOs (66%) see more threats facing their businesses today than three years ago. Just over a quarter (27%) believe global growth will improve over the next twelve months, a decline of 10 points on last year. In the graphic below you’ll see the CEOs are also less confident about their own growth prospects. While we completed interviewing CEOs in December, my guess is that if we were to ask CEOs today, the results could be even more downbeat. 

CEO Survey confidence 2-01

It’s safe to say China’s economic rebalancing, crude oil price falls and cybersecurity and geopolitical security concerns are all impacting an overall increase in uncertainty about the global economy’s growth prospects. Levels of confidence that the economy will improve among North American CEOs is half that (16%) of the most optimistic regions (Western Europe 33% and Middle East 34%). Almost a third of China’s CEOs (32%) believe global economic growth will decline in 2016. The fact that CEOs continue to point to US, China, Germany and the UK as ‘safe havens’ for growth underlines the general uncertainty about where real growth will come from in the long term.

So what is it that CEOs are most worried about? As you can see below, concerns about regulation are higher than ever and the lack of key skills and exchange rate volatility continue to trouble CEOs. But it is the increase in worries about geopolitical uncertainty that is the most striking. And given recent events, I’m sure this uncertainty will become even more prominent in the year ahead.

CEO Survey top concerns-01

This is also reflected in the trend CEOs are seeing towards a more distributed authority and greater differences between socioeconomic and political models, beliefs and values. To CEOs there’s a clear movement away from a single global marketplace and single global rule of law towards regional trading blocs and multiple rules of law and liberties. But the most worrying trend is the clash of beliefs and value systems.

As you can tell, CEOs need to navigate a brave new world and a challenging business environment. So it’s all the more important for CEOs to set the right priorities that redefine their business today for it to stay successful tomorrow. This year they’ve told us that they are focusing on 3 priorities:

First, CEOs are focused on technology. Nearly two thirds of CEOS suggest data and analytics and customer management systems generate the greatest return on investment in terms of engagement with customers and other stakeholders. And over half of CEOs rank R&D and innovation technologies as generating greatest return on investment. Technology is central to innovation – and CEOs of companies which are ‘digital natives’ find it easier to track changing consumer expectations and innovate with agility.

Second, they recognise the wider stakeholder expectations of their business, particularly the customer. Reshaping companies built on profit alone into ones where profit and purpose combine, is not going to happen quickly or easily, but it’s a transformation that is already starting and that businesses need to keep pace with.

We’ve asked CEOs the question if business success in the 21st century will be redefined by more than just financial profit and 76% of them agreed. 69% of CEOs indicate that they have adjusted their organisation’s purpose to include the broader impact on society.

The third priority CEOs are focusing on is in line with the second – reporting and communicating broader measures of success. They want better measures of traditional impacts on profitability like innovation and key risk.  At the same time they have selected some of the ‘softer’ drivers of success, such as values and purpose which they want to do more communicating around. The challenge is to better measure and communicate both the “harder” and “softer” drivers of business success.

So while CEOs see a lot downsides on the horizon, they are working actively not just to deliver short term profit but focusing on making their businesses sustainable for the future. I invite you to explore all the findings from our 19th Annual Global CEO Survey.

Dennis Nally leads the global network of PwC firms. He has extensive experience serving large multinational clients in a variety of industries, principally focusing on technology and life sciences. Dennis is also a frequent speaker and guest lecturer on issues affecting the professional services profession and the global capital markets. Read Dennis Nally's full biography.

 

01/13/2016

Seeing the sea in new ways: The PwC Circumnavigation report

Authors: Henrik Steinbrecher, PwC Sweden and Miguel Marques, PwC Portugal

One of the advantages of being an organisation with the international scale and the depth of know-how that PwC has, is the ability to bring diverse kinds of expertise to a variety of issues that transcend the interests of individual countries, industries, or organisations.

There’s no more obvious example than the world’s oceans, which are perhaps humanity’s single greatest natural resource. With fishing, transport, naval security, tourism, oil and gas, renewable energy being large and profitable sectors, it’s clear that many national economies are dependent on the seas. Consider the following facts from the National Oceanic Atmospheric Administration:

Circumnavigation

• 14 percent of U.S. counties that are adjacent to the coast produce 45 percent of the nation's gross domestic product (GDP), with close to three million jobs (one in 50) directly dependent on the resources of the oceans and Great Lakes.
• In 2011, the ocean economy, which includes six economic sectors that depend on the ocean and Great Lakes, contributed more than $282 billion to the U.S. GDP and provided more than 2.8 million jobs.
• Tourism and Recreation account for 70 percent of the ocean economy's total employment and 34 percent of its GDP. Offshore Mineral Extraction accounts for another 37 percent of the ocean economy's GDP.

It is therefore critical that business leaders, CEOs and government protect this valuable resource and ensure that it’s properly managed and effectively and equitably utilized.

So, how can we do this? By taking a long-term, strategic, and above all integrated approach to the ‘economy of the sea’. That’s where our own expertise comes in. For the last 10 years, PwC Portugal has been compiling and analysing data on all the many industries that rely or work on the sea, and the different nations that use it.

The results of this research, now available in Circumnavigation: An integrated approach to the economy of the sea show fascinating insight into how our use of the seas is changing. We look at how ‘blue’ thinking is exploiting the vast potential of the oceans in innovative new ways, whether it’s using robotics to mine the seabed, or applying genetic engineering to generate marine lifeforms for food production, pharmaceuticals, cosmetics and other sectors. As industries across the world continue to be disrupted, it’s important that CEOs whose businesses rely on the ocean are aware of these innovations and have the tools to implement them within their organization.

The report also showcases why managing the seas in an integrated way is crucial, not least to minimise the potential for conflict, which can only increase as more people use them. Conflicts can arise between nations, between businesses, between industries, and between the ‘three dimensions’ of the sea itself - beneath the surface, on the surface, and in the air above. We need to find ways for those who operate within these different dimensions to do so to their mutual benefit, from fishing to offshore wind, from oil rigs to cruise liners.  Likewise, we need to ensure that ports, marinas, and the land-based maritime industries work more collaboratively to make best use of the available land and resources, and support the development of the necessary engineering and technological skills.

Countries like Ireland and Norway have already started to pioneer this integrated approach, and it’s clear that to make it work you need not just the right frameworks, but the right people, and the right technology and equipment. But the potential – if we get this right - is as vast as the sea itself. We hope that Circumnavigation will be a useful contribution to this important emerging debate, and a valuable resource for anyone interested in understanding the intricacies of the economy of the sea and how to capitalize on new ways of thinking and managing ‘blue’ business.



 HenrikHenrik Steinbrecher leads the Middle Market business for PwC globally, focusing on owner-led, private, family controlled and entrepreneurial companies. He’s particularly focused on family and owner led businesses, advising them on how to address strategic issues relating to the owner's agenda.

Contact Henrik or connect with him on LinkedIn

 

 


MiguelMiguel Marques leads the Economy of the Sea PwC thought leadership project, focusing in the blue growth, the promotion of economic development, creation of new jobs and protection of the environment, through sea industries. He´s particularly focused on family business related to sea activities, as they have the perfect “patient capital” profile to invest in the blue businesses that need more time to develop.

 Contact Miguel or connect with him on LinkedIn

 

 

 

01/07/2016

Can’t trust business leaders? 8 reasons why you should

Author: Suzanne Snowden, Director, Global Thought Leadership

Suzanne
The end of one year and the start of the next is always a good time to take stock of one’s activities (that includes me!). I’ve been asking myself: How have I spent my time this past year? What are the things I’ve done that have really mattered? Were these the things that got measured? Did anyone notice or care?

Often some of our most meaningful achievements get lost in the flurries of emails and progress against plan that make up much of working life.

This year, in our 19th Annual Global CEO Survey, which we’ll launch later this month in Davos, we asked CEOs what their organisations bring to society which isn’t currently measured. Some CEOs were clear in their responses – that everything they do is acknowledged and valued by their wider stakeholders. However, many more felt there are a multitude of things businesses offer that don’t get measured and reported – in addition, of course, to the goods and services they’re best known for.

Here are the top eight they told us about: 

• Employment – businesses create jobs in the local communities in which they operate
• Prosperity for nations – private enterprise drives growth and provides funding, through taxes, to support communities and countries
• Innovation – businesses create and share all sorts of innovative ideas, from cutting edge technologies to research in healthcare, transport and environmental sciences
• Education and training – many CEOs mentioned the benefits wider communities get from the training they provide
• Environmental protection – business leaders mentioned programmes they’re driving, centred around lowering environmental impacts, protecting ecosystems and reducing CO2 emissions
• Safety, security and wellbeing – many CEOs mentioned the safe environment they are  providing either indirectly through their products or directly in the security and support for wellbeing for their employees and communities  (including physical security in areas of relative danger)
• Contributions to critical infrastructure -  Some of the organisations surveyed are physically building things which will transform people’s lives (from roads and bridges, to digital network infrastructure for nations)
• Philanthropic and charitable support – Finally, CEOs are also giving back to some of the great causes they see around them.

As Manuel Manrique, President and CEO of Sacyr, says:

Perhaps society is not fully aware of how our activities help to develop the communities we operate in. Our presence and activity in certain communities lead to significant developments, including better infrastructures, greater services and a more prosperous population. The resulting situation contrasts with the standard of living experienced before we arrived – and this can be seen clearly in certain places, such as Panama.

CEOs have a demanding job already and it’s getting more complicated. The challenge for many, in a more connected and transparent world, is to refine the value their businesses bring in a broader and more holistic way – one that goes beyond financial metrics and takes into account social, environmental and other dimensions.

The other challenge is to then communicate better the pivotal role businesses play in society. That’s critical to building trust with the stakeholders that businesses serve. For Nigel Wilson, CEO of Legal & General, there’s no more important question than the one about trust, as he told us: 

 

People’s attitudes to and expectations of business have undergone a fundamental shift in recent years. Customers and citizens are demanding more of the businesses they buy from and have higher expectations of the business community. To rebuild trust, businesses need to work with and gain the support of the stakeholders they serve. A good place to start is to better communicate the value you bring.

What do you think? What value does your business deliver to society, above and beyond the products or services you provide? Do your customers and stakeholders know? We’d love to hear from you!

Contact Suzanne Snowden
Connect with Suzanne on LinkedIn
Follow Suzanne on Twitter

Suzanne is Programme Director for PwC's Annual Global CEO Survey and Global Director, Thought Leadership at PwC. She has a passion for scanning the horizon for the latest trends and issues that impact global business. She pilots PwC's network of thought leaders engaging in the creation, development and presentation of PwC's research and insights.

Our 19th Annual Global CEO Survey, which launches on 19 January 2016, will reveal more about how CEOs are recognising the need to measure success differently. Sign up here to join the webcast of the live launch of the survey from the Annual Meeting of the World Economic Forum in Davos.
 

 

12/29/2015

Is it time for climate leadership? A tipping point for business

Author: Emma Cox, Sustainability & Climate Change LeaderEmma Cox

Earlier this month the truly historic Paris accord on climate change was signed. The agreement was welcomed by tears and applause… a reflection surely of the collective aspiration of both developing and developed nations to transition to a low carbon economy.

With an unprecedented 195 nations involved, and many of their leaders showing political will, it did seem as though all the stars were aligned. And perhaps they were. With a goal to keep warming well below 2 degrees and to pursue efforts to limit the temperature increase to 1.5°C, the deal is more substantial and ambitious than many expected (and a few even dared hope for).

It has been a difficult and bumpy road to here, but the hardest work begins now. As the world must switch from debates to deeds, our focus turns to what will be expected from businesses and governments going forward.

What will it really mean for business leaders?

Ahead of the summit, we asked a sample of our CEO Pulse executive panel1 about their perspectives on where they stand on the issues around climate change. CEOs are now on a “climate leadership” journey and we saw this reflected in Paris, with many global CEOs actively participating in the COP21 discussions.

The Paris agreement will cause business to face up to new and demanding targets which will create both opportunities and new risks to growth. Business leaders will grapple with the impact in multiple ways, including:

· increased diversity of sourcing, supply chain management;

· the development of new products and services;

· changes to core operations (particularly for those in coal dependent businesses);

· new considerations around who to partner with; and

· re-thinking their purpose.

Three-quarters of CEOs we polled this summer are seeking to develop more sustainable products and services. The winners will now include those who embrace new technologies to find new ways of feeding the world, moving things and people around, and innovative ways of powering tomorrow’s homes and businesses.

It’s evident that this is already a boardroom discussion. Three out of five CEOs in our pre-Paris poll say they’re acting on climate change to create a reputational advantage; and over half are motivated by improving shareholder value (53%) and building trust in their organisation (52%).

That they are also personally motivated by thoughts of their children and grandchildren (80%) resonates with politicians’ statements – according to US President, Barack Obama, we must work to build "a world worthy of our children... a world that is safer, more prosperous, more secure and more free. Let there be no doubt: the next generation is watching what we do."

The message from CEOs is clear: they are motivated and prepared to act on tackling climate change, but this needs to be backed up by government commitments.

So what does Paris mean for policymakers?

Greater public awareness and engagement motivates business leaders. Over three-quarters of CEOs we spoke to indicated that a clear, consistent and long term national government policy framework was important to drive business to take the greatest action.

But the potential for increased government regulation is also one of businesses’ biggest concerns. Business leaders need to keep actively involved as they have a vital role in supporting and shaping the changes required - if we’re to build a well below 2°C global economy. Business’s key role was reflected in the final text as a welcome move.

For business, the sharp end of the Agreement that will drive business action will be the national plans or Nationally Determined Contributions (NDCs as they’re now known). We analysed the major NDC's in our Low Carbon Economy Index, which signal to business a step change in efforts to tackle emissions at the national level. On average countries will need to more than double the rate of reduction in the carbon intensity of their economies to achieve their targets!

Chart_Climate Change

As outlined in national plans/NDCs, this new and substantial investment will target renewables, biofuels and other low carbon infrastructure. Governments will need to think seriously about how they and the private sector can work together to deliver this.

So what will it take to succeed? It’s widely anticipated that as much as $6trillion a year will be needed to build a resilient, low carbon economy, and as a result, finance played an important and pivotal role in Paris. Indeed, we saw the financial sector make a number of commitments on future management of climate risks from investing in green bonds to reducing carbon intensive lending.

And as for business, it’s important to remember that they will not only bring much needed finance to the climate ready table – they will also be a source of much needed expertise and capability as well as a resource for innovation, R&D, capacity building, education, technology transfer and deployment.

Both governments and CEOs now need to work out not just how to meet the NDCs’ pathway, but to beat them, because the decarbonisation curve must get even steeper if we are to meet a less than 2° goal.

Ultimately, by giving world leaders the opportunity to commit and helping catalyse actions by governments, business and civil society in the months and years ahead, the Paris deal is the first of many steps in the right direction.

The summit may be over, but all around the world the hard work to turn ambition into reality is just beginning…

Emma leads a team of over 100 specialists, providing advice and support to private and public sector clients and international institutions – in the UK and internationally - on all aspects of sustainability and climate change related issues. With a particular focus on cities and urbanisation, Emma has worked on a wide range of infrastructure advisory projects in both the public and private sector. She is also a member of PwC’s Consulting UK Leadership Team. Read more

1 142 CEO respondents from PwC’s CEO executive panel polled in July 2015

 

 

 

12/03/2015

Reimagining operations

Author: Mark Strom, Principal, Global and US Operations Consulting Leader   Mark.Strom.08042013.mstrom003.Advisory.ProductServicesIndustries-F

It’s almost too familiar to address, but it still needs to be done. I’d estimate that at least half of the companies my teams work with would benefit from having more incentives for operations leaders to collaborate proactively and achieve business rather than functional goals. Think about it: when one team tries to innovate, they often come into direct conflict with an operational assignment to cut costs – or they create some new beast that’s harder to manage than the last ‘big idea’. Decisions are made without consultation or strategic grounding. Politics slow implementation down. Tribes form. And this behaviour entrenches people even further into their inward-looking behaviours.

Today’s operations teamsi need reimagining. They need more people who are adept at creating the enterprise ‘fabric’ (social, process, technological) to deliver what customers truly value. In our latest Global Operations Survey, 61% of operations leaders say cross-functional collaboration has the greatest potential for helping the company reach its strategic goals.

OpsPriorities_Overview_910px

Beyond the silo-busting basics

Some practices are fairly basic for breaking down functional silos in well-run companies. You can look for these signals easily:

  • Do you reward performance based on contributions to the overall strategy?
  • Are operations leaders routinely involved in strategic decisions about products and services?
  • Are operations projects routinely funded based on enterprise strategy?

Today, we see leading companies do much more beyond the basics. They start with a deep understanding of what customers value and then reimagine how to deliver it. Our survey shows that a striking three out of five operations leaders (63%) say that understanding what customers value is a challenge for company operations, yet few (25%) feel very confident that their operations are designed to deliver value and a distinctive experience. Reimagining operations centers on the customer and the small, yet focused set of capabilities that are designed to differentiate the company and drive competitive advantage. These choices are set at the top, and operations leaders define how they’ll contribute to making each capability work. With a capabilities-driven mindset, functions aren’t so inward facing – their attention shifts to a bigger picture that’s connected to customers.

BusinessEnvironment_Overview_910px

Effort here is worthwhile, even though it may be a longer-term investment. In our survey, more strategic companies are far more likely than everyone else to focus on building a few differentiating capabilities to drive a competitive advantage (51% vs. 29%). They’re also more confident they’ll achieve a broad set of performance objectives: achieving revenue and cost targets, driving strategy, providing a distinctive customer experience, and adapting to change. Other research points to performance differentiators from capabilities-driven strategy too.

So, which capabilities define your company in the eyes of your customers? Asking this question helps you align operations with the company strategy and make clear choices about what will set you apart. 

If you’ve had experience with a capabilities-driven strategy we’d like to know how it’s been going. Has it been a silo buster? Has it improved operations decision making in your company? Share your experiences with us in the ‘comments’ sections below.

Mark is PwC’s global lead for the Operations competency with responsibility for coordinating the practice across the PwC network, including operations transformation, product development, procurement and sourcing, production and supply chain operations, service operations, and asset lifecycle management. 

 When we talk about operations we mean both core and support. Core operations typically include: product, services and technology development, marketing and sales, customer services and support, sourcing/procurement, supply chain, manufacturing, and production. Support operations typically include: governance, human resources, information technology, legal, finance, and data analytics.

 

11/16/2015

APEC CEOs look to expand despite drop in confidence

Dennis Nally Jan15Author: Dennis Nally, Chairman, PwC International Ltd.

Slowing growth in China, uncertain US interest rates, regional geopolitical tensions and growing concerns around cyber security have combined to make it a challenging six months for Asia Pacific business leaders. Not surprisingly, the results from PwC’s 2015 APEC CEO Survey reveal CEO confidence in 12 month revenue growth declining sharply. Nevertheless, APEC CEOs are still looking to expand into new APEC geographies – a testament to their ability to balance volatility against opportunity.  This investment is central to supporting inclusive growth in the region.

1-APEC-Survey-graphic

The over 800 CEOs and industry leaders in our 2015 APEC CEO Survey – launched at the APEC CEO Summit in Manila this week – were polled between June and August. At the start of our work, confidence levels were similar to 2014, but this quickly changed as the US Federal Reserve prepared to raise interest rates and China devalued its currency. Almost 90% of the CEOs also said a rise in regional geopolitical tension would have a negative impact on their business. The survey results are a timely window into how these events are influencing CEO decision making.

When identifying current concerns, cyber security tops the CEO list. Not surprising, given some of the major cyber events we’ve witnessed recently. The CEOs I spoke with no longer see cyber security as a matter left to the IT department or risk management office. Confidence in data security is a worldwide issue – one that sits at the top of the CEO agenda.

So with all these risks amplifying volatility and creating new uncertainties for APEC CEOs across industries and economies, how are they responding?

1. Investing in the region
Although down from 67% last year, I’m glad to see the majority of CEOs (53%) still plan to increase investments in the APEC region over the next 12 months. There’s also a clear reallocation and diversification of investments within the region. While China, the US, and Indonesia remain the main draws for CEO business investments, the Philippines, Viet Nam and Singapore economies are attractive to APEC CEOs and where half of CEOs plan to increase investments in the year ahead. And across the Pacific, Chile and Peru are also attracting more investors.

2-APEC-Survey-graphic

2. Focusing on emerging tech and R&D
The business leaders we interviewed are also focused on the opportunities new technologies can bring to their business, with 63% expecting a new wave of business spending to modernise their operations. Most CEOs point to expanded broadband access and increased participation in the digital economy as holding the most promise to foster regional connectivity, surpassing trade agreements and transport corridors. In PwC Strategy&’s Innovation 1000 Study, our researchers found that Asia has now become the number-one location worldwide for corporate spend on R&D.

3. Supporting inclusive growths
When we ask CEOs which factors are key for inclusive growth in the region, almost all of them point at expanded access to high-quality education and the upgrade of transport systems. Other important areas include greater economic incentives for savings and access to financial services, better access to health care and more reliable access to power and electricity. Businesses can and should play a key role in addressing all these challenges, and real progress needs businesses working collaboratively with governments, universities and NGOs to spur global competitiveness and continual innovation.

This is just a sample of the interesting results coming out of the PwC APEC 2015 CEO Survey.  You can explore the full report and more APEC research on our website at pwc.com/apec.

 

 

Dennis Nally leads the global network of PwC firms. He has extensive experience serving large multinational clients in a variety of industries, principally focusing on technology and life sciences. Dennis is also a frequent speaker and guest lecturer on issues affecting the professional services profession and the global capital markets. Read Dennis Nally's full biography.

11/10/2015

Investing in tomorrow’s megabrands today

Authors: Henrik Steinbrecher, PwC Sweden and Marko Korkiakoski, PwC Finland

Entrepreneurs have always been the bedrock of economic activity, but never more so than now. And, thanks to digital technology, a whole new generation of ‘micro-nationals’ are operating on a global scale, and effectively competing with corporations thousands of times their size. Armed with little more than a laptop, a good idea and some cash, entrepreneurs are changing the rules of the game. Innovations that used to take months or even years, can now be in place almost overnight - the speed of change is accelerating, and the scale of the impact is growing.

Photo_R_RGB_SH14_D5_JA_3169Disruption is now the name of the game. And, as start-ups continue to successfully challenge traditional business models, CEOs need to be aware of their unexpected competition, and be able to retain or gain an edge amidst the chaos.

In this continuously changing ecosystem, senior executives need to understand how to create value in new ways: using digital transformation, diverse and dynamic partnerships or acquisitions while adopting different ways of thinking and working. Because, while innovation can often be scary/destructive, it’s imperative that we continue to support new ideas – as this is how we evolve and improve.

That’s why we're very happy to announce our new global partnership with Slush - a not-for-profit organisation that matches entrepreneurs and tech talent with top-tier international investors, multinational corporations, family businesses, high-net worth individuals looking to invest, executives and media at key events around the world.

Slush is a young and dynamic group from Finland who, over the last few years, has grown from a small local event with a couple of hundred people to one of the most influential organisations in technology today.  Their events are now famed for bringing together some of the world’s most promising young tech entrepreneurs along with a seriously impressive guest-list of CEOs, politicians, journalists, and investors.

Slush events connect the dots between ideas and investment, helping to create powerful and supportive networks for start-ups, CEOs, government officials and investors. This ensures that the next wave of tech entrepreneurs have the support they need to turn their visions into reality – and possibly change the world.

We’re delighted to be working with Slush and can’t wait to see the great things we can accomplish together.

For more on our global partnership with Slush, visit: www.pwc.com/slush.

 

 

Henrik Steinbrecher2Henrik Steinbrecher leads the Middle Market business for PwC globally, focusing on owner-led, private, family controlled and entrepreneurial companies. He’s particularly focused on family and owner led businesses, advising them on how to address strategic issues relating to the owner's agenda.

Contact Henrik or connect with him on LinkedIn

 

Marko Korkiakoski2Marko Korkiakoski leads Middle Market  in Helsinki Finland. His particular focus is to integrate PwC Services and competences in a way which demonstrates the Trusted Business Advisory concept for mid-size, family and owner led companies and owners, but also for startups, founders and investors.

Contact Marko or connect with him on LinkenIn