Closing the gap between rich and poor

Authors: Rollie Quinn, Government and Public Services Global Leader and Nick C Jones, Global Director of PwC's Public Sector Research Centre

Globalisation and technology have brought many gains over the last twenty years. People, goods and services, capital and information all flow more easily and quickly across the world. Being ‘connected’, whether in business, government or as an individual, has come to be seen as a universal requirement in the 21st century. But has everyone benefitted?

This is a question that goes to the heart of the debate on inclusive growth which has become increasingly important following the last year where electorates have challenged the existing order.

The view from CEOs in PwC’s 20th Annual Global CEO Survey, launched in Davos, is that while we have seen significant benefits from increased trade and mobility as well as skilled work forces, globalisation per se has done little to address inequality. Indeed, almost half (44%) of the CEOs surveyed felt that globalisation had not helped at all to close the gap between rich and poor, similar to the proportion of a parallel poll of the public (39%).

Closing the gap between rich and poor

With over a half (53%) of CEOs believing that global economic growth will remain static over the next 12 months, and ‘uncertain economic growth’ being the top threat to growth prospects (replacing over-regulation from last year), it is clear that this year will involve further head scratching on what to do from those in government, at national and local levels.

This is particularly the case given that CEOs see geopolitical uncertainty in their top five threats while many CEOs (58%) agree that the trend toward closed national policies creates challenges for business and makes it more difficult to compete in a more global market place.

So what’s to be done? There are no silver bullets but it is clear that policy action can help if directed to support the top drivers for growth, identified by CEOs surveyed as innovation, technology and human capital. Over three quarters (77%) of CEOs surveyed are concerned about a lack of availability of key skills: an area where governments can have a direct impact.

In addition, business needs effective, efficient and sustainable infrastructure – the backbone on which economic success and prosperity can grow. This includes providing the assets which deliver public services and improve the wellbeing for a nation (such as timely transport, quality education and affordable housing).

But government action on its own is not enough: business has an important role too. For instance, business and political leaders alike recognise the critical role infrastructure investment can play to bring a wide range of benefits for business and society.

CEOs interviewed commented that collaboration between business and government is needed to drive the kind of systemic change which will enable the proceeds of globalisation and new technology to be distributed in a way that closes the gap between rich and poor.

The interviews with CEOs reveal, however, the polarised views on whether such collaboration can actually be achieved to deliver more inclusive growth. Some say ‘we have to be more open and honest and more proactive in talking to government’ and ‘be more active at promoting the positive economic impact of globalisation’. Others are less hopeful and call for governments to be more radical and ‘provide the leadership through policy change where change is required to benefit society as a whole.’

Perhaps the solution is for both business and governments to go ‘glocal’: ‘think global, act local’ and work to ensure that the proceeds of growth are seen by the many, not the few.


Rollie Photo

Rollie Quinn is PwC’s Government and Public Services (G&PS) Global Leader.  PwC’s Global G&PS is a $2B business, which includes over 12,000 professionals delivering in over 150 countries. G&PS clients include: international governments and global organizations, central governments including state owned entities; and State and Local governments.

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NickNick C Jones is the Global Director of PwC’s Public Sector Research Centre and has authored, and contributed to, reports on a wide range of public services issues. He sits on PwC’s Global Government and UK Government and Public Sector Leadership teams and is also a member of the Editorial Team for PwC’s Annual Global CEO Survey, commenting on the relationship between business and government.

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Man and machine: What will the future hold?

Author: Carol Stubbings, Global Leader of PwC's People and Organisation practice

It takes bravery nowadays to predict the future. Indeed, if the events of 2016 have taught us anything, it's that unlikely AAEAAQAAAAAAAATCAAAAJDE3ZmIxZWQ0LTE0MTgtNGU3My04MDQzLTY3NGVhMGFkMzU4Mwoutcomes can easily become a reality.

This year marks the 20th year of our CEO Survey‎ and it's been fascinating to look back over the surveys to see how the thinking of CEOs has developed, reflecting the environment around them. To their credit, CEOs saw a lot of the turmoil coming; back in 2009, 76% predicted a rise in political and religious tension and even then 46% believed that governments would become more protectionist.

‎But successful predictions are relatively rare - and that's a salient lesson for people strategy.

In 2015, our CEO survey showed that a third of business leaders were increasing their reliance on contractors and freelancers – signalling the emergence of the ‘gig economy’. Two years later, companies that trailblazed working models based around this new breed of workers are fighting a regulatory backlash and concerns about brand damage. Was that predictable?

It’s a challenge to get people strategy right in such a complicated world. And it’s about to get even more difficult. There’s no doubt that we’re living through a time of profound change, one where technological development is forcing us to question what our place will be in the world – and what role humans will play in the workplace of the future. CEOs are concerned about the impact of a more digitalised world on their relationship with stakeholders; 69% felt this would have a negative impact on stakeholder trust in the next five years.

As automation and the use of Artificial Intelligence (AI) increases, more jobs (and more white collar jobs) will be lost - or at best radically reshaped. One in eight CEOs are already set to reduce headcount due to automation. Yet, our survey shows that the majority of CEOs are still planning to increase headcount – 52% say they’ll hire more people in the coming 12 months. Top of CEOs' talent wish list are those skills that can’t be replicated by machines; innovation and creativity, adaptability, emotional intelligence and leadership.

6a01bb088fa79f970d01b8d2582b09970c-320wiIt’s hard to know for sure what the future workplace model will be, and how humans and machines will work together. The advent of artificial intelligence means we’ve got to the stage where machines can think – the one thing that set humans apart from every other creature on this planet. So where does that leave us? Dov Seidman, CEO of LRN, which advises companies on leadership and building an ethical culture, told the New York Times recently that it’s the human heart that sets us apart – software cannot produce passion, character and collaborative spirit. This is echoed in our recent interview with Jorge Mario Velásquez Jaramillo, CEO of Grupo Argos SA in Columbia, who said: “Human talent is irreplaceable. You can automate processes. You can have technology as a very significant enabler of business relationships, but human warmth [is] very difficult to replace with machines.”

It’s going to be a huge challenge to get people strategy right in a world where humans and machines work alongside each other. There are many ways this could evolve, and some scenarios seem far more likely than others. But in the month we’ve seen President Trump inaugurated and the UK Government’s approach to ‘Brexit’ becoming clear, taking more time to plan for unlikely outcomes seems like a very smart move.

Carol is the global leader of PwC's People and Organisation practice, which brings together 10,000 specialists with industry, technology, analytics, business, talent, strategy and HR expertise. Alongside her work with multinational companies, Carol talks and writes about Talent, Innovation and Diversity; with a focus on the Future of Work and Younger Workers and the role companies and their leadership can play in shaping their own paths in an uncertain environment. Read more.



Growing wealth disparity: the failure of imagination?

Author: Blair Sheppard, Global Leader, Strategy and Leadership Development. Blair-sheppard

We are confronting a fundamental issue in the world today: how to handle the growing disparity in wealth and erosion of the middle class throughout the world. This was highlighted in Oxfam’s recent report and is recognised by the CEOs surveyed for our recently released 20th CEO Survey; 44% of them said that globalisation has done nothing to close the gap between rich and poor.

Two factors are at the root of this challenge: technology and lack of investment in the future. But to really respond to the challenge requires us to think differently about potential responses. Currently we are applying 20th Century logic to a 21st Century problem. And this sets us up for failure.

The first and most important creator of growing wealth disparity is technology. Machine intelligence and robotics are already systematically replacing attractive and high paying work, making a few people even wealthier, while hitting two groups especially hard: the middle aged who are difficult to re-train and the young, who find many entry-level roles now automated and have not been prepared for other, yet to be identified, roles. This affects both wealthy countries with a higher average age (e.g. Germany at 48.5 years) and some of the poorest and youngest countries (e.g Nigeria at 18.5), who can no longer compete in their traditional, labour intensive ways. 

Robotics_B                                 Source: PwC's CEO Pulse on robotics

The second factor likely to exacerbate the problem is one I am somewhat embarrassed to admit as a former Dean of a business school: the declining rate of investment around the world. Uncertainty in political and economic markets, the decline in trust in institutions and the formal modelling of financial cost-benefit analysis has made us more risk averse – and less likely to invest in work-creating ideas at a time of accelerated job extinction.

But most problematic is our reluctance to question and adapt our established ways of thinking to a new paradigm.  Yes, taxes are an important solution to the problem, but not if they simply enhance the wealth of those already most benefiting. Yes, investing in job creating industries is a good idea, but not if the solution is unsustainable. Yes, focusing on local job creation is an answer, but not if we do so by reducing healthy trade. Yes, wealth redistribution is part of the solution, but not if it comes without the means to build a productive life and career.

What might a different approach look like? The answer requires imagination, or perhaps more appropriately re-imagination. Re-imagining life and a career as a series of related but quite different roles. Re-thinking the meaning of work and leisure. Re-defining national growth so it includes concern for job growth and resilience as well as GDP. Re-focusing our governments’ attention on the city, where the challenges are more tractable. Re-imagining the role and obligations of the wealthy. 

And finally re-imagining what it means to be human. For, while a little scary, this act of re-imagination has the potential to unlock new levels of freedom, creativity and opportunity for all of humanity.

Blair leads the team that focuses on strategy and leadership for the PwC network. He is also Professor Emeritus and Dean Emeritus of Duke University’s Fuqua School of Business. Read more.


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.

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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.

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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