A new study by EY suggests CEOs widely understand the need for transformation following the Covid-19 pandemic. We have all the details right here.
It seems inarguable that the world understands change needs to happen following the Covid-19 pandemic. But now we know a little more about what’s going through the minds of boardroom leaders following a new study, the global EY CEO Imperative Study 2021.
More than two-thirds (68%) of the 305 CEOs from the Forbes Global 2000 surveyed suggested that they plan to take on major investments in data and tech in the next 12 months. Meanwhile, 61% have plans for a major transformation in the same period. Within three years, 42% expect to make changes to their organisation’s risk management process, too.
We have more on the findings from the survey here, with critical insights from Andy Baldwin, EY Global Managing Partner – Client Services.
Transformation Isn’t a Nice-to-Have, It’s a Necessity
Digital-led transformation has been the subject of boardroom discussion and plans for years now, but the pandemic crisis forced a lot of hands. It’s no longer important, it’s urgent and mission-critical.
The reason behind this, many CEOs understand, is the importance of human factors to the success of their transformation projects. 68% of respondents said they have at least one transformation priority related to the importance of people, the cultivation of future talent and organisational culture.
“The past year has been trying for everyone and CEOs have had to make tough decisions by reviewing portfolios and projects to balance the long-term growth prospects against immediate shareholder expectations.
“Technology has been the common denominator for most organisation’s resilience amid the pandemic. Interestingly, the traditional and analogue businesses, that were initially struggling at the start of the crisis, have accelerated the adoption of new digital technology and led the spend on tech and data. We are now seeing more of a hybrid business model as CEOs continue seeking to plan for any future partial or full lockdowns. As vaccine roll out programs bring hope that we may be turning the tide, we are now seeing businesses shift their focus to assess how they can “win-in-turn” and this is driving investment plans over the next 12 months.”
The Split Between “Thrivers” & “Strivers”
To better look at the differences between organisations and how they’re performing, EY split the surveyed companies by revenue growth rate throughout the pandemic and by predictions for in three years’ time. Groups in the split included:
34% of businesses were already benefitting from a period of financial growth before the pandemic hit, and this group will continue outpacing their peers over the next three years. CEOs of those businesses are actively leaning into this pivotal moment and accelerating their transformation agendas.
34% of companies that had low or flat growth prior to the pandemic and expect to remain there for the next three years and expect no change to their transformation agenda over the same period.
32% of leaders outlined that prior to the pandemic, their organisations were experiencing a decline in revenue and expect that their revenue would either continue to shrink, or level off over the next three years, and over the same period CEOs in this group will slow their transformation agendas.
This analysis highlights that while the CEOs of Thrivers are already taking advantage of the present opportunity, those within the Survivors and Maintainers groups must immediately act to avoid falling further behind.
The past year has been trying for everyone and CEOs have had to make tough decisions by reviewing portfolios and projects to balance the long-term growth prospects against immediate shareholder expectations. Technology has been the common denominator for organisational resilience.
Managing Partner – Client Services, EY Global
Data Trust Failings Could Hinder Transformation Drives
As data security and privacy regulations move to the forefront of public discourse, there remains a considerable trust gap between the capabilities of intelligence technologies and what people are willing to let these innovations do. Only 34% of respondents affirm that customers trust them with their data, reinforcing the need for CEOs and the C-suite to scrutinise processes around data collection, management and use, while increasing transparency with customers and other stakeholders. If left unaddressed, this issue could limit growth, slow innovation and stall transformation efforts.
Despite this gap, 88% of respondents state that the use of data science to anticipate and fulfil individual customer needs will be a main differentiator in the next five years. Meanwhile 87% of respondents say delivering data-driven experiences will drive competitive advantages during the same period. In the more immediate term, 41% of respondents believe artificial intelligence (AI) and data science requires increased attention from the C-suite over the next 12 months.
Transformation Differences Between Industry Sectors
While digital innovation was the top transformation driver overall and the greatest area of increased focus to generate growth, there were important distinctions among different sectors. Most notably in the Energy sector, where less than one-third (32%) of respondents believe digital transformation requires attention. Instead, respondents within the Energy sector are more focused on climate change and geopolitical risk. In the Finance sector, just over half (51%) of respondents were focused on digital, while two-thirds (67%) look to cybersecurity.
Among the starkest divides are in the area of long-term value, where 69% respondents in the Manufacturing sector believe this is where their focus should be, compared with just 17% of respondents in the Technology sector.
Long-Term Value Creation Predictions
The research found that over the next five years, 87% of respondents believe the creation of long-term value across stakeholders will be welcomed and rewarded by the market, while 91% of respondents believe new business models will increasingly incorporate aspects of the circular economy. Alongside this, 80% agree there is likely to be a global standard for measuring and reporting long-term value creation and 80% agree that their organisations will take significant new steps to take environmental, social and corporate governance (ESG) responsibility inside their operations. However, analysis of responses against key long-term value dimensions such as societal, human, financial and customer, revealed a clear “say-do” or intention-action gap.
DNA of the Future Enterprise
The research found leaders face key capability and execution gaps, with actions failing to meet intentions when it comes to generating long-term value, changing organisational structures from inhibiting agility, and sluggish investment in ecosystems hampering resilience. Addressing these gaps will require a top-down strategy focused on three interconnected value drivers:
- Placing humans at the centre of everything the organisation does, increasing agility to react to changing market and consumer demands
- Technology at speed, empowering organisations to deploy new solutions faster
- Innovation at scale, collaboration among organisations across an ever-increasing ecosystem to move into new markets
By focusing on these value drivers, CEOs can reorient their organisations around a culture built for continuous transformation and set their businesses up to outperform competitors in the short-, medium- and long-term.
Andy Baldwin adds: “While the research highlights that CEOs are willing to transform, EY data found a clear gap between intention and execution particularly when it comes to long-term value and ESG. Given the sense of urgency around these issues is only increasing, CEOs will come under greater regulatory and reputational pressure to operate differently. Leaders need to follow through their public commitments with action to demonstrate they are taking the bold steps needed to drive long-term value and change.”
of companies have fallen further behind in growth following the pandemic
state their companies enjoy customer trust related to data
say they have investor support to make strategic decisions even if it reduces near-term earnings