Thursday, March 16, 2006
Global CEOs Say Globalization and Complexity are Today’s Key Issues: PwC Survey
PricewaterhouseCoopers keeps advertising on our site about their recently published global survey of 1,400 CEOs. So we decided to check out the survey and results.
The survey looks fairly comprehensive in scope, and represents a good cross section of small and large companies with public and private ownership all over the world. Statistically this would count for a good sample and robust outcome. PwC recently interviewed 1,410 CEOs in 45 countries: 463 in Europe, 331 in Asia-Pacific, 301 in South America, 187 in the United States and 56 in the Middle East and Africa. Financial services companies represented 17%; technology and media companies represented 14%; and companies with real products represented 68%. 23% of the companies had sales greater than $1 billion and 58% earned less than $500 million. Interestingly, 52% were public and 47% private.
The two mega trends which arose from this group of leaders are that globalization, especially into hot emerging economies, has become a strong strategic focus; and that increasing complexity is a fact of business life which companies are confronted with, and have to strongly embrace and manage. This to us seems to portray a different tone than what we have been recently hearing as key global issues: high energy costs, terrorism threats, global war for talent, and investor transparency. Perhaps these issues are subsumed under or totally replaced by PwC’s larger and more recent categorizations.
Intuitively though, these two factors make a lot of sense: the world is not only flat, it is also challenging to navigate. And the most successful businesses are those which can smartly move across this new global landscape with sufficient vision, tools, and savvy to anticipate and manage the inevitable complexity of the effort.
Globalization seems an inexorable trend to these CEOs. The potential to find new customers and sales overweighs the cost of entry, political instability and dealing with different regulations. The hot emerging economies of today, we can call them BRICTIM, (combining the initial Brazil, Russia, India and China with PwC’s three other fast growers: Turkey, Indonesia and Mexico) are growing fast, and likely to eclipse developed countries not too far into the future. Can any global multinational afford to ignore the vast middle-class and industrial purchasing power in these countries? Unlikely. And the feeling now is: the sooner we get there to establish ourselves, the better. According to this survey, 58% of CEOs say that globalization will have a somewhat or very positive impact on their organizations.
The other mega trend: increasing complexity, which has slowly crept into our business and personal lives. It appears to have increased significantly over the last three years. What causes complexity?: extending operations to new territories (65%), engaging in mergers and acquisitions(65%), and launching new products and/or services(58%). And of course, globalization, the first mega trend, also adds to complexity. There appears to be some kind of Catch-22 in the way these influence each other.
Complexity is an inescapable part of managing an organization: there are multiple stakeholders, differing agendas, myriad of regulations, and thousands of info-bits. CEOs recognize and embrace complexity as a fact of life. Their agenda then becomes its effective management: cope when inevitable and simplify when not adding value. Their problem is the “capability gap”: the chasm between clear understanding of the challenges that complexity poses with their ability to manage complexity effectively.
So, in summary, globalization is a positive endeavor since the advantages of new customers and revenues outweigh the effort of entering new markets. More so for BRICTIM, the new mantra is access to new markets rather than just lower cost labor (moving quickly beyond the outsourcing phenomenon). Globalization does add to commercial and geopolitical complexity, but that is unavoidable. Do CEOs recognize complexity and the criticality of managing it? Yes. But are they effective in translating that into meaningful action. Not yet, according to PwC. Enabling complexity when it adds value and eliminating it when it is useless will be key to success.
If you have gotten this far, we believe you pretty much have the gist of the report findings. There are excellent interviews with some leading CEOs, with free and frank exchanges on key issues on their minds. We just cannot manage the complexity of summarizing their wide variety of global views and experiences. It just has to be read on its own, and we highly recommend it.
PwC has completed a valuable study and unearthed the key factors that are driving CEOs in today’s world. The report is an excellent effort and presents a unique perspective not commonly found in bland survey reports. We encourage you to click through our site to http://www.pwc.com/extweb/insights.nsf/
docid/04C2B11D81F7A050852570F9006DBBCB(paying Google along the way) to download the report.
One thing we would say to PwC that it is hard to really read the small print and navigate through the large number of pages (54), graphs and percentages. The format seems to distract from the powerful messages one needs to take away.