CEOs all around the world are less optimistic than they were a year ago about the strength of the global economy and their own organisations’ ability to grow revenues in both the short and medium term. What’s at the root of this drop in CEO confidence? CEOs are less bothered by the broad, existential threats that figured prominently in the rankings last year, like terrorism and climate change, and are more ‘extremely concerned’ about factors that affect the ease of doing business in the markets where they operate and those that impact their overall confidence and willingness to invest and/or take risk. They are increasingly worried about trade disputes and the unpredictable geopolitical landscape. The steady march that we have seen over the last 40 years toward increasing globalisation is hitting some political roadblocks. Only time will tell whether these are permanent or temporary. But as they plan the future of their organisations this year, chief executives clearly feel the impact.
It is colouring their decisions about global expansion. While most still believe in globalisation, they appear to be less interested in expansion plans outside their home markets. Instead, organisations are narrowing their focus or staying local in the search for revenue growth. As they look inside their own enterprises for growth opportunities, CEOs are contending with gaps in their organisations’ capabilities. For example, many are struggling to extract value out of their data and to find the right talent. To help unlock internal growth potential in their organisations, chief executives are paying close attention to emerging digital technologies such as AI. As noted, the prize for getting this right is immense. PwC estimates US$15.7 trillion in global GDP gains from AI by 2030.
We have heard much in recent years about the potential downstream benefits to business and society alike of successfully applying these emerging technologies. This year, there is more nuance in the discussion. Concerns are rising about technology and leaders are learning how to leverage advanced technologies in responsible and sustainable ways, with an ever more critical eye on matters such as cybersecurity and privacy, data ownership and integrity. This gets to the theme of this year’s World Economic Forum in Davos, “Globalisation 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution.”
As CEOs focus more on execution, search for revenue growth, work to address data and talent issues, implement emerging technologies, and seek to capture related benefits and value, we urge them not to retreat from the broader conversation on establishing new societal frameworks needed to meet evolving human needs and foster sustainable prosperity. Every leader is affected by the challenges facing us this year, but no individual organisation, whether in the public or private sector, can tackle them alone.
Business has a key role to play in bringing about the realignment of economies and society, alongside other stakeholders. We urge business leaders to engage in this important conversation, guided by the principles for better capitalism that we have laid out previously.
We must look beyond financial performance for more effective indicators of progress. GDP alone can’t answer this key question: Is life actually getting better or worse for most people? And shareholder returns provide no guidance as to whether a business is delivering on its purpose to contribute to society. We need to define societal indicators that demonstrate sustainable quality of life in a more holistic and integrated way. To help accomplish this, PwC is supporting the UN Global Compact and the Global Reporting Initiative (GRI), the world’s leading organisation for sustainability reporting, to create a mechanism to help businesses prioritise and report on the UN’s Sustainable Development Goals.
We must harness technology to meet the needs of people and their communities. CEOs feel concern — along with their optimism — about emerging technologies. Technology itself is neither inherently good nor inherently bad. But the advances of the digital age are powerful in unprecedented ways and, if properly harnessed, may hold the keys to addressing systemic challenges for the benefit of the broader community. It’s easy to advocate the design of technology for positive and sustainable outcomes. Developing the specifics, across the boundaries of our various institutions, will be much more difficult — but necessary.
We must educate for the future so people have the best chances of success. People are the main success factor in digital transformation projects, and many organisations are providing digital skills training today to prepare their people for the future. But to move beyond successful implementation to true innovation, business leaders should continue to upskill their current and future workforce as well as cultivate soft skills such as creativity, problem solving and empathy in their corporate cultures.
Educational institutions also will need to adjust, fostering lifelong development of technical skills and creative problem solving. Since people and goods will continue to move across national boundaries, there is an ever-growing need for cooperation among governments and businesses on a global scale. The results of this year’s CEO survey may seem sobering to some, but they also provide reason for hope. The world’s senior decision makers are realistic this year about the challenges facing them, and this may incent them — and their organisations — to act.
By Bob Moritz,
PwC Global Chairman.
Courtesy: PwC on PwC’s 22nd Annual Global CEO Survey