Changes in Global Business Environment Spur New Business Ideals

New study reveals diverging regional priorities among CEOs.

Chief executives believe that --more than rigor, management discipline, integrity or even vision -- successfully navigating an increasingly complex world will require creativity.

According to a new IBM survey, less than half of global CEOs believe their enterprises are adequately prepared to handle a highly volatile, increasingly complex business environment. CEOs are confronted with massive shifts that, according to the study, can be overcome by instilling "creativity" throughout an organization. In fact, more than 60% of CEOs believe industry transformation is the top factor contributing to the uncertainty, and the study's findings indicates a need to discover innovative ways of managing an organization's structure, finances, people and strategy.

The study, which involved 1,500 chief executive officers from 60 countries and 33 industries worldwide, also uncovers starkly divergent strategic concerns and priorities among CEOs in China, Japan, Europe and North America.

"Coming out of the worst economic downturn in our professional lifetimes, it is remarkable that CEOs identify creativity as the number one leadership competency of the successful enterprise of the future," said Frank Kern, senior vice president, IBM Global Business Services "But step back and think about it and this is entirely consistent with the other top finding in our study: that the biggest challenge facing enterprises from here on will be the accelerating complexity and the velocity of a world that is operating as a massively interconnected system."

Managing Complexity
Eight in 10 CEOs expect their environments to grow significantly more complex, but only 49% believe their organizations are equipped to deal with it successfully -- the largest leadership challenge identified in eight years of research.

The CEOs said that the complexity of an interconnected world is aggravated by a number of factors. For example, CEOs expect revenue from new sources to double over the next five years, and 76% of CEOs foresee the shift of economic power to rapidly-developing markets. In addition, over the last four studies, the expected impact of technology on organizations has risen from sixth to second place in importance.

  • The study highlights the attributes of top-performing organizations based on revenue and profit performance during the past five years, including the economic downturn.

    Top-performing organizations are 54% more likely than others to make rapid decisions. CEOs indicated they are learning to respond swiftly with new ideas to address the deep changes affecting their organizations.
  • 95% of top-performing organizations identified getting closer to customers as their most important strategic initiative over the next five years, using Web, interactive and social media channels to rethink how they engage with customers and citizens. They view the historic explosion of information and global information flows as opportunities, rather than threats.
  • Organizations that have built superior operating dexterity expect to capture 20% more of their future revenue from new sources than their more traditional peers.

One World, Diverging Views
The study also noted that opinions about what changes to make, what new skills will be needed and how to succeed in the new economic environment varied with geography.
For example, China proved much more resilient than the developed nations during the economic downturn. Thus, CEOs in China are, understandably, less concerned about volatility than CEOs in other regions. In fact, they are becoming increasingly confident of their place on the world stage.

However, if China is to fulfill its global aspirations, it will need a new generation of leaders with international management experience. Many of the country's CEOs recognize this; 61% believe "global thinking" is a top leadership quality. Most companies will also need new industry models and skills. They cannot simply replicate the models they have used in their domestic market, which has a completely different cost structure than the global market. CEOs in China are also devoting far more energy to building new skills and capabilities than their peers in the West.

In North America, which faced a financial crisis that led to governments becoming major stakeholders in private enterprise, CEOs are more wary of "big government" than CEOs elsewhere. A full 87% anticipate greater government intervention and regulation over the next five years, compounding their sense of uncertainty.

In Japan, 74% of CEOs expect the shift of economic power from mature to rapidly-developing markets to have a major impact on their organizations. By contrast, the European Union is less concerned about this shift, with only 43% of CEOs expecting to be impacted.

Understanding these and other sharp differences emerging by region is increasingly important as economies and societies become more closely linked. Organizations confront these differences as they increasingly operate across boundaries and across different regions.

For access to the study visit: http://www.ibm.com/ceostudy

TAGS: Talent
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