In today’s fast-paced business landscape, corporate leaders face a torrent of trends, ideas, and information, making it increasingly challenging to discern what truly matters. To gain insights into the evolving priorities of top-performing CEOs, McKinsey & Company recently conducted its latest CEO Excellence Survey, exploring the actions taken by these leaders to address key challenges. In this article, we delve into the three prominent signals identified by CEOs – digital disruption, the economy, and geopolitics – and discuss the proactive strategies they are employing to seize opportunities and manage risks in the ever-changing business environment of 2023.
1. Embracing Digital Disruption
In the face of digital transformation, CEOs recognise the need to become technology architects and leverage advanced analytics for a competitive advantage. Leading companies are taking the following actions:
Developing Advanced Analytics: Leveraging advanced analytics enables businesses to extract meaningful insights and personalise customer experiences. Diageo plc, a beverage maker, has experienced a 17 percent increase in media spend ROI by utilising geolocation data to target content. Sun Life Financial Inc., a financial services giant, now processes 60 percent of life insurance policies without medical exams, resulting in an improved customer experience.
Enhancing Cybersecurity: CEOs are investing in robust cybersecurity measures to protect their organisations from evolving cyber threats. JPMorgan Chase, for example, has prioritised modernising infrastructure, embedding cybersecurity controls into their business, and training employees to be vigilant against potential threats.
Automating Work: Automation, including the use of AI-generated content, is being embraced as a means to eliminate time-consuming manual tasks and improve efficiency. By implementing technology-driven solutions, companies like Humana and Walmart have reduced administrative burdens and streamlined processes, leading to enhanced productivity and cost savings.
2. Mitigating Economic Risks
CEOs understand the importance of preparedness in the face of high inflation, supply chain pressures, and potential economic downturns. To mitigate risks and maintain resilience, they are adopting the following strategies:
Reducing Operating Expenses: By implementing cost-cutting measures, organisations can strengthen their balance sheets and position themselves favourably for economic recoveries. General Motors, for instance, focuses on targeted reductions in executive and salaried positions while optimising supply chain agreements, deferring capital spending, and tightening expense policies.
Redesigning Products and Services: CEOs are leveraging disciplined cost management to free up resources that can be invested in enhancing products and services. With inflation being a key concern amongst consumers, redesigning products and services to be more cost efficient will make your offerings more attractive. By improving customer value, companies like Shiseido and Adobe aim to attract and retain customers, fostering top-line growth.
Reassessing Strategic and Economic Assumptions: In light of economic uncertainty, CEOs are continually evaluating and adapting their strategies. In the face of ever-changing resource constraints like ship shortages, supply chain pressures especially on international shipping, and evolving consumer demands, flexibility and agility are paramount. Companies like Illinois Tool Works demonstrated this well when they swiftly adjusted pricing strategies to offset cost increases during a recent period of significant inflation.
3. Managing Geopolitical Risks
Geopolitical dynamics have a profound impact on business operations. To navigate these complexities, CEOs are taking the following measures:
Building Robust Compliance Capabilities: Heightened compliance measures are crucial in an era of changing global dynamics. Companies are strengthening trade compliance organisations and improving screening processes for customers and business partners, while also identifying opportunities for growth within regulatory frameworks. If your business creates a product, make sure you’re regularly checking in with the regulatory body that oversees compliance in your field, to ensure you don’t get surprised by new requirements.
Creating Resilient Supplier Networks: CEOs recognise the importance of supply chain resilience. By addressing potential points of failure, companies can withstand disruptions and maintain operational continuity. Tim Cook of Apple emphasises the continuous optimisation of global supply chains to enhance overall resilience. Rather than simply finding the cheapest option, do thorough research and build a real relationship with your suppliers, to ensure you’re not left dead in the water when an issue arises.
Investing in Monitoring and Response Capabilities: Effective leaders prioritise early-warning indicators and crisis response capabilities to turn threats into opportunities. Equinor, Norway’s largest energy company, has increased its state of alert to safeguard Europe’s energy security, underscoring the global increase in margins of threat to many industries. By investing in high-level monitoring and response plans, you’re giving your business more room to adapt in the face of uncertainty.
4. Beyond the Big Three
The three categories above are described by McKinsey as having the highest “signal within the noise”. However, three other trends were also flagged within the survey as clearly important topics for CEOs to monitor:
Talent: Despite a tight market for finding effective talent, many CEOs are reporting a renewed focus on performance. Meta CEO Mark Zuckerberg has told his company’s employees they should prepare to have their “performances graded more intensely.”
Ways We Work: Along the same lines as the Talent focus, many CEOs are expecting employees to return to higher hours spent in the office or with customers. Reasonings include increased mentorship, community, innovation, and a stronger sense of meaning in the workplace.
Climate Action: While many CEOs report that climate action is a priority, they also state a disinterest in “checking boxes” – that is to say, doing meaningless actions to affect ESG rankings and ratings. As BlackRock CEO Larry Fink stated, “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients.” This mentality is leading to an increased interest in industries predicted to have a high ROI by focusing on sustainability.
The disruption of COVID-19 is still being keenly felt in all industries, as the McKinsey survey found. But as former United States President Franklin D. Roosevelt put it, “A smooth sea never made a skilled sailor.” We’re excited to see the outcomes of CEOs’ focus on recovery, reassessment, and results in the near future.