KPMG today released its 2016 KPMG Global CEO Outlook Study revealing stronger optimism about future growth prospects amongst the Australian CEOs surveyed compared to their global counterparts. This was despite 15 percent of Australian CEOs confirming their business had experienced either flat or negative growth over the past 3 years compared to global. Locally, 92 percent of surveyed leaders were upbeat on the world economic growth outlook, compared to 80 percent globally.
The annual study by KPMG International is of nearly 1,300 CEOs from companies with revenues of USD 0.5 billion up to more than USD 10 billion, across nine industries, and in 10 countries – including 53 Australian CEO responses.
The report found corporate leaders recognise that to achieve growth, they must focus more clearly on the increasingly competitive landscape. Global CEOs are characterising the short to medium term as a time that will bring unprecedented change.
While a majority of Global CEOs see challenges ahead, with expected moderate economic growth, they are optimistic they can successfully manage through the environment. The next 3 years are seen by 72 percent to be more critical than the previous 50 years. Australian leaders (75 percent) are more concerned about the critical 3-year outlook than their global counterparts, but also express greater confidence with a more bullish attitude.
In the global context, the Brexit is a significant volatility event that has occurred in the time since the CEO Study was conducted. This event will no doubt give pause for thought for many CEOs around the world as they contemplate the impact on their business. In the coming months, more will become clear, however, the modest size and the impact of the UK economy in a global sense suggest the broader impact of the Brexit will be modest.
“Nevertheless, the motto ‘who dares wins’ could be adopted for Australian CEOs,” said Peter Nash, Chairman of KPMG Australia. “They are taking on more risk than their global counterparts but they are also more confident about the medium term outlook.”
On the operational side, Gary Wingrove, CEO of KPMG Australia, pointed to the survey result showing almost half of Global CEOs (Global 48 percent) and a significant number of Australian CEOs (Australia 43 percent) said they expected to achieve top line growth of 2-5 percent in the next 3 years.
“It’s significant that both Global and Australian CEOs are more confident about the growth outlook expressed in top line terms, but that Australian CEOs say they will depend far more on new markets to drive growth than their Global counterparts,” he said.
A third of Australian CEOs (36 percent) say new markets will be the most important source of growth (compared to 25 percent globally). Locally, new customers rank second as a growth driver (28 percent); new channels third (19 percent) and new products last (17 percent).
The focus on innovation was a key highlight of the report findings. Mr Wingrove noted that for Australia, Prime Minister Malcolm Turnbull’s ‘National Innovation and Science Agenda’ appeared to have struck a chord with the local CEOs surveyed.
“The trend of support for innovation expressed in the 2015 Global CEO Study continues this year. Twenty-eight percent of Australian CEOs nominated ‘fostering innovation’ as one of their top three strategic priorities - compared to 21 percent globally,” he said. “Only Chinese CEOs nominated this as a greater priority area (43 percent).”
He noted that for Australian CEOs the competitive market and technology, rather than economic conditions, were now top of mind.
“Strategically, innovation has come to the fore. It is significant that 45 percent of Australian CEOs say they are taking an ‘accelerated’ approach to innovation compared to 35 percent globally.”
Mr Wingrove said it was also interesting that Australia was more concerned about implementing disruptive technology (Australia 28 percent) than Global (18 percent), but that both local and global leaders had named a stronger client focus as a top growth priority (Global 19 percent / Australia 17 percent).
Looking globally, Peter Nash said that with volatility in world markets and the increasing speed of change, CEOs across the world were reshaping their strategies.
“We are in a time of transformation and it’s a positive finding that an increasing number of both global and Australian CEOs are addressing disruptive change,” he said.
“Global CEOs particularly have recognised the pace and nature of change but say they are still optimistic about growth prospects for their company, their industry and the global economy.”
He noted that last year, the 2015 KPMG Global CEO Outlook Study showed CEOs were ‘somewhat confident’ about growth, but had concerns around short-term uncertainties. They had widespread plans to focus on hiring staff, while navigating the challenges of disruption and innovation – but the speed of transformation had intensified around the world since then.
Global leaders recognised the demands of the increasingly competitive business environment with 70 percent expressing concern about ‘mission critical’ issues compared to only 64 percent of Australian CEOs.
On the global front, the top concerns for CEOs were customer loyalty (Global 88 percent / Australia 79 percent) and the impact of the global economy (Global 88 percent / Australia 87 percent). Time pressure was the third most significant concern for global leaders with 86 percent saying they lacked time to think strategically about disruption and innovation. Australian CEOs were even more time pressured, with 94 percent squeezed for the personal time needed to consider these drivers.
Both Global and Australian CEOs named innovation, digital transformation and disruption as their key strategic drivers. The impact of millennials (Global 86 percent/Australia 79 percent), integrating automation such as artificial intelligence and cognitive (Global/Australia both 85 percent), and keeping abreast of product and services developments (Global 85 percent / Australia 81 percent) were amongst the top CEO concerns in this space.
Head of Communications, KPMG
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The KPMG Global CEO Outlook 2016 for Australia looks at the key concerns and goals of Australian CEOs over the next 3 years.