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Transformation

Growing pains

CEOs as leaders of radical transformations: Who will succeed?

We are at the beginning of the Fourth Industrial Revolution. “Disruptive technologies and new business models are triggering formal re-evaluation strategies,” observes Tim Zanni, Global and U.S. Technology Sector Leader. Yet a vast majority of U.S. CEOs, despite having not grown up as digital natives, are highly confident about their ability to lead their companies through radical transformations.

98% and 91%

Moreover, U.S. CEOs are the most confident globally.

CEO countries

Is that a sign of overconfidence? Not necessarily. But it also does not mean that CEOs have it all figured out.

“Many companies are implementing the tech industry playbook as the model for growth and sometimes, survival,” Zanni says. “The tech industry approach to solving problems is ground-breaking with an acceptance to fail fast and pivot quickly.” 

For P.F. Chang’s Osanloo, confidence is tempered by an awareness and realization of what’s at stake, the gravity of change that new technologies are bringing about. “I think I’m appropriately nervous about the disruptive role of technology in the restaurant business,” he says.

With new advanced technologies leaving behind those who are not transforming fast enough, being appropriately nervous may be just the right state of mind—the current version of Andy Grove’s famous saying that only the paranoid survive. “They are the ones,” says KPMG’s Cliff Justice, “who really understand the external environment, and they also understand the tools they have to work with in their industry, in their own organization, and the gravity of change that this entails.”

Some CEOs, however, may be overly dismissive, relying on what they perceive as their traditional strengths such as brand or market share. Such leaders need to make the difficult choice and disrupt what does not at the time seem to be broken. 

Western Union’s CEO, Hikmet Ersek, made such a move when he started Western Union Digital at a time when the company’s core business was doing well operating in a traditional way. It wasn’t easy to convince the market about Western Union’s digital potential. “It took confidence,” remembers Ersek. “Everybody said, oh, it's a dying company, Western Union won't survive.” Now a half-billion-dollar business, Western Union Digital has been growing by 20 percent-plus every year. 

PW Power Systems CEO Raul Pereda points out that the power industry is once again in transition—driven by renewable technologies—and navigating the new landscape means thinking differently than in the past. “Ten, 20 or 30 years ago, wind and solar weren’t really of the scale in the industry to make an impact. We don’t necessarily see renewable technologies as competition, but as an opportunity where our aero-derivative gas turbine products can coexist in a power producer’s portfolio in a complementary manner. Our units are fast starting, flexible and can be brought online in optimum blocks of power. Even as renewables continue to grow, utilities will still require a mix of dependable, steady power in their environmentally friendly
portfolios.”

Decision making in the digital age

The survey reveals that U.S. CEOs have an ambivalent relationship with data. On one hand, a majority profess having the same trust in predictive analytics that they have in historical data. They also have trust in unstructured data. At the same time, however, they do not plan to increase their usage of predictive analytics models or their usage of unstructured data. 

Most tellingly, when confronted with a critical decision and data-driven insights contrary to their experience, a majority (78 percent) have overlooked data-driven insights and gone with their intuition at some point over the last three years.

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number of ceos who agree

Perhaps the best explanation of that dichotomy was offered by Medidata’s Sherif, whose company gathers and analyzes data from clinical trials. Even though he represents a very data-driven service, Sherif says that it is never just the data itself but how you think about it. “Everybody looks at data,” he adds, ”but then they parse data to understand data quality, follow instincts around risk taking and apply their own judgment.”

Many CEOs also trust social media to drive their strategic decisions, more than they trust traditional media or research institutions. Though this may seem strange at first glance, Traci Gusher, KPMG Principal focusing on artificial intelligence, explains: “Social media is direct, from the customer.

Traditional media can be filtered through the lens of a reporter. Removing the layer of interpretation increases the trust factor, because CEOs don’t have to sift through the bias.” CEOs, for example, are smart to follow customers’ comments about their companies on Twitter or Facebook.

There is one data source that may be underused in terms of strategic decision making—financial information gathered during the external audit. “There are ways to marry audit-generated data with other types of data to identify where there may be gaps or spikes in performance,” says Frank Casal, Vice Chair of KPMG’s Audit practice. “That’s where technology can help create insights from that blend of data from multiple sources.”

The reporting obligations and the opportunities presented by the new U.S. tax law are driving the need for very detailed data and offering opportunities to derive value from the corresponding analytics, says KPMG’s Brad Brown, Chief Innovation Officer and Technology Leader for Tax, KPMG LLP.

“The data can be used not only to comply with the requirements of the law, but also to manage risk and drive value for the organization. U.S. and global tax reform now can really be an accelerant to a company’s understanding of the global supply chain and the relative profitability occurring within different product lines and geographies, leading to value optimization,” says Brown.

number of ceos who express

What is critical is to be able to control data, and not get lost in the weeds. Sums up Patricia Kampling, CEO of Alliant Energy: “There is more data today, without a doubt, but it is important to focus on the data that helps decision making or reveals trends, and not get overwhelmed with the quantity. It’s also very important to go beyond the data and realize that nothing is more valuable than having constant communications with employees, customers and technology partners. Data tends to be backward looking, and these direct conversations help bridge the gap from the past to the possibilities of the future. I would say that my decision making is a combination of data-driven information, input from many, and decades of experience.”

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