More than ever before, leading a business is about challenging convention and driving positive change. Three in four (74 percent) CEOs in our survey say their company is striving to be the disruptor in its sector.
CEOs are embracing disruption for many reasons, including technology-driven change sweeping through industries and economies on a global scale, as well as a shake-up in the geopolitical status quo.
In response, CEOs are championing new ways of creating value, as well as strengthening their core business, and innovating to ensure their organization is not left behind. Seventy percent of CEOs are more open to new influences and collaborations than ever before.
Three in four CEOs say their company is striving to be the disruptor in its sector.
Meeting the challenges of an uncertain future is about more than reshaping the organization. CEOs are also focusing hard on their own skills and the role they perform. For many, disruption is as much a personal challenge as an organizational one.
We see CEOs evolving their own role and the attributes they need for success. This may mean relying more heavily on soft skills such as emotional intelligence – as is the case for 45 percent of respondents.
CEOs tell us they are also constantly learning new technical skills, which may not have been as critical when they set out in their roles.
Almost seven in 10 (68 percent) CEOs have taken steps to challenge themselves, often through formal training, during the past 12 months.
CEOs are following a difficult balancing act between disrupting their own roles and reshaping the business itself to become radically different.
CEOs understand that uncertainty on the horizon requires a prudent focus on strengthening their business in established markets, so they can protect their bottom line while preparing to seize opportunities when they arise.
At the same time, they are enthusiastically embracing disruption, championing new and exciting ways of creating value. Our respondents tell us they are making innovation a top strategic priority, as well as a key initiative to achieve growth.
In the 12 months since KPMG’s 2016 Global CEO Outlook, the world has become a more complex and unpredictable place. ‘Business as usual,’ certainly no longer applies.
Approximately two in three (65 percent) are confident about global economic growth during the next 3 years – down from 80 percent in 2016. This more restrained level of confidence is also reflected in respondents’ views on the outlook for their country and industry over the same period.
In addition, CEOs from some industries – notably banking, energy, and consumer and retail – are more upbeat about sector growth than their peers.
Two in three CEOs are confident about global economic growth during the next 3 years – down from 80 percent in 2016.
The survey found clear differences in outlook depending on where the CEO’s organization is based. CEOs in the US are notably more confident than their non-US peers and are the only regional grouping whose confidence has increased since last year. In Europe, the outlook remains positive overall, albeit less pronounced than last year. The biggest change is in ASPAC – especially from the vantage point of Australia, China and Japan - where optimism about global economic growth has faded during the last 12 months.
Our survey suggests that CEOs remain confident about their own businesses. More than eight in 10 CEOs (83 percent) describe themselves as confident in their company’s growth prospects for the next 3 years, with around half (47 percent) saying they are very confident.
While this is a slight decline, down 6 percentage points from last year, the high percentage still points to an optimistic mindset among CEOs.
More than eight in 10 CEOs (83 percent) describe themselves as confident in their company’s growth prospects for the next 3 years.
One of the short-term impacts of geopolitical uncertainty for businesses could be around taxation. Jane McCormick, KPMG’s Global Head of Tax says businesses are “in a period of unprecedented change in relation to tax and trade policy.”
This may be why 67 percent of CEOs expect tax rates to increase in their country in the next 3 years. The proportions are even higher if we break the results down on a national level, with the UK (81 percent), France (80 percent), China (76 percent), Spain (74 percent) and Germany (74 percent) being the most concerned about the prospect of higher rates.
Sixty-seven percent of CEOs expect tax rates to increase in their country in the next 3 years.
CEOs today are aware of the new strategic and operational challenges they may face in the years ahead, following the political events of the last year.
A small majority (52 percent) believe that the uncertainty of the current political landscape is having a greater impact on their business than they have seen for many years.
Most CEOs have already taken steps to manage their exposure. The majority (69 percent) are bringing new specialists into the management team to help them better understand potential threats. Three in four tell us they are spending much more time on scenario planning to plot a course through the shifting climate.
The majority of CEOs are bringing new specialists into the management team to help them better understand potential threats.
Three in four CEOs surveyed are spending much more time on scenario planning.
As uncertainty increases, businesses have reviewed their register of key risks. Seven in 10 CEOs (69 percent) report that they have increased investment in governance and risk management in the last year, 27 percent significantly.
One of the most striking changes in this year’s survey is the rise in the number of CEOs who cite reputational and brand risk as a top current concern. Businesses appear to be aware that everything they do takes place in a more transparent environment than ever before.
Considering the high-profile nature of many recent cyber-attacks, it may seem surprising that cyber appears at number five on the risk list, compared to its top ranking last year. To an extent, this could be explained by CEOs’ growing confidence in their management of the risk.
Top strategic initiatives
|Greater speed to market||1|
|Implementing disruptive technology||3|
|Becoming more data-driven||4|
|Digitization of your business||5|
Top technology challenges
|Attracting new strategic talent||1|
|Integrating cognitive technologies||2|
|Piloting emerging technologies||3|
|Optimal use of data analytics and predictive technologies||4|
|Reskilling the current workforce||5|
The KPMG 2017 Global CEO Outlook raises many critical questions for business around the balancing act that CEOs must play as they strive to disrupt the market while preparing for future uncertainty. We summarize how CEOs are prioritizing their activity around seven core areas of the business below and in Innovations and Building trust.
Tatsuo Yasunaga, President and CEO of Mitsui & Co., says his business focuses on its underlying resilience as well as taking steps outside its primary sectors. “Our strategy is to strengthen our core businesses as a foundation on which to establish new business in sectors with promising growth potential,” he explains. “Because we want to generate sustainable growth, we take a long-term management perspective from the earliest stages of our planning.”
To prepare for uncertainty in the years to come, CEOs are primarily focusing on strengthening their existing markets and their core businesses. At the same time, when it comes to the core business, 70 percent of CEOs are making bottom-line growth a primary objective for investment.
CEOs’ strategic priorities for growth in the next 3 years
Our survey finds that rather than seeing transformation as a discrete program, with an abrupt transition from one incarnation of the business to the next, many businesses will have accepted it as part of ‘business as usual’. Fifty-three percent of CEOs are increasing penetration in established markets as a strategic priority.
The prospect of uncertainty would traditionally cause businesses to restrict their investments in innovation. Yet CEOs today are scaling up rather than scaling back on technology-led innovation.
The strategic initiatives they are pursuing support innovation in one respect or another, and many are taking a hands-on role in the innovation process.
Aviva’s Wilson is a good example of a CEO who takes a close personal interest in enabling disruption. When his company set up a “digital garage” in London to explore digital opportunities, Wilson describes how he helped make the initiative a success.
“I knew we had to cut the ties between the digital business and the old business,” Wilson says. “At the launch I said, ‘Your strategy is to compete with and cannibalize the rest of the business.’ Everyone hated that. But I had to make sure that no one in the traditional business could block what we were doing. It's changed the total dynamic.”
Top strategic initiatives
|Greater speed to market||1|
|Implementing disruptive technology||3|
|Becoming more data-driven||4|
|Digitization of your business||5|
The popular view of cognitive technologies is often that they will make a large number of positions redundant, but CEOs indicated they expect cognitive technologies to actually drive headcount gains over the next 3 years.
While 32 percent of CEOs expect their headcount to increase across certain roles, on average, to be slight, the majority of CEOs we surveyed believe that cognitive technologies will drive a short-term increase in these roles.
How cognitive technology will affect headcount in the next 3 years
Disruption is not without its risks, especially when the majority of competitors are also planning to out-innovate the market. Around half of CEOs (48 percent) are expecting major disruption in their sector in the next 3 years.
The findings suggest that many CEOs are confident in their ability to manage industry change and succeed in a highly competitive, innovation-focused environment. This year, 48 percent of CEOs said that they were concerned about their business model being disrupted by a new entrant not currently perceived to be a competitor — down from 65 percent last year. Yet CEOs are not complacent: they know that their businesses can always innovate more effectively, especially when deploying emerging technology. One in two CEOs, for example, admits that their organization may not yet have the advance warning systems, capabilities and innovative processes to respond to rapid disruption.
Moore of Macquarie says his company has relied on its innovativeness in the face of uncertainty in the past. “Our organization has thrived on intellectual curiosity, optimism and an openness to ideas,” he says. “This has been particularly important in the face of the geopolitical and global economic challenges of recent years.”
Percentage of CEOs expecting a major disruption in their sector in the next 3 years
Percentage of CEOs concerned with a new entrant disrupting their business model
The ability to disrupt a market, or to innovate within an organization’s established structures, is closely linked to a business’ understanding of emerging technologies and their potential application.
CEOs in 2017 are notably more confident in their understanding of new technologies than they were in 2016. While half (47 percent) remain concerned about whether their business is keeping up to speed with new technologies, this figure was significantly higher – 77 percent – in 2016.
Percentage of CEOs concerned whether their business is keeping up to speed with new technology >>
But CEOs don’t consider technological innovation within their business to be a fait accompli either. Four in 10 (38 percent) express concern that they are not using digital as effectively as they could to connect with customers. Six in 10 (61 percent) tell us they are frustrated that their organization is not having as much success with new business models as it should.
Percentage of CEOs concerned they are not using digital as effectively as they could to connect with customers >>
Despite the progress that businesses have made around technology, deep-seated challenges remain. The principal issues that CEOs face relate to talent shortages and complexity around integrating cognitive technologies. Similarly, when asked about their biggest barriers to implementation, complexity of integration and skills shortages come first and third, respectively.
Top technology challenges
|Attracting new strategic talent||1|
|Integrating cognitive technologies||2|
|Piloting emerging technologies||3|
|Optimal use of data analytics and predictive technologies||4|
|Reskilling the current workforce||5|
CEOs’ ambitions will rely in large part on their ability to manage their relationships with the market, understand what their customers are looking for, and protect their brand.
In this year’s research, we see CEOs understanding their customers’ needs and desires on a highly intuitive level. More than six in 10 (64 percent) say they are effective at sensing market signals.
Percentage of CEOs who say they are effective at sensing market signals >>
The ability to understand what customers’ value is critical to improving their experience of the company’s services and products. Accordingly, we see businesses implementing changes to improve the experience they provide to customers: 55 percent tell us they have aligned their middle- and back-office processes to reflect a more customer-centric approach to front-office operations.
Percentage of CEOs that have aligned their middle- and back-office processes to be more customer centric >>
For many, enduring success with customers – and the ability to introduce successful new services and products – relies on an ability to balance human understanding with a mature capability in data and analytics. There is still some way to go. Almost half of CEOs (45 percent) say their customer insight is hindered by a lack of quality data. And 56 percent express concern about the integrity of the data upon which they base decisions.
Percentage of CEOs who say their customer insight is hindered by a lack of quality data >>
But it is clear that without greater confidence in the data, CEOs will find it harder to provide innovative products and services that are truly game-changing.
Percentage of CEOs who feel concerned with the integrity of the data they base decisions on >>
We see the balance between CEOs’ two principle goals this year – driving disruption while harnessing uncertainty – playing out clearly in their approach to talent.
CEOs predict they will need to grow their headcount over the next 3 years. But they are more restrained in their expectations than last year. Whereas, in 2016, 73 percent expected their number of employees to increase by more than 6 percent in the near future, this year, 47 percent expect headcount growth on this scale.
Percentage of CEOs that expect headcount growth of more than 6 percent
The majority of CEOs are, however, planning to boost their investment in recruitment in the near future. In the last 12 months, 52 percent say they have increased spending on recruitment. Over the next 3 years, the proportion who are increasing investment in recruitment rises to 75 percent.
This supports a view that highly skilled talent will be key to businesses successfully disrupting their markets.
Percentage of CEOs that expect to increase their investment in recruitment in the next 3 years
Lisa Heneghan, Global Head of Technology, Management Consulting, KPMG, warns, however, that the rise in headcount will not be permanent. “At the moment, businesses are using digital labor primarily to improve the experience for their clients,” she explains. “The biggest driver is often times not cost reduction and, until it is, we won’t see them making big changes to their workforce strategy. That will take more time.”
Another factor to be resolved, before businesses use cognitive technologies to reduce employee numbers, is one of trust. “If you’re relying on software to make the decisions for you, at what point can you trust that those decisions are going to be the right ones?” asks Heneghan. “You only build that over time.”
Cyber continues to be a major concern for CEOs, although it has dropped to rank as the fifth most significant risk, from first place in last year’s survey.
The 2017 survey shows that CEOs believe their business is making progress in their management of the threat. Today, four in 10 (42 percent) feel fully prepared for a cyber event – up from 25 percent in 2016.
Percentage of CEOs that feel fully prepared for a cyber event
For some CEOs, the growing demands of cyber security management is proving to be more time consuming. In our survey, 72 percent say they are comfortable with the extent to which mitigating cyber risk is part of their role. Last year, it was 83 percent.
Percentage of CEOs that feel comfortable with the extent to which they are mitigating cyber risks as part of their role
However, we find a significant proportion of CEOs (71 percent) who see their investment in cyber as an opportunity to find new revenue streams and innovate, rather than as an overhead cost. For example, some businesses have created value by investing in technology that sends an alert to the customer if there is an unusual login, such as in a different country. This means that the customer knows if someone is pretending to be them, which gives these businesses a good opportunity to delight their customers.
There is a great deal of variation among industries in readiness for a cyber event. While it may be surprising that certain key industries at risk are not more prepared for a cyber incident compared to other industries, the flip side may be that they are aware of the growing sophistication of hackers and have a better understanding of how difficult it is to achieve resilience.
Industries that say they are fully prepared for a cyber event
In recent years, public opinion has been highly critical of big business. Many CEOs believe there will be little improvement in this sentiment in the near future.
In recognition of the growing importance of brand and reputation to business success, 61 percent of CEOs surveyed say building greater trust among external stakeholders and customers is a top three priority for their organization today.
Just one in three respondents to our survey expect public trust in business to get better in the next 3 years.
Building integrity and improving how the organization is perceived is far from easy, and is unlikely to be achieved in the short term. Indeed, organizations that seem overly keen to demonstrate their principles through expensive marketing campaigns, may find their efforts met with cynicism from critics who delight in accusing big business of ‘greenwashing’ and other tactics.
Three in four CEOs say they are placing greater importance on trust, values and culture in order to sustain their future.
With this in mind, we believe it is critical to have a long-term focus on building a respectful and transparent culture within the organization. This view appears to be shared by CEOs in our survey, three in four of whom (74 percent) say they are placing greater importance on trust, values and culture in order to sustain their future. Six in 10 (61 percent) believe that becoming more socially responsible is incompatible with short-term performance objectives.
Six in 10 CEOs believe that becoming more socially responsible is incompatible with short-term performance objectives.
The 2017 Global CEO Outlook is based on a survey of 1,261 Chief Executive Officers (CEOs) from Australia, China, France, Germany, India, Italy, Japan, Spain, the UK and the US. These CEOs operate in 11 key industries including automotive, banking, infrastructure, insurance, investment management, life sciences, manufacturing, retail/consumer markets, technology, and energy/utilities and telecom. Three hundred and twelve CEOs came from companies with revenues between US$500 million and US$999 million, 527 from companies with revenues from US$1 billion to US$9.9 billion, and 422 from companies with revenues of US$10 billion or more. Of the respondents, 1,105 CEOs came from public companies and 156 from private companies. The findings from CEOs in 42 additional regions and countries can be found in the Appendix section of this report. The survey was conducted between 21 February and 11 April 2017.
Figures may not add up to 100 percent due to rounding.
The 2017 Global CEO Outlook is based on CEOs’ perspectives from around the world. For a more in-depth view from a country perspective, look at the results for a selection of countries.
Banco Santander is the largest bank in the Eurozone by market capitalization (€85 billion, as of 19 May 2017). Geographic diversification in Europe and the Americas balances the profits of this retail and commercial bank between emerging and developed economies. Its strategic focus on organic growth through earning customer loyalty has pushed it to leading positions in customer satisfaction in nearly all of its markets while boosting fee income.
The company’s CEO since January 2015, José Antonio Álvarez has been tasked with continuing that growth agenda in an increasingly competitive and disrupted marketplace. Key to the company’s strategy is the notion of earning customers’ loyalty so that they see Santander as their primary banking institution. “Our performance shows that our strategy is working,” says Álvarez. “In the last 12 months, the number of ‘loyal’ customers increased by 1.5 million to 15.5 million.” And while these numbers have catapulted the bank to the top of the heap in customer satisfaction rankings in most of its core markets, Álvarez says he still sees plenty of upside for his organization. “In total, we serve 128 million customers worldwide,” he says. “This means we still have huge potential for increasing the number of loyal customers, even within our existing customer base.”
Asked about the company’s most pressing investment priorities these days, Álvarez was quick to cite the bank’s technology spend, which is currently €1.9 billion per year – an investment he says that is focused primarily on helping the company to better serve its customers via digital channels. “We’re looking at how new technologies can allow us to have more commonality across the group on the operational side and pushing in that direction,” he says.
On the risk management side, Álvarez noted that, as is the case with all banks, Santander’s performance is linked closely to the economies of the countries in which it operates. “That is why our unique business model is so important, as we have a balanced presence across both mature and developing markets. This means our fortunes are not tied to a single economy,” he says.
Like many of its peers in the financial services space, Santander is starting to study and implement a number of emerging technologies, including artificial intelligence (AI). He says AI, in particular, has the potential to reduce processing times for products such as mortgages, which have historically required significant back- and middle-office processing. Álvarez also says that it’s vital in a commoditized business, such as banking, to keep a close eye on costs. “Our efficiency is one of our main advantages,” he says. “The efficiency ratio of our peer group is in the 60s. At 46 percent, our ratio is top-three among our peers. Maintaining this advantage is critical.”
In an age of increased automation in financial services, Álvarez says that success requires CEOs, “…who are capable of bridging the gap between the digital world, which is shaping the future, and the knowledge and expertise of a conventional, trusted institution that’s been in business for 160 years,” he says. “We need to be able to strike a balance between those two worlds.”
When asked which personal attributes have become more important in his work as CEO, Álvarez referred to his belief in ‘straight talk’: “I was known for not beating around the bush,” he says. “In my conversations with our teams, speaking clearly and the ability to listen show up again and again as a valuable attribute.”
Part of the Tata group, Tata Motors Limited (TML) has established itself as a leading global automobile manufacturer, with a portfolio that includes cars, utility vehicles, a full range of trucks (0.5-49 ton GVW), buses and defense vehicles. To date, the company has sold more than nine million vehicles in more than 50 countries and employs a workforce of 45,000. One of the things the company remains focused on–says CEO and Managing Director Guenter Butschek–is research and development around new powertrain solutions, which includes a portfolio of green drivetrain and alternative fuel solutions, enhancing safety by providing suitable ”Advanced Driver Assistant Systems” for the Indian market environment. On the product portfolio side, Butschek says the company is making strategic investments that will allow it to produce its passenger vehicles on its Advanced Modular Platform, a move that will help TML to create significant economies of scale. The same concept will be applied for a larger passenger vehicle product family and the entire commercial vehicle portfolio.
He says the company is also investing heavily in technology as it explores new opportunities to bring TML into the digital age. “Tata Motors has developed a well-defined technology roadmap for the future, which is well-integrated into our product strategy,” says Butschek. He also specifically mentions the increasingly important role of artificial intelligence, which he refers to as “…a business imperative to manage the new complexity of data with predictability, reliability and speed.”
TML is already working on a number of virtual reality applications, including a strategic partnership with Microsoft, which will help it unveil a number of ‘out-of-the-box’ concepts for its customers. He points to examples such as ‘gaming zones’ (using FORZA and HoloLens, etc.) and an exciting ‘Virtual Showroom’ jointly developed with Tata Elxsi, a leading provider of design and technology services. “And in the back-end operations, we are working on concepts like Industry 4.0, data analytics and the Internet of Things to name a few,” Butschek says. “It’s redefining the way we currently operate and take decisions.”
At the same time, however, TML is also prioritizing the importance of customer relationships in an increasingly competitive marketplace. “Under the organization’s strategic game plan, we have redefined ‘customer centricity’ as one of our six pillars,” he says. Dedicated project teams are working to achieve higher levels of customer satisfaction by building customer insights into key processes. Butschek also says that he held group discussions and roundtables with dealers in the fall of 2016 to establish processes for capturing the customers’ insights, which were then fed into process optimization and the product development cycle, with progress regularly monitored by the top leadership team.
When asked whether he's learning new skills in his role as CEO, Butschek was decisive in his response. “Without the appetite to learn while you grow, you will miss the opportunity to shape the future,” he says. “As individuals, we just get blocked in our routine tasks. I am particular about my own development and, therefore, keep my eyes open to the world. Devoting time for ‘hands on experiences’ at innovation hubs across the globe, like Silicon Valley, or the budding start-ups in Bangalore are some of my personal priorities.”
For the better part of the last decade, Oracle has been working diligently to get a head start on the competition, rewriting all of its products for the cloud. Oracle has boosted its R&D spending significantly, invested in a massive infrastructure platform for its cloud solutions and is now actively, and very successfully, selling those solutions to businesses of all sizes.
The company has undergone a period of incredible transformation. Oracle changed not only the products it was selling, but also the manner in which those products are implemented, as well as the associated sales processes and back-office processes. “At Oracle, the transformation never ends,” says Safra Catz, CEO who credits Oracle founder and Chairman Larry Ellison as being the visionary behind the company’s most recent metamorphosis. “You’ve just got to constantly improve.”
On the topic of transformation, Catz remarks that it’s important to pay attention to the ‘people’ aspect of change management. “A lot of this is really not about technology. It’s about sociology,” she says. “People hate change. And the reason they hate change is they’re actually afraid you don’t know what you’re doing. You have to build trust into the transformation. You have to show some immediate thinking and some quick results. You have to build momentum.”
When it comes to measuring success at Oracle, Catz says the most effective bellwether is the company’s customers. “It is always about the customer,” she says. “I know that’s really a cliché. But if they’re successful, we’re successful. You have to understand, especially with a product like ours that you can’t physically see, that the only way to measure the success of our company is by understanding the success of our customers.”
As a result of its migration to the cloud, Oracle is now positioned to market to a much larger base of small business. In the old days, if a company wanted to use an Oracle database, it would need to have a database administrator. Today, that’s not the case. “Part of moving to the cloud means we can serve much smaller companies,” says Catz. “Our move down-market is only possible because we’re now able to run all these solutions for these business owners. All they need to do is use a smartphone or a browser.”
At a very disruptive time in the market, Catz says leaders need to make sure they’re focusing on the right areas. “You should focus on the pain points,” she says. “Where are things going wrong? Talk to your customers. They’re the best canary (in the mine) to tell you there’s a problem.”
Reflecting on the company’s continuing journey, Catz says that ultimately, winning means making Oracle’s customers outrageously successful for the long term. “We’re owners. We’re not renters. We’re not patching up walls. We’re building a whole, new, steel foundation here.
Dangote Industries, one of the leading diversified business conglomerates in Africa, generates revenues in excess of US$3 billion and employs more than 26,000 people, with business interests as diverse as cement, sugar, pasta, natural gas, and telecommunications.
The company’s various businesses are growing at paces that would make most CEOs envious and Dangote is focused on aggressive growth. “I think really, the future is looking very, very bright,” says Aliko Dangote, the company’s CEO.
When it comes to entering a new geography or a new business line, Dangote has a very specific point of view. Rather than entering a new market via acquisition, he says the company is intent on building the business from scratch and then, in his words, “start competing with a lot of people”. It’s an approach that continues to generate wins for the organization. “Areas where some of our competitors [have] been there for 50 years before us,” Dangote says. “We’ve gone there, we’ve struggled with them. We’ve taken more market share … with no advertisements, nothing.”
Another key element behind the group’s impressive growth is a relentless focus on quality. “What we’re doing is making sure the quality is unquestionable,” he says, adding that when you’re providing the highest quality product in the market, you’re able to attach a very good price to that product.
When the company entered the cement business, for example, Dangote realized the burning question was whether they’d be able to produce cement that rivalled the quality of the established and only other cement producer operating in Nigeria at the time. “We concentrated on quality. We knew customers would not trust our brand because they’d been used to one brand for over 50 years. That’s how we came out to have the best quality ever.”
Dangote is also a big believer in leading by example. He rises before 5:30am every day and after prayers and running 10 km, is at the office by 8:30am, putting in 18-hour days on a regular basis. “I don’t really take my job as something I have to do. It is my hobby,” he says. “Twenty-four hours in a day really is not enough.”
On the topic of leadership, there’s another important element that Dangote thinks is necessary for any company to be successful. “The main thing for any CEO to do is to make sure there’s ownership. Some of our competitors are not doing well because there’s nothing like ownership in their businesses,” he says. “What we try to train our people is that they must be committed and they must have ownership of the business. Don’t take it as something that you’re doing just to earn a salary. I think that kind of outlook can bring a major change in any business that you operate.”
With more than 280 branches across 18 markets, DBS is one of Asia’s leading financial services groups. And since being appointed to the position of CEO in 2009, Piyush Gupta has been focused on mobilizing DBS’ 20,000 employees to build the Asian bank of choice in a period of significant disruption and transformation.
When asked about DBS' business strategy, Gupta says it’s business-as-usual. “Our strategy doesn’t really change from a year-to-year basis,” he says. “Depending on where you are in the cycle, you either press the foot on the accelerator or not. We’re a little more bullish on countries like India, Indonesia, but that’s just tactical and timing. The basis of our strategy, which is to manage our mature markets for performance…that’s pretty much on track.”
Under Gupta’s leadership, DBS is reimagining its approach to customer experience and continues to transform itself to better compete in an increasingly digital economy. “If you look at our industry, it hasn’t been disrupted even remotely as much as industries like the telcos, or music, or books or retail have been,” he says. “And that is surprising, given that we are really a very digitizable industry. We don’t actually manufacture anything at all. I think we are right at the start of what is going to be quite a dramatic transformation in our industry.”
While the journey toward digitization necessarily brings challenges, Gupta observes that there are also a number of compelling opportunities. “In the big markets, where we are a challenger, we would not have been able to contemplate that with the brick and mortar model,” he says. “Creating a distribution network of branches is just extraordinarily expensive in today’s day and age. The digital opportunity allows us to reimagine how we can access these populations in these markets at a very different cost point.”
Gupta is a big proponent of emerging technologies and speaks enthusiastically about the growing roles that technologies such as artificial intelligence (AI) will play at DBS. Looking ahead, he sees a day when big data and AI will help provide more contextual banking solutions to customers via their smartphones. “I sometimes say my vision is to make DBS invisible,” he says. “What that means is that we should be able to hide the banking services in something else the customer really wants to do with their life and it should be just completely seamless. AI and the contextual use of big data really powers that extremely well.”
On the human capital side, Gupta echoes the sentiments of a number of CEOs with whom we spoke, reiterating the importance of change management during organizational transformation. “We’ve been able to get to a stage where large numbers of people in all our countries are confident enough to go try,” he says. “Fail fast, fail quickly, all the usual mantras of start-ups. We’ve been adopting those.”
When asked about his biggest concerns as a CEO, Gupta is quick to bring up transformation once again. “Our industry is going to be totally transformed and if you don’t transform yourself, you are going to be dead in 5 or 10 years.”
Headquartered in Sydney, Macquarie is a global diversified financial services group with over 13,500 employees and total assets of AU$182.9 billion. Founded in 1969, the company has a 48-year track record of unbroken profitability. Nicholas Moore, Macquarie’s CEO, says the company is well positioned to capitalize on a number of trends, including demographic shifts and an increased move toward digitization in the financial services industry.
While Moore acknowledges there will continue to be short-term fluctuations in the global economy, he is bullish over the long term. “We remain confident about [the global economy’s] long-term resilience and our ability to help clients capitalize on the opportunities this presents,” he said. “A key theme is the ongoing demographic shift in developed and developing markets. The resulting increase in urbanization requires investment in infrastructure, energy and technology. The aging population has also resulted in greater wealth accumulation, driving innovation in investment products. Macquarie is well placed to benefit from these long-term investment themes.”
The company’s growth strategy is driven, as Moore describes it, “from the bottom up”, with its business groups sourcing opportunities in the markets in which they operate. “This approach since inception has enabled us to build a strongly diversified business,” he says.
On the risk management front, Moore says, “Risks that have grown in profile in recent times are regulatory and compliance risk, conduct risk and cyber risk,” he says. “Geopolitical uncertainty is not a new phenomenon and we weigh it as we do all risks.” At the same time, Moore is quick to point out that uncertainty can also create business opportunities as the company looks for new markets in which to operate and for new products to offer its customers.
When it comes to technology, Moore says Macquarie continues to actively embrace emerging technologies and apply them to its businesses. “We’ve already embedded machine learning and artificial intelligence in a range of products, such as the Owners Advisory robo-advice platform and the natural language search in our transaction banking products,” he says. And as is the case with virtually all companies surveyed for this year’s report, Moore said Macquarie is constantly assessing emerging cyber threats and that it continues to improve its security at all levels.
With respect to its customer strategy, Moore points out that the company’s businesses are fundamentally client-based. “Our people are responsible for building client relationships and are accountable for the outcomes of the initiatives executed on their clients’ behalf. And our commitment to our clients’ long-term growth ambitions includes a willingness to deploy our balance sheet to invest alongside our clients.”
With 23 million customers and operations in 48 countries, 88,000 employees and assets of $896 billion, Scotiabank positions itself as Canada’s international bank.
Brian Porter joined Scotiabank in 1981, working in a variety of increasingly challenging roles and departments before being named the bank’s CEO in 2013.
When asked about some of the broader trends he sees in the markets in which the bank operates, and where he sees opportunities for future business, Porter was quick to answer. “Every country I’m in, a lot of governments are focused on infrastructure… whether it’s ports, toll roads, hospitals,” he says. “Different countries are looking at this in different ways, but infrastructure would be something that’s on the radar in all our countries.”
The other trend he points to is one noted by virtually every other CEO we spoke with: technology. “I describe ourselves as a technology company that happens to be in the financial services business,” he says. Porter observes that customers’ preferences are changing and that the bank’s job is to learn what customers want in order to become more relevant to them. “We’re spending a lot of time and focus on enhancing the customer experience, making it easier for them to do business with us, reducing friction times, getting rid of clunky processes in the mid-office or back-office,” he says. “So we spend a lot of our time talking to customers, understanding what their expectations are.”
To fuel its digital ambitions, Porter says the bank is increasing its technology spend by double-digits each year. “Given the degree of change in our business, and the complexity of the platform, we’ve got to be very cognizant of the changes in technology and how they impact our business and so we will spend $2.6 billion on technology this year.”
On the risk side, Porter also echoed the sentiments of the vast majority of CEOs with whom we spoke when he cited cybersecurity as being among the bank’s chief areas of focus. “Protecting the perimeter of the bank and our clients’ information is critical to the trust relationship we have with our clients,” he says. “We don’t take anything for granted in terms of cyber.”
Another area of focus for the bank? The geopolitical environment. “Given how we operate, geopolitical risks are more prevalent today than I’ve seen them for some period of time,” he says. “We’ve operated outside of Canada for more than 100 years, so geopolitical risks are a real concern.”
When it comes to leading successfully, Porter says there’s no substitute for curiosity. “These are complicated, changing businesses. And that’s where curiosity is important. You have to want to understand how technology is impacting our business and changing our customers’ attitudes.”
Headquartered in London and with 33 million customers, Aviva is the UK’s largest composite insurer operating in 16 markets, including Europe, Asia and Canada. Mark Wilson has been Group CEO since 2013 and has made a number of bold calls to help bring the company into the digital age and, in the midst of industry-wide disruption, position it for success over the long term.
When queried on the company’s evolution over the past 4 years, Wilson affectionately refers to Aviva as a ‘self-help story.’ “We spent 4 years fixing the balance sheet and fixing the company and we now have excess capital and cash,” he says. “We’ve fixed the stuff that most others haven’t. And we’re now at a stage where we can just run the business and be the best in the business. That’s what we’re doing and that’s why you’re seeing the growth. But it took us 4 years to get there.”
While the company’s fundamentals are now on solid footing, Wilson says he still grapples with the same external factors that worry many other CEOs. “There are only two things that keep me awake at night,” he says. “One is cybercrime, because you can never fully protect yourself. And secondly, geopolitical issues.”
On the threat of cybercrime, Wilson says that as recently as a few years ago, many CEOs were in a state of “blissful, naïve ignorance”. “The problem is that it doesn’t matter how much money you spend or how good you are, you are never safe. It’s always going to be a red, flashing light.”
Wilson is well known for his ambition to make Aviva a digital-first insurer. The company is well on its way but, as he notes, there are some major hurdles in transforming a longstanding, traditional insurer into a digital, agile entity. “There are a few big challenges and one of them is just cultural,” he says. In his first year, he estimates the company spent £70 to £80 million on its digital transformation and achieved “precisely nothing”. It wasn’t until he served as a judge at a London hackathon that he realized the root of the challenge was cultural in nature. Shortly after that, the company set up a ‘digital garage’ in London’s East End and, as Wilson says, put in place a few initiatives that were not popular with everyone. “It caused a lot of internal strife at the time but it is now looked on as an iconic moment,” he says.
At the launch speech at the digital garage, Wilson told employees their challenge was to compete with and cannibalize the rest of the business. “Everyone hated that,” he says. The second thing he said was that this was the way forward and that if anyone in the ‘traditional’ business resisted or got in the way, they would be gone. “I fired two senior people the next week,” he says.
Now, Wilson says he receives resumes each week from digital professionals from all sorts of industries. “Our head designer was the lead designer of Call of Duty®,” he says. “The customer experience guy was the customer experience guy at BA. It’s just changed the total dynamic.”
One of the largest general trading companies in Japan, Mitsui & Co. has offices in 66 countries/regions and focuses its operations in areas including energy, metals, chemicals, machinery and infrastructure, lifestyle products, information technology and more. The company, which has revenues of US$43 billion, attributes much of its success to its ability to adapt its business model to meet the needs of changing times.
When queried about the company’s current growth strategy, President and CEO Tatsuo Yasunaga comments that, “we live in an unpredictable, disruptive era, but I believe that even when adapting to rapid change, we have to incorporate our prime strengths, a long-term management perspective and robust corporate governance to drive sustainable growth.” As the company pursues that growth, Yasunaga says it will be incumbent upon him to continue to support and motivate Mitsui’s employees. “One of my key roles is to support a corporate culture that combines open-mindedness to new ideas with a thorough and disciplined work ethic in the true spirit of ‘challenge and innovation’.
He says the company’s strategy is to strengthen its core businesses as a foundation upon which to establish new businesses in sectors that have promising growth potential. And because Mitsui aspires to generate sustainable growth, he says the company takes a “long-term management perspective” from the earliest stages of its planning.
Technological innovation is at the forefront of the company’s long-term growth strategy and Yasunaga is enthusiastic about embracing the capabilities of digital technology to enhance its overall value proposition and levels of operational efficiency. “We live in an age of immense technological disruption with incredible opportunities for innovation. Digital technology is enabling our people to play a central role in transforming industry and services,” he says. “From the front line of our business operations, we can use information digitalization to drive value creation in partnership with our customers, anywhere in the world.”