Economic outlook and business confidence | KPMG | ZA

Key findings on the South African 2017 CEO Outlook

Key findings on the South African 2017 CEO Outlook

Economic outlook and business confidence

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CEO Outlook 2017

The Chief Disruptor: In a time of growing uncertainty, we find CEOs disrupting or challenging their own role in order to better lead the business.

  • Almost seven in 10 (68%) respondents say they have taken steps to disrupt their role in the last 12 months.
  • A similar proportion say they are more open to new influences and collaborations than at any other point in their career.
  • Only 26% believe their emotional intelligence is as important as their technical skills.
  • Of three personas identified during this research, the largest group is the “positive disruptor” – CEOs who remain committed to innovation and challenging the status quo despite the changing economic landscape.

Geopolitics; the new uncertainty: It is an opportune time for CEOs to rethink what they stand for. In the space of a year, the world has become a more complicated place – economically, geopolitically and technologically. 

  • In 2017, two in three CEOs (70%) feel confident about global economic growth during the next 3 years. CEOs are also notably less confident in their own industry’s prospects for growth.
  • 34% of South African CEOs believe the uncertainty of the political landscape has had a greater impact on their business than they have seen for many years. However, 88% are ramping up their scenario planning to plot a course through uncertain waters. And 92% say they are recruiting new skills/specialists into their management team to better understand geopolitical risk.
  • Many CEOs, particularly in the US, believe the new US Administration will have a positive effect on their organization’s growth (52 vs 86%), yet those outside the US are more circumspect about the likely impact on global growth (33% vs 52% saying positive effect).
  • CEOs in SA are sceptical about their dealings with the UK ahead of Brexit, with less than half (40%) saying it would have a positive effect on their organisation’s growth. 

Business growth: CEOs are cautiously optimistic about their own businesses, but some are toning down their prospects for the years ahead. A renewal on their core strengths is the focus.

  • CEOs expect the global economy to have the single biggest impact on their company’s growth in the coming years. There has been a drop in the number of CEOs that are confident in their business’ 3-year prospects (from 72% in 2016 to 60% today). 
  • To achieve growth, half of South African CEOs are prioritising Africa for new market growth, while 76% are not yet interested in overseas markets.

Talent: Talent management is coming into focus as an important area of investment over the next 3 years.

  • In keeping with the tone of cautious optimism on growth, CEOs are scaling down their ambitions for headcount growth. 76% expect their number of employees to increase by more than 5% in the near future.
  • However, CEOs identified recruitment as their top area of investment over the next 3 years, with 82% saying they plan to provide incremental investment funds for recruitment over this same period.
  • CEOs say the third largest barrier to strategy implementation is lack of skills/knowledge (26%).

Innovation remains a key ambition: As well as disrupting their own roles, CEOs are focused on driving positive disruption in the market.    

  • Today’s CEOs are still driven by the prospect of innovation, disruption and changing things for the better.
  • 86% say their business is aiming to be the disruptor, rather than the disrupted, in their sector. More than six in 10 (68%) see disruption as an opportunity, not a threat.

The technology solution: Achieving disruption relies on the implementation of new and emerging technology. Complexity and talent gaps present key obstacles.

  • Implementing disruptive tech is a top three strategic priority for CEOs, yet CEOs expect their level of investment in most emerging tech to decrease in the next 3 years, which sets up a strategic paradox.
  • Some CEOs may be feeling more confident about their business’ core
    technology architecture than they are about its digital capabilities. Most (82%) admit that their organisation likely isn’t disrupting business models as much as it should.
  • The biggest tech-related challenges involve overcoming complexity and finding the right talent to implement new solutions.

Digital labour/cognitive: 

  • CEOs say that emerging cognitive technology would lead to increasing headcount in all parts of their business over the next 3 years. This is especially evident in HR (72%) and middle management (60%), but senior management numbers are also predicted to rise (54% say an increase is planned).
  • Perhaps not surprisingly, integrating cognitive tech was second only to attracting new talent as the biggest tech-related challenge to the organisation. 

Deepening customer relationships: Understanding the market is a work in progress.

  • CEOs’ biggest customer challenges are around targeting and building the business among customer and demographic groups in their home markets.
  • CEOs are largely confident that they understand their customers, with the majority (80%) believing that they are effective at sensing market signals.
  • Another 80% of CEOs noted that they are able to confidently articulate how they create value for their customers. 

Innovating with cyber: CEOs are finding the positives associated with cyber security. Getting it right will be an essential part of protecting the business’ reputation in the years ahead.

  • Almost 10 in 10 (96%) CEOs see investment in cyber security as an opportunity to find new revenue streams and innovate, rather than as an overhead cost.
  • In South Africa, Cyber risk is still giving a lot of CEOs (40%) sleepless nights, with Emerging Technology Risks being the second risk (34%).

Building trust for the long term: A shift in priorities.

  • 16% believe that public trust in business will decline over the next 3 years. At the same time, 86% believe that building greater trust among external stakeholders and customers is among their top three priorities.
  • Almost 10 in 10 CEOs (94%) say their organisation is placing greater importance on trust, values and culture in order to sustain its long-term future.

 

© 2017 KPMG Services (Pty) Limited, a South Africa private company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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