An immense impetus to reinvent

FOR BUSINESSES planning for 2024, nothing could be of better help than the perspectives of chief executive officers (CEOs). Insights from top company officials not only serve as the barometer of the business climate but also give decision-makers a map for navigating the maze of trends in the world of enterprise. In the complicated modern landscape of global business, staying ahead requires a deep understanding of challenges and opportunities for companies this year.

For instance, for its latest Global CEO Survey, professional services company PricewaterhouseCoopers ( PwC) surveyed more than 4,700 CEOs in 105 countries and territories from October to November last year to uncover what companies might do this year.

PwC’s findings indicate that more and more corporations are feeling immense pressure to reinvent and make meaningful changes to their companies’ business models. According to their survey, 45% of CEOs globally believe their company will not be viable in ten years if it stays on its current path.

This number grows to 54% for Philippine-based CEOs and even higher to 63% in the Asia Pacific region, despite 97% of CEOs having taken steps towards business reinvention.

The survey revealed that several factors will drive changes to the way companies create, deliver, and capture value in the near future. Some variables that may influence companies to reinvent their business models include technological advances, customer preferences, government regulations, and competitor actions.

Despite this intensification of CEO worries about corporate viability, the survey suggests that it does not reflect near-term economic concerns. Based on the annual report, 38% of CEOs anticipate global economic growth compared to last year’s 18%. However, slightly more company officials still believe that the growth will contract in the coming year with 45% expecting a decline; while another 18% expect the global economy to remain the same.

In the Philippines, meanwhile, 57% of CEOs believe the global economy will improve over the next 12 months, slightly higher than the Asia-Pacific average of 40%.

Additionally, companies in the region and globally are feeling less threatened by economic risks this year. Data from the survey indicates that only 24% of CEOs believe that their company will be exposed to inflation, 24% to macroeconomic volatility, 21% to cyber risks, and 18% to geopolitical conflicts.

CLIMATE CHANGE CONCERNS

The report of PwC also highlighted the importance of climate change in today’s business landscape. After all, it is estimated that 55% of global gross domestic product (GDP), or roughly US$58 trillion, is moderately or highly dependent on nature. This has led to CEOs investing in multiple climate-related actions like improving energy efficiency, innovating new climate-friendly products, and incorporating climate adaptation in their business plans.

However, some top officials also reported their companies’ lack of climate actions with 36% of CEOs admitting that they had no plans to invest in naturebased climate solutions, while 31% said that they had not included climate risks in their financial planning according to PwC.

Nevertheless, top officials have already accepted that climate-friendly investments tend to have significantly lower rates of return. Based on the survey, 40% of companies’ climate-friendly return on investments were reportedly at least 4.1% lower than the acceptable rate of return compared to their other endeavours.

ARTIFICIAL INTELLIGENCE

Aside from climate change, CEOs also expect generative artificial intelligence (AI) to significantly change how companies operate. Findings from the annual report suggest that nearly three out of five CEOs believe that generative AI will improve the quality of their products while about 50% of the top officials anticipate the technology to enhance their capacity to build trust with stakeholders.

In the next three years, generative AI is expected to have an even bigger impact than it currently has. According to the survey, seven out of 10 CEOs predict that AI will drive changes to their business model, increase competitiveness in different industries, and demand new skills from workers.

Nonetheless, CEOs also voiced their concerns regarding the use of artificial intelligence in their companies. Based on PwC’s poll, cybersecurity risk, the spread of misinformation and disinformation, legal liabilities, reputational risks, along with bias towards specific groups of customers or employees are some leading concerns regarding the use of generative AI in enterprises.

BARRIERS TO REINVENTION

Moreover, barriers prohibiting reinvention were also included in the survey. Many of these obstacles are within the CEO’s realm of influence. For example, 55% of CEOs said that competing operation priorities were prohibiting change in business models, 52% stated a lack of skills in their company’s workforce, and 47% noted their company’s limited financial resources, all of which are considered by PwC to have “stronger CEO influence.”

In the meantime, lack of workforce skills ( 71%), lack of technological capabilities in one’s company (69%), and competing operational priorities were determined as top barriers to reinvention in the country. Another barrier that looms large in the business economy is the inefficiency of how companies conduct administrative tasks such as emailing, meetings, and decision- making. Data from the annual report shows that 40% of CEOs deem these activities inept. PwC estimates the cost of these inefficiencies to be US$10 trillion on self-imposed tax on productivity.

Likewise, results from the survey suggest the importance for companies to reallocate their fund in the process of reinvention, which will then lead to higher profit margins. Data from PwC showed that companies with a higher percentage of financial and human reallocation also had higher associated levels of reinvention. These levels were derived from a factor analysis of the extent of impact the following actions had on how companies create, deliver, and capture value based on different criteria.

Finally, the CEO Survey noted that CEOs who are less confident in their company’s viability in the next ten years are also the ones who are slightly more conscious of key threats. Conversely, these same CEOs who are less confident are also the ones who are somewhat more likely to take reinvention actions such as making new strategic partnerships, shifting from global supply chain models to regional ones, or implementing novel pricing models.

Ultimately, the survey results for this year show that CEOs are showing a real sense of urgency and a bias toward action. While profit- raising ventures such as developing a new business model adept for the current times and using generative AI to increase efficiency will surely help their company in the present, slowly setting the pace in combatting climate change will eventually pay dividends in the future.

In the Philippines, 57% of CEOs believe the global economy will improve over the next 12 months, slightly higher than the AsiaPacific average of 40%.