CEO Survey Shows Focus On Digital Transformation To Stay Competitive

Newsroom 21/02/2023 | 17:06

A KPMG survey has revealed the continuing preoccupation of many CEOs across the world with technology, both in terms of potential threats and the benefits it can provide. The 2022 CEO Outlook draws on the perspectives of 1325 CEOs across 11 markets, providing insights into their outlook on the prospects for their industry and also the wider economic landscape. The survey looks at CEOs’ concerns and priorities in terms of a broad range of issues which affect their businesses, of which digital transformation is a very important one. Advancing digitalization is one of the two main areas seen by many of the CEOs as a top operational priority to achieve growth over the next 3 years, scoring approximately equally with attracting and retaining talent.

By Inga Țîgai, Associate Partner KPMG, Co-Head Technology, Media, Telecom

 

The survey reveals concern about getting left behind by technological advances. Disruptive technology is seen as the top risk and greatest threat to organizational growth over the next 3 years, and takes third place in terms of concerns over the next six months (below pandemic fatigue and economic factors like rising interest rates and inflation). The solution is to keep up to date, and hence a large number of CEOs continue to prioritize digital investment — with 72 percent agreeing they have an aggressive digital investment strategy, intended to secure first-mover or fast-follower status.

However, in spite of these concerns which tend to be more focused on the long term, the anticipated recession may be pushing some businesses to reconsider their strategies over the short term. Four out of five CEOs note that their businesses are pausing or reducing their digital transformation strategies to prepare for the anticipated recession (40 percent have paused or reduced, and 37 percent plan to pause or reduce over the next 6 months). In fact, 70 percent say they need to be quicker to shift investment to digital opportunities and divest in those areas where they face digital obsolescence. Since digital transformation has become more expensive in recent years, and in view of the uncertain economic outlook, it makes sense for CEOs to prioritize their tech investment in those areas that help drive growth and potentially slow or reconsider efforts that may be considered non-critical. In a nutshell, the digital focus is around business, compliance and people.

It is imperative that businesses focus their digital investments on impactful, and measurable, value creation opportunities most able to support their strategic goals. In spite of the short term economic challenges, it would be unwise to make cutbacks in investment in digitalization in an unfocused way, without a detailed assessment of priorities and threats, as this could be a false economy which could end up costing the business more. One solution which CEOs are increasingly turning to is to form strategic partnerships with other organizations which bring fresh expertise and hence can help the development of effective digital transformation which brings real value to the business.

In the complex environment in which companies operate, Digital Tax Administration is another catalyst for them to invest more in Enterprise Resource Planning (ERP) tools, which enable redesign of compliance processes, to improve the quality of their data. Tax administrations use technology and BigData tools to collect, verify, audit and assess tax liabilities. In some jurisdictions the reporting is shifting to real time or almost real time (through SAF-T, and e-invoicing). Businesses need to stay ahead of this curve.

The survey also shows that investing in recruiting talent and retaining the best people is also a key priority for the CEOs and we actually saw a narrowing of the gap between this and technology as a priority for investment compared to the previous year’s survey. Given a binary choice, 56 percent said  they were placing more capital investment in new technology compared to 44 percent who said they were investing more in developing their workforce’s skills and capabilities. In the 2021 survey the figures were 60 percent and 40 percent respectively. However, the two are not mutually exclusive. As businesses have implemented their digital tools, their attention has shifted to adoption, engagement and change management in order to support their people working in a very different world. To drive their growth, CEOs may be looking to make their existing people more productive through digital transformation. Moreover, employees increasingly expect their employers to provide up to date, top quality technology to support flexibility, reduce the administrative burden, and give them the tools they need to do their job well. So investment in technology and in people go hand in hand.

Another key area to emerge from the survey is the importance of cyber security, which is a major concern for many CEOs, but which also presents opportunities – 77 percent see information security as a strategic function and a potential competitive advantage. A business which has high quality cyber security and a strong reputation for protection of information will gain the trust of customers. On the other hand, a security breach, particularly if it attracts widespread publicity, can cause massive damage to a business. Concern about cyber security among the CEOs surveyed has increased, with 73 percent saying they are worried about a corporate cyber attach compared to 61 percent in 2021, probably reflecting concern about geopolitical uncertainty. Moreover, cyber security does not end with one’s own business- three out of four CEOs (76 percent) say that protecting their partner ecosystem and supply chain is just as important as building their own organization’s cyber defenses.

Growing experience of the challenges of cyber security is also giving CEOs a clearer picture of how prepared — or underprepared — they may be. More CEOs recognize they’re underprepared for a cyber attack, with 24 percent admitting so in 2022, compared to 13 percent in 2021; this year, 56 percent say they’re prepared, about level with last year. And nearly three-quarters (72 percent) say their organization has a plan in place to deal with a ransomware attack, compared to 65 percent in 2021. The rapid increase in cyber attacks, coupled with the increasing difficulty of detecting attacks on time, calls for heightened vigilance and innovation in dealing with cyber incidents.

The survey shows the understanding among most CEOs that digital transformation is critical to business success, whether in terms of protecting against competition from disruptors, guarding against cyber attack or hiring and keeping top employees. While costs may present challenges, particularly in the current uncertain climate, the key to successful digital transformation is a strategic plan focused on how it will add value to the business. Partnerships with digital transformation experts, with experience of developing such strategies, can be valuable.

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Newsroom | 09/03/2023 | 17:26

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