I had a really strong sense of déjà vu when, a little over a year ago, I was elected as KPMG’s new Global Chairman. I felt the same sense of excitement and trepidation I had when, eight years before, I’d taken over as CEO for KPMG Canada. Transformation driven by technology, geopolitical risk and uncertainty, new regulation and competitors all dominated my thinking.
Pretty much every CEO I speak to has a very similar story. Nothing truly prepares you for this kind of role. Being a subject matter or technical expert, leading a country or a global division develops many of the necessary leadership skills and capabilities, but nothing really prepares you for the breadth and pace of issues you’ll face as a CEO.
Most of the CEOs I talk to feel that the Fourth Industrial Revolution – characterized by a fusion of physical, digital and bio technologies – means the job is only going to get tougher.
That anecdotal feedback that I heard as I’ve travelled the world is backed up by our research. We’ve spoken to over 1,300 CEOs leading many of the world’s largest global businesses and found that the best are finding opportunities in this disruption, changing their products and services faster than ever before, and in some cases their entire business model. And those market leading CEOs also recognize the need to develop, and even reshape, their own skills to take on the new challenges they face.
So what are we hearing and, perhaps more importantly, what do CEOs need to focus on in 2019 and beyond to make sure they can successfully lead their businesses through this tumultuous period?
1. Make digital a personal crusade
CEOs need to embrace the digital agenda like never before. Digital is now at the core of virtually every business. I was speaking to the CEO of a large cement manufacturer in South America who brought this home to me when he said he now runs a digital business, where the key decisions he takes are based on data and analytics and computer modelling to forecast future demand, energy pricing and the most efficient forms of delivery.
Setting a digital strategy and leading a digital transformation can’t be delegated. The costs, and stakes, for every business are simply too high.
Yet most CEOs did not get to their leadership role because of their digital background or expertise. Over 70% of the CEOs we spoke to believe they need to lead a radical digitally-led transformation of their business model, and that requires CEOs focusing on their own digital capabilities, learning new skills and being prepared to acknowledge where their knowledge stops, and finding trusted advisers to help shape their decisions.
Understanding cloud, the impact of AI on the workforce, and the fundamentals of cybersecurity are increasingly becoming table stakes for CEOs.
CEOs also recognize that they have a very personal responsibility to protect their customers’ and their employees’ data. Hardly a week goes by without another high-profile media story about a breach of data security. Almost 60% of the CEOs we talked to told us they not only understand this new data paradigm, but they already see protecting customer data as their personal responsibility, and the potential personal consequences for their role if there is a major customer data loss on their watch.
So every CEO has to prioritize and invest the time needed to develop their own digital skills and stay on top of the critical digital issues that they will be held accountable for.
2. Navigate through geopolitical headwinds
Increased geopolitical risk – the threat of political disruption to international trade and investment – has risen to the top of most of the Board agendas for the companies I speak with. And the CEOs we spoke with rated a return to territorialism as the number one threat facing their business.
CEOs understand that they need to hone their global political knowledge and skills and engage with the politicians and civil society leaders, while remaining politically neutral.
CEOs are also acutely aware of the need to build and sustain trust. They tell us that strengthening trust with their important stakeholders is one of the things they know they need to do to reduce the threat posed to their businesses by losing that trust. This is one of the things I see first-hand at KPMG, and we are embarking on a comprehensive programme of initiatives to ensure we can be the most trusted and trustworthy adviser to our clients.
How CEOs see their role in protecting customer data, by country
3. Finding the right balance between data and intuition
We found a surprising digital paradox. CEOs, and the companies they lead, are investing and spending more money on data driven insights than ever before. Yet nearly 70% of the CEOs we spoke to admitted they have relied on their own intuition over data-driven insights to make strategic decisions in the past three years.
More than half of the CEOs we spoke to are less confident in the accuracy of predictive analytics compared to historic data, and have the highest trust for social media sources over all others.
CEOs need to find a better balance between data and intuition, and that inevitably involves spending more time getting deeper into the way that data driven insight for their business is being developed, and how it is used to shape strategy and operational decisions.
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The CEOs I’m talking with know that the core skills that they built through their career won’t be enough to make them a successful CEO. They know that rising geopolitical risk, the near certainty of a cyber attack on their business and the imminent arrival of new competitors, combined with environmental and operational risks will stretch them more than any previous generation of business leaders.
To deal with these challenges, CEOs need to be prepared to evolve as quickly as the market and their business. The winners will spend more time learning new skills and accept that they can’t be the master of every discipline and topic. The stakes have never been higher, and the public scrutiny has never been more intense for CEOs. The question is, can they successfully adapt to this new era?