Purpose, engagement and digital transformation are among the top issues on the minds of Australian CEOs in the COVID-19 era.
KPMG’s 2020 Global CEO Outlook offers a unique lens on evolving priorities as the pandemic has unfolded. KPMG initially surveyed 1,300 CEOs globally in January and February, before many key markets were beginning to feel the full impact of lockdowns. Then, in July and early August, we conducted a follow-up survey with 315 global CEOs – including 50 from Australia – to understand how thinking has evolved.
Australian CEOs are increasingly using their company’s purpose as a framework for decision making in the COVID-19 era. The study also found that talent and supply chain risks have moved up the priority order, while a large majority say that the COVID-19 experience has accelerated their digital strategy approaches both to customers and internal operations – by years in many cases.
Key Australian developments include:
It is stark that digital transformation has accelerated during the crisis. More than three-quarters of CEOs here and internationally said the crisis had brought forward the provision of digital customer experience by years or months and it has also sped up digitisation of operations, and the creation of digital models and revenue streams. Separate KPMG Australia research has recently shown that most consumers now want either wholly or mostly online service in areas like financial services, so this development will have positive and permanent effects.
Despite the effects of the pandemic, 74 percent of Australian CEOs are confident in their own businesses’ growth prospects in the next 3 years. In part, this is because they have greater control over the levers that will determine this – one of the most critical being digital acceleration. With business transactions increasingly taking place online, companies are rethinking what customers want and how to deliver. We found that 78 percent of CEOs say the pandemic has accelerated the creation of a seamless digital customer experience, with 28 percent of those saying progress “has sharply accelerated, putting us years in advance of where we expected to be”. Digital has accelerated across the board: customer experience, business model innovation, workforce and operating model.
In light of the pandemic, Australian CEOs believe that purpose is more powerful and relevant than ever.
At the beginning of the year, we found that most CEOs globally were seeing the primary objective of their organisation shift from purely profit to also consider their purpose in society. In light of the pandemic, 74 percent of Australian CEOs said that their organisation’s purpose has helped them understand what needs to be done to meet the needs of stakeholders, including employees, shareholders and the wider community, during the crisis.
Purpose has become a central pillar for Australian CEOs – 82 percent say they feel a stronger emotional connection to their corporate purpose since the crisis began. At the same time, however, the massive disruptive impacts of the pandemic has caused many CEOs to question whether their current purpose really meets the needs of stakeholders. In fact, 84 percent of Australian CEOs say they have had to re-evaluate their purpose as a result of COVID-19, which is higher than the international average of 66 percent.
While COVID-19 has been a traumatic experience for everyone and has damaged economic activity, it has nonetheless been a catalyst for some positive and long-lasting impacts on businesses. A large majority of leaders said they felt a greater emotional connection to their company’s purpose since the shutdown, and that it was helping to drive action to meet the changing needs of their stakeholders.
Talent and supply chain rise up list of risk priorities
As they plan their path to long-term growth, business leaders recognise that there have been new challenges to contend with during the lockdown.
In January, Australian CEOs ranked talent risk behind eight other risks to growth. However, since the start of the pandemic, talent risk has been named as the most significant threat to their businesses, followed by supply chain and operational risk.
Supply chain risk has moved up the agenda from tenth position at the beginning of the year – to second place as a major strategic threat. Even before COVID-19, supply chain risk was in the spotlight as a result of increasing volatility, be it trade tensions or extreme climate-driven events. However, the pandemic has brought this issue into sharper relief, as organisations sought to maintain supply chain continuity in the midst of worldwide lockdowns.
Building resilient, flexible supply chains – ones that can withstand shocks and offer the agility to pivot to new opportunities – will be critical for organisations to drive growth and build a competitive advantage in the new reality. The survey found that 88 percent of Australian CEOs have had to rethink their global supply chain, significantly higher than the global average of 67 percent.
CEOs are not being deflected from their Environmental, Social and Governance (ESG) goals
COVID-19 is clearly not the only threat we face that has profound economic and humanitarian consequences: climate change also offers a significant threat over the coming decades.
The seriousness with which Australian CEOs take the issue of climate change is reflected in the fact that 84 percent say that managing climate-related risks will play a part in whether they keep their jobs or not over the next 5 years. To move forward, they are looking to double-down on the structural shifts that have emerged during the crisis, such as less business travel: 60 percent say they want to lock-in climate change gains made as a result of the pandemic. More than half (58 percent) said that their response to the pandemic has caused their focus to shift to the social component of their ESG program.
Australian CEOs are not taking their eye off the future of work. COVID-19 has effectively forced many organisations to experiment with how work is done. For example, many organisations had to pivot to virtual working literally overnight. With the pandemic transforming the world of work, 78 percent of Australian CEOs say they will continue to build on their current use of digital collaboration and communication tools, and 70 percent believe that remote working has widened their available talent pool.
CEOs are also acutely aware that their employees are grappling with significant anxiety about today’s situation and what the future holds and have also had to embrace very different ways of working. While the threat of talent risk was ranked behind eight other risks at the beginning of the year for Australian CEOs, it is now considered to be the number one threat to long-term growth, with CEOs recognising the need to keep their people feeling safe but also connected, engaged and productive.
Read our media release on the 2020 report.
Download a full copy of the 2020 report.