Emerging technology emerges as top growth risk

CEOs are keeping technology risk front of mind in the short and long term.

In our KPMG 2022 CEO Outlook report, disruptive technology emerged as the top risk and greatest threat to organisational growth over the next three years. And while pandemic fatigue and economic factors, like rising interest rates and inflation, remain a key concern for the next six months, emerging and disruptive technology is a close third.

In the face of these risks, CEOs continue to prioritise digital investment; 72% say they have an aggressive digital investment strategy in place to secure first-mover or fast-follower status. The focus on digital transformation is also being driven by increasingly flexible working arrangements and a heightened awareness of cyber security threats, exacerbated by geopolitical uncertainty.

Staying on the right track

The looming recession may be pushing 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. Meanwhile, 70% say they need to be quicker in shifting investment to digital opportunities and divesting in areas of digital obsolescence.

Digital transformation has become more expensive in recent years, so investment should be prioritised in areas that help drive growth — and potentially slowed or reconsidered for efforts that may be considered non-critical. In uncertain times, it’s imperative that businesses focus their digital investments on impactful, and measurable, value creation opportunities most able to support their strategic goals.

 

Bringing people and technology together

CEOs continue to narrow the gap between digital transformation objectives and investments in their workforce. The gap between CEOs who are pumping more capital into new technology (56%) and those who are developing workforce skills and capabilities (44%) has narrowed from 2021, when 60% prioritised technology investment over workforce-related investments (40%).

Businesses have shifted their attention to tech adoption, engagement and change management among their people to support a vastly different world of work. To drive their growth, CEOs may be exploring ways to increase their people's productivity through transformation.

Building successful partnerships

Few organisations can succeed on their own. Businesses rely on ecosystems as building successful partnerships can help a company deliver a competitive edge.

Increasingly, CEOs view partnerships as an important means to continue the pace of their digital transformation (71%, compared to 59% in February 2022). CEOs also see building strategic alliances with third parties as the most important strategy to help them reach their growth objectives over the next three years.

Many are finding it more useful to partner with the likes of start-ups and fintechs to bring agility and resilience to growth. To bring the business together and drive successful transformation, CEOs need the right partners and the ability to connect it all.

 

Cyber is strategic

The cyber environment is evolving quickly, and so are business leaders' focus on cyber capabilities. In our survey, 77% see information security as a strategic function and a potential competitive advantage. Geopolitical uncertainty is also fuelling concern over corporate cyber attacks among many CEOs (73%), up from 61% in 2021. 

Increasing awareness of the challenges in cyber security is giving CEOs a clearer picture of how prepared — or underprepared — they may be. More leaders (24%) recognise that they are underprepared for a cyber attack, compared to 13% in 2021. Meanwhile, the number of respondents who say they are prepared (56%) remain level with last year's. Nearly three-quarters (72%) say their organisation has a plan to deal with a ransomware attack, compared to 65% in 2021.

The rapid increase in cyber attacks, coupled with the increasing difficulty of detecting attacks on time, calls for automation and innovation in dealing with cyber incidents.

 

Exploring opportunities for growth

  • Bring your people and technology together: Organisations have invested significantly in digital transformation; the next step is ensuring people adopt and optimise their use of these technologies.
  • Work with partners to drive value: CEOs are increasingly interested in partnerships. Identifying, integrating and managing third parties effectively can help increase speed to market, reduce costs, mitigate risks and supplement capability gaps in delivering on your customer promise.
  • Get closer to customers: Orchestrating compelling customer experiences requires companies to begin with the customer and work backwards, taking an outside-in perspective to reverse-engineer and shape what the experience should be; then, they should adopt an inside-out view to define how the experience should be delivered.
  • View cyber security as a strategic function: Increasingly, cyber is no longer seen solely as an IT issue; it is a fundamental business operation imperative. The exponential increase in cyber attacks, coupled with the difficulty of detecting an attack in a timely manner, calls for automation and innovation in dealing with cyber incidents.