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CEOs need to continually challenge their business models and adapt

UK chief executives are acutely aware they need to continually challenge their business models and adapt organisations to keep pace with disruption … and to disrupt others. 

Chart: Organic growth is losing favour among CEOs

% of CEOs who see organic growth as their principal growth strategy

2017
2018
2019
United Kingdom
71%
32%
21%


Global
72%
28%
25%

It’s vital you are very clear on what your business does and does not do. We found just the act of clearing the decks around our strategic purpose has been incredibly helpful for our people.

Tristia Harrison
CEO
Talk Talk

New routes to growth

Over the past three years of this survey, we’ve seen a clear shift in growth strategies from organic to inorganic. And within that move towards inorganic growth one of the most striking trends in this year’s report was the enthusiasm to forge strategic alliances.

In fact, UK chief execs are more enthusiastic about strategic alliances than CEOs from any other country surveyed and now rank it as their most important strategy to drive growth (above organic, M&A, joint ventures and others). Nicola Longfield, Head of Corporates Deal Advisory at KPMG in the UK, says that digital transformation is driving many alliances and partnerships.

 

Another important strand to the rise of strategic alliances is that we are likely to see a greater reliance on ecosystems to deliver growth and create optionality, says Nicholas Griffin, Head of KPMG’s Global Strategy Group. ”CEOs realise that in many cases they need to pursue multiple options where they lack capability or need to set a pace that internal innovation engines cannot deliver.”

We found UK CEOs had the highest appetite for setting up accelerators and incubators and over two thirds said they would undertake some sort of corporate venturing. They were also far keener than global CEOs to collaborate with start-ups and use third-party platforms as a sales channel.

42% of UK CEOs say strategic alliances are their most important growth strategy

In order to be resilient, a company has to have the right leadership and one with the right mindset. Building the right culture and organisational structure are crucial.

Henadi Al-Saleh
Chairperson
Agility

Emerging markets

CEOs are telling us that expanding the footprint of their organisation remains a vital tool in building resilience and tapping into faster growth, despite CEOs’ growing scepticism around prospects for the global economy over the next three years.

Emerging markets is the top priority for 66% of CEOs who are looking to grow beyond the United Kingdom (compared to 57% looking towards emerging markets in 2018). 

While the IMF has said it expects growth in emerging markets to moderate slightly this year before ticking up to 4.9% in 2020, it estimates that advanced economies will grow at less than half the rate of emerging markets this year and slow further to 1.7% in 2020.

Given that backdrop, UK CEOs are looking towards emerging markets to protect growth: 86% say they are building a presence there to become more resilient.

Every organisation needs a culture where people trust and respect each other because having that base allows people to try out things; to make mistakes knowing that everybody has got his or her back if things fall apart. That is the key lever to innovation.

Claudio Gienal
CEO
AXA UK & Ireland

Building a culture of innovation within

UK CEOs might be leading the pack when it comes to partnering with other organisations to maximise growth, agility and innovation, but organisations will struggle to react to rapid changes in customer demand or technological disruption if they are not creative and innovative themselves.


If that is the case, then CEOs in the UK – like their global counterparts – still have work to do. Our research found a disconnect between the culture that CEOs aspire to have and the culture they have today: 77% say they want employees to innovate without fear, but only 57% say that corporate culture is already in place.

52% of UK CEOs said they needed to improve how they innovated (the lowest rate globally)

Chart: CEOs want to foster innovation but have to work harder on culture first

To what extent do you agree with the following statements?

Key

I want my employees to feel empowered to innovate, without worrying about negative consequences for them if the initiative fails

Our organisation has a culture in which "fast-failing" unsuccessful innovation initiatives are celebrated

                          

C-suite reboot

As disruption in all its forms is increasingly reshaping organisations, it is no surprise that disruption is also reshaping leadership teams. Already in most major organisations, CFOs and CMOs have been joined by a new generation of direct reports to the CEO – from chief analytics to chief digital officers. However, while CEOs have added more firepower to their leadership teams, they are not stopping there.

One response is to introduce greater diversity into the leadership group – one that not only introduces different skills and experiences but that better reflects a business’s customers and employees.

87% of UK CEOs are actively transforming their leadership team