A French perspective on the key themes of the 2017 CEO Outlook Survey.
Commenting on France’s results from the KPMG International 2017 CEO Outlook Survey, Nicolas Richard, Partner in Management & Risk Consulting, leading Advisory Services in France explains why French business leaders seem to have a greater appetite for international expansion than their international counterparts, why they should change how they think about projects’ time horizons, and why they are now more likely to face challenging decisions than they were in the past.
Q: French CEOs are investing heavily in innovation, but many have concerns about being disrupted. Do you think more French CEOs should learn to think of disruption as an opportunity for growth rather than a threat?
Nicolas Richard: Disruption is more of an opportunity than a threat but I see a great deal of uncertainty around how to harness it among French business leaders, especially with regard to digital disruption. That’s mainly for two reasons. First, because technological change often raises questions about current structures of governance. If you have a siloed executive committee, any disruptions affect not just the operations but also its governance.
Second, many large companies are driven by their business plan. They have set their budget and are working towards set business and financial outcomes. Digital disruption means they cannot be sure of their four-year strategy anymore. A number of projects are struggling between trying to ensure there is a significant return for the business and undertaking a major transformation.
It’s possible that there is a cultural element here. The tradition of keeping to existing structures is perhaps rooted in the French education system and culture. Some of the Anglo-Saxon countries tend to have a slightly more flexible response to disruptions.
Q: The survey suggests that most French businesses are not getting the insight they need from data and analytics. What should leaders do to build a stronger analytics capability? What should the balance be between human intuitive understanding, and one based on data?
Nicolas Richard: I think we’ll look back at these survey results a few years from now and see that right now we are at an inflection point. Many big companies have spent a long time working out which technologies to use to gather analytics, and are now facing the question of how to integrate that capability into the structure of their organizations in order to best convert those insights into action. Many are still working on that.
We have seen a number of larger firms acquire smaller ones to gain better customer analytics capabilities. But the market in France is fairly young, even compared with other European countries. So the first priority for many French companies should be to prepare their organizations to make the best use of customer insights, rather than worrying about the balance between intuitive and technical methods.
Q: Why do you think most French businesses are looking to expand into new geographical markets in the near future, and what steps should they be taking now to ensure they can achieve these strategic ambitions? For context, 33% of French CEOs said they planned to expand into new geographical markets compared to a global average of 21%.
Nicolas Richard: The French market is very dynamic especially towards global acquisitions and looking at growth platforms in other geographies. Even for mid-size companies, global strategy is no longer something to dread and it becomes part of their investment strategy. On the other hand, that kind of expansion can only happen when the business is strong in its home country – where the business is able to manage digital transformation well and deals with changing customer expectations while keeping the company profitable. The combination can be quite a challenge.
Q: The survey suggests that organizations increasingly see business transformation as an ongoing activity. How can leaders ensure their business embrace transformation?
Nicolas Richard: It starts with the right mindset. By definition technological transformation is an ongoing activity. That means moving away from the idea of delivering on a plan and recognizing that you cannot work towards outcomes which are too long-term. If you are working on a five or six year plan the technology will have changed in that time. Instead of giving a project a year until you review it, give it three months. If you have insufficient evidence that the project works it is often better simply to stop it and move to another.
Q: The CEOs in our survey believed that the role of the CEO needs to evolve in order to better lead the business. What are the main reasons why you think the evolution is necessary now, and what are the key personal and professional attributes that the CEO of tomorrow needs to have?
Nicolas Richard: There is a much greater need to manage ambiguity today than there used to be. In the past, CEOs normally found that they were taking decisions where 80% of the elements of the project were defined, analyzed and clear. The market landscape is shifting faster than it would have done before, which increases uncertainty and instability. That means that the decisions which reach the desk of the CEO are more likely to be ambiguous than they used to be.
Today, CEOs are more likely to be making decisions where only 60% of the characteristics and risks associated with doing or not doing a project are knowable, which requires a higher tolerance for making decisions with incomplete information. One partner advising CEOs in France put it well when he said "if one of the decisions on the CEO’s desk is perfectly clear, it probably shouldn’t be on the CEOs’ desk at all." That sums up the challenge.