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Are CEOs Prisoners of Geography?

Are CEOs Prisoners of Geography?

Culture is a core component of geopolitics; understanding sociodemographic idiosyncrasies can help forecast what will play out in terms of politics and policy, and vice versa. It is also generally well-accepted that cultural differences can impact on leadership style.

So, are CEOs Prisoners of Geography1, with perspectives changing with location?

The US vs. Them2

Our CEO Outlook survey showed us that a CEO based in the US faces a different business landscape than a CEO in China - or at the least, adopts a very different lens.

Whereas US CEOs told us their top threats to growth were operational risk and cybersecurity, the survey finds that China CEOs view “emerging/disruptive technology risk” as a potential challenge, as well as “a return to territorialism” (perceived risks such as the US renegotiating NAFTA and the UK leaving the EU), “environmental/climate change risk” and “reputational/brand risk”.

Which of the following risks poses the greatest threat to your organization’s growth? US China Rest of World (excluding US and China)
Return to territorialism (e.g. US renegotiating NAFTA, UK leaving EU) 29% 66% 66%
Cyber security risk 44% 29% 32%
Emerging/disruptive technology risk 29% 44% 37%
Environmental/climate change risk
12% 46% 42%
Operational risk
65% 18% 19%
Reputational/brand risk
17% 30% 29%
Interest rate risk
39% 15% 16%
Talent risk 30% 17% 16%
Regulatory risk
12% 15% 17%
Supply chain risk
11% 10% 17%
Tax risk 10% 2% 2%


On the flip side, nearly half of Chinese CEOs (48%) considered that growth over the next three years will be harder earned than ever before – compared to a mere 9% of US CEOs. Interestingly, in most cases, the perspectives of CEOs from the rest of the world were more likely to align with that of a CEO in China.

These findings in themselves are not surprising. The threats faced by business are of course partially defined on market location, and it is not hard to see why businesses based in the US may be facing a different outlook than those abroad.

But perhaps more importantly, these differences are not confined to the risk and opportunity landscape – the divergence in perspectives can also be seen in strategies, approaches and responses adopted by business leaders. For example:

  • An overwhelming 82% of Chinese CEOs and 79% of CEOs from the rest of the world saw acting with agility as the new currency of business – compared to just 14% of CEOs in the US. 
  • CEOs in China were far more likely to consider strategic alliances with third parties as a strategy for growth (42% compared to the US at 23% and the rest of world at 36%). 
  • US CEOs were far more comfortable with their existing capabilities in scenario- and risk-modelling (with 56% ranking their existing workforce as effective compared to less than a third of CEOs elsewhere). 
  • Few US CEOs expect to increase their usage of predictive models and analytics over the next three years (9%), compared to over half of CEOs in China and 40% of CEOs in the rest of the world.

Why does this matter?

The difference in focus and strategies outlined above could indeed be appropriate for particular companies operating in certain countries under specific conditions. But what I would say is that we have a tendency to surround ourselves with people and information that have similar mind-sets and approaches – which is why people end up questioning others whom they don’t even know for voting in a particular way.

In this kind of echo-chamber, it is easy to fall prey to an unconscious tendency to act in a particular way, which is particularly risky when it stems from attitudinal, nationality or cultural motivations rather than situational change. Being aware of how identity politics play into not only the markets that businesses operate in, but within their own organizations, is critical to ensuring that a CEO can act as an effective Chief Geopolitical Officer.

Footnote

1Due credit to Tim Marshall and his (highly-recommended) book ‘Prisoners of Geography: Ten Maps That Tell You Everything You Need To Know About Global Politics’.

2Similar credit to our Alliance partner Eurasia Group and its founder Ian Bremmer for allowing me to shamelessly pilfer the title of his new book ‘Us vs Them: The Failure of Globalism’.

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