The survey finds that the COVID-19 crisis has shaken CEO confidence in global economic growth. Today, around one-third (32 percent) say they are less confident now about prospects for global growth over the next 3 years than they were at the start of the year. However, this loss of confidence is not as dramatic when CEOs consider what the future holds for their companies, with only 17 percent less confident today. They are clearly more confident in mastering their own company’s fortunes, where they have more control and levers of influence.
CEOs are more confident in their own businesses’ growth prospects over the coming 3 years. In part, this is because they have greater control over the levers that will determine this. One of the most critical levers they can control here, and a major growth driver, is digital acceleration. With commerce increasingly taking place online because of factors such as physical distancing, companies are having to rethink what customers want and how to deliver. We found that 75 percent of CEOs say the pandemic has accelerated the creation of a seamless digital customer experience, with over 1 in 5 (22 percent) of those saying progress “has sharply accelerated, putting us years in advance of where we expected to be”.
The challenge for organizations is to focus efforts and investment on the areas that are capable of generating the most long-term value, while avoiding those areas that might just prove to be a short-term reaction to the pandemic. When we asked CEOs to name the greatest challenge they have faced in accelerating digital transformation, the biggest issue was ‘lack of insight into future operational scenarios’. Companies need to understand whether a COVID-related change – such as shifting customer behaviors – is evidence of a permanent trend that is emerging rather than just a temporary effect of the pandemic.
As they plan their path to long-term growth, business leaders recognize that there have been new challenges to contend with during the lockdown. A potential second wave of COVID-19 in their key markets would likely deepen these concerns, with further adverse consequences in terms of retaining key employees, hiring talent and keeping their workforces productive.
In January, CEOs ranked talent risk behind 11 other risks to growth. However, since the start of the pandemic, talent risk has risen to be named as the most significant threat to their businesses ahead of supply chain risk, the threat of a return to territorialism, and environmental risk.
Supply chain risk has accelerated up the agenda from its ninth-placed position at the beginning of the year – it now occupies 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 even sharper relief, as organizations desperately 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 organizations to drive growth and build a competitive advantage post-COVID. This will be particularly important in a world where CEOs are aware that increasing territorialism – which is their third-placed risk today – could make the transfer of goods both more difficult and more costly. We look further into this issue in the ‘Customer-centric supply chain’ section.
Managing talent risk requires that CEOs both focus on the now and the long-term future. Today, CEOs are acutely aware that talent will be key to driving long-term growth and building an organization that can thrive in a new reality. New digital talents will be needed to meet changing customer behaviors and needs. As automation of the operating model accelerates, upskilling and reskilling will be critical for people’s employability and effectiveness. To build a new organization, people’s willingness to learn continuously and their adaptability will be increasingly important attributes. Developing new learning content – and delivering it virtually – will be a critical step.
With digital acceleration shaping the future of industries, organizations will need a deep understanding of how customer behavior will shift and how to meet these emerging demands. Data-driven insight – and scenario modelling – will be critical to understand what major shifts are likely to emerge. Pre-pandemic, the major challenge to many organizations’ digital transformation was the burden and complexity of legacy IT and a continued struggle to manage their data effectively. These challenges have not gone away and organizations will need to focus on cybersecure IT transformation, across organizational silos drawing on cloud technologies and agile techniques. This is the time for organizations to reflect on their talent base and build a robust foundation of digital skills.
Unless otherwise indicated, throughout this report, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International.