© 2011 IBM Corporation Leadership in a global reality 6th December 2011 Preben Thalund Madsen,...

© 2011 IBM Corporation

Leadership in a global reality6th December 2011

Preben Thalund Madsen, Partner IBM Global Business Services


The Global CEO Study 2010 is the fourth biennial CEO study, building on our insights and findings over the last 6 years

1,541 CEO interviews

2010Capitalizing on Complexity

Key Findings Rapid escalation of

complexity creates need to: Embody creative

leadership Reinvent customer

relationships Build operating dexterity

2008 Enterprise of the Future

1,130 CEO interviews

Key Findings Hungry for change Demanding customers as

opportunity to differentiate Extensive business model

innovations Moving towards global

business designs

2006Innovation

765 CEO interviews

Key Findings Business model innovation

matters External collaboration is

indispensable Innovation must be

orchestrated from the top

2004Your turn!

456 CEO interviews

Key Findings Revenue growth is the

number one priority Responsiveness is a new

key competence Improving internal

capabilities is a first step toward growth


In this largest known sample of face-to-face CEO interviews, we spoke with over 1,500 CEOs and public sector leaders

The study represents organizations in 60 countries and 33 industries

Note: The CEO response sample has been weighted based on 2008 Actual Regional GDP of the IMF World Economic Outlook, October 2009;* Growth Markets include Latin America, Asia Pacific (excluding Japan), Middle East and Africa

13%Communications

25%Distribution

18%Financial Services

24%Industrial

20%Public 25%

Growth markets*

21%North America

42%Europe

12%Japan

Sectors Regions


Agenda

CEOs must navigate in a highly volatile, increasingly complex environment

- Massive global shifts increase uncertainty

- Continued rise of technology as key external factor

- Challenges are compounded by regional differences

Standing out in a complex world

- Embody creative leadership

- Reinvent customer relationships

- Build operating dexterity

Seizing the upside of complexity


16%17%

14%10

14%16%

CEOs are confronted with massive global shifts in the New Economic Environment

Slow down or reversal of globalizationIncreased protectionism, dominance of local interests and local requirements

Continued globalizationGlobal capital flows, trade, access to markets, skills and knowledge

Mature markets retain economic powerConsumer demand, economic power and innovation skewed towards mature markets

Rapidly developing markets gain economic powerConsumer demand, economic power and innovation shifting to rapidly developing markets

Small government, light regulationMove or return to unrestrained markets with limited state ownership or regulatory reform

Big government, heavier regulationGreater government involvement, more regulation and government as a stakeholder in strategic businesses

Source: Q8 Which of these future scenarios for the next five years do you consider more realistic? Globalization n=1,515; Markets n=1,502; Government n=1,519

67%

76%

70%

Not at all/to a limited extent To a large/very large extentTo some extent


Continued rise of technology as key external factor for CEOs

Source: Q1 What are the 3 most important “external” forces that will impact your organization over the next 3 years? n=1,538

Three most important “external” forces over the next three years


Vast majority of CEOs experience the New Economic Environment as distinctly different

More volatileDeeper/faster cycles, more risk

More uncertainLess predictable

More complexMulti-faceted, interconnected

Structurally differentSustained change

Not at all/to a limited extent To a large/very large extentTo some extent

“Last year’s experience was a wake-up call, like looking into the dark with no light at the end of the tunnel.”

President and CEO, Industrial Products, The Netherlands

Source: Q7 To what extent is the new economic environment different? Volatile n=1,514; Uncertain n=1,521; Complex n=1,522 ; Structurally different ,

18%13% 69%

21%14% 65%

22%18% 60%

21%26% 53%

The New Economic Environment


CEOs are now challenged to close the complexity gap and use complexity to their advantage

Source: Q10 How much complexity will your organization have to master over the next 5 years? n=1,512; respondents who selected “More/significantly more complexity”; Q12 How prepared do you feel for the expected complexity ahead? n=1,508; respondents who selected “Fully prepared”

Expect high/very high level of complexity over 5 years

Feel prepared for expected complexity

30%Complexity gap*

“Complexity should not be viewed as a burden to be avoided; we see it as a catalyst and an accelerator to create innovation and new ways of delivering value.”

Juan Ramon AlaixPresident, Pfizer Animal Health, United States

“The world is non-linear, so the ability to cut through complexity relies on processing a large amount of information quickly and extracting nuggets to make quick decisions. Building advantage will be an outcome of dealing with complexity better than our competitors”

Julian SegalDirector and CEO, Caltex Australia Limited, Australia

Expected level of complexity and preparedness to handle

* Complexity gap = difference between expected complexity and the extent to which CEOs feel prepared to manage complexity

49%

79%


Agenda




- Complexity challenges are compounded by regional differences







We identified Standout organizations that delivered superior performance during both the long term and recent short term

Lo

ng

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stea

dy-

sta

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per

form

anc

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Short-term,crisis performance

Performance Analysis Framework

Top 50 percent

Long-term Performance4 year operating margin CAGR (2H03/1H04 – 2H07/1H08)

Short-term Performance1 Year operating margin growth (2H07/1H08 - 2H08/1H09)

Standouts

Top

50

perc

ent


Standouts are also better prepared to manage the expected complexity

Complexity gap*

Note: Long-term performance: 4 year operating margin CAGR (2H03/1H04 – 2H07/1H08); Short-term performance: 1 year operating margin growth (2H07/1H08 - 2H08/1H09)Source: Q10 How much complexity will your organization have to master over the next 5 years? n=299; Q12 How prepared do you feel for the expected complexity ahead? n=296

“Really, I am not afraid of complexity at all. On the contrary, this just motivates me.”

Jacques PellasSecrètaire Général, Dassault Aviation,

France

* Complexity gap = Difference between expected complexity and the extent to which CEOs feel prepared to manage it

Lo

ng

-te

rm,

stea

dy-

sta

te

per

form

anc

e

Short-term,crisis performance

Top 50 percent

Standouts

22% Gap 6%

Gap

52% Gap 35%

Gap

Top

50

perc

ent


Standouts capitalize on complexity in three ways

• Creativity is #1 leadership quality• Drive change in the organization to

stay ahead of market and use a wide range of communication styles and tools

• Break with status quo of industry, enterprise and revenue models


Creativity is the #1 leadership quality

Source: Q19 Which of the following leadership qualities do you think are most important in the next five years? n=1,538

60%

52%

35%

28%

26%

26%

12%

12%

Creativity

30%

Integrity

Global thinking

Influence

Openness

Dedication

Focus on sustainability

Humility

Fairness

“Creativity is vital in a complex environment.”

Government Official,Hong Kong

Most important leadership qualities over the next five years

“Only leaders who act with integrity shall and will survive.”

CEO, Electronics Industry, Switzerland


Standouts focus on quick decisions despite uncertainty

42%15% 43%

41%31% 28%

Ways in which to achieve rapid change over next five years: Decision Making

54%more

Source: Q21 How will you realize rapid change over the next 5 years? Quick decision vs thorough decision n=299

Thorough decisions Quick decisionsBoth

Standouts

Others

“We need to keep making quick decisions instead of waiting and thinking about it: good decisions that may not be absolutely right because we don't know all the information. We have left competitors behind by making quick decisions – it is a differentiating factor for us.”

CEO,Life Sciences, Belgium


Standouts leap ahead with new management and leadership styles and balanced communication approaches

13%8% 79%

25%17% 58%

Continuouschange

Ad-hocinitiatives

Persuade andinfluence

Commandand

control

“There isn’t the luxury of time. We used to say, ‘Wait until this crisis is over and we get back to normal,’ but that never happens. We have to be ‘change animals.’ ”

Michele McKenziePresident and CEO, Canadian Tourism Commission,

CanadaSource: Q21 How will you realize rapid change over the next five years? n=300

28%33% 39%(Managed) viralcommunication

Top-downcommunicatio

n

Standouts realizing rapid change over the next five years: Management Style

Both


So what builds creative leadership?

Embrace ambiguity: Reach beyond silos, exemplify breakthrough thinking, act despite uncertainty.

Take risks that disrupt legacy business models: Pilot radical innovations, continually tweak your models, borrow from other industries’ successes.

Leapfrog beyond “tried-and-true” management styles: Strengthen your ability to persuade and influence, coach other leaders, use a wide range of communication approaches.

Recommendations

How will you develop the critical capabilities to enhance creativity among your leadership?

In what ways can you explore, reward and integrate diverse and unconventional points of view?

What is your approach to evaluate every element of your business model to get the most from currently untapped opportunities?

How will you leverage new communication styles, technologies and tools, both to lead a new generation of talent and encourage breakthrough thinking?

Tough questions to consider



• “Getting closer to customers” is the single most important theme

• Better understand customer needs through collaboration and info sharing

• Exploit the information explosion to deliver unprecedented customer service


“Getting closer to the customer” is THE top priority for Standouts

83%

Others

95%

Standouts

Getting closer to customers

14%more

Getting closer to customer

People skills

Insight and intelligence

Enterprise model changes

Risk management

Industry model changes

Revenue model changes

88%

81%

76%

57%

55%

54%

51%

Dimensions to focus on over the next 5 years

“Our customers want personalization of services and products. It is all about the market of one.”

Tony TylerCEO, Cathay Pacific Airways, Hong Kong

Source: Q13 Which of the following dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years? n=1,523, n=303

“To surprise customers requires unexpected ideas through interactions of people with diverse perspectives.”

Shukuo IshikawaPresident and CEO, Representative Director, NAMCO

BANDAI Holdings, Inc. Japan


CEOs want to better understand customer needs and actively work with them

Source: Q15 To what extent will your customers’ expectations of you change over the next five years? n=1,518

12%82% 6%Better understanding of needs

20%70% 10%New or different services

20%69% 11%More collaboration, information sharing

22%61% 17%New or different products

25%51% 24%New or different channels

24%45% 31%Stronger focus on price-value equation

30%46% 24%Increased focus on social responsibility

Not at all/to a limited extentTo a large/very large extent To some extent

CEOs’ view of “How customer expectations will change over the next 5 years”

All participants:


Customer-centric CEOs exploit the information explosion to better understand and serve customers

49%

OtherCEOs

63%

Customer focusedCEOs

Impact on organization ofinformation explosion

29%more

66%

OtherCEOs

78%

More focus on insight and intelligence

to realize strategy

18%more

Customer focusedCEOs

Deep dive analysis: CEOs that scored high or very high on “getting closer to the customer”

... to generate insight and intelligenceCustomer focused CEOs use data...

Source: Q9 To what extent will the following factors impact your organization over the next 5 years? n=1,507; respondents who selected Information explosion “to a large/very large extent”; Q13 Which dimensions will you focus on more to realize your strategy in the New Economic Environment? n=1,516; respondents who selected insight and intelligence “to a large/very large extent”

“Insight and foresight are linked with leadership. It's insight that helps to capture opportunity.”Zhou Ming, Executive Vice

President and Secretary General,

China Council for Int’l Investment Promotion

China

“Information is not well validated. The problem is a ‘misinformation explosion.’ ”

Dr. Paul Byrne, President,

Grant MacEwan UniversityCanada


So how do you reinvent customer relationships?

Honor your customers above all else: Unprecedented level of focus, heightened customer exposure for every employee, measure what customers value.

Use two-way collaboration to sync with customers: Make customers part of your team, solicit customer wants, co-innovate and interact with customers in new ways, deliver true process transparency.

Profit from the information explosion: Tap the value of limitless data, use analytics to translate data into insight into action that creates business results, share information freely to build trust and improve customer relationships.

Recommendations

How will you engage customers in new ways that increase interest and loyalty to generate new demand and revenue sources?

How can you involve customers more effectively and directly in product and service development?

Can you hear the voice of your customers through the vast amount of data? Can you understand and act upon the information?




• Simplify operations and products to better manage complexity

• Use iterative strategies, make quick decisions and execute with speed

• Integrate globally, increase cost variability and exploit partnering to increase agility


Standouts simplify operations and products to better manage complexity

Changes to operating strategy: Simplify

“Simplification and standardization are key strategies that we have been using for several years to reduce existing and future complexity.”

Brenda Barnes, Chairman and CEO, Sara Lee, United States

“When things look very simple, you need to look for a competitive edge. When things are complex, you simplify to get the competitive advantage”

Graeme Liebelt, Managing Director and CEO, Orica Limited, Australia

Source: Q18 How will you change your operating strategy? Manage complexity versus simplify n=294

Others

Standouts 30%more

61%

47%


CEOs that prioritize speed and dexterity are increasing the share of variable cost

12%12% 76%

26%14% 60%

Source: Q18 How will you change your operating strategy? Fixed versus variable cost n=170

Changes to operating strategy of operational dexterity focused CEOs

Deep dive analysis: CEOs that selected ‘iterative strategies, quick decisions and execute with speed’

27%more

Increase share of fixed cost Increase share of variable costBoth

Dexterous CEOs

CEOs not prioritizing dexterity


Speed and dexterity enable revenue growth from new sources

30%

25%

Next 5 years

Revenue generated from new sources

Source: Q16 What percentage of our revenue (budget) comes from new sources, such as new products or services, new markets or new industries? Median of percentage for past five years n=1380 and median of percentage next five years n=1,388

“Scaling for growth takes a balance of operations, innovation and business model changes to enable growth to the next level of a business. Leadership needs to balance the timing to make the right changes at the right time.”

Jay GeldmacherExecutive VP, Emerson, United States

Deep dive analysis: CEOs that selected ‘iterative strategies, quick decisions and execute with speed’

20%more

20%

15%

Last 5 years 33%more

Dexterous CEOs

Others

Dexterous CEOs

Others


So what are the steps to build operating dexterity?

Simplify whenever possible: Simplify interactions with customers, simplify products and services by masking complexity, simplify for the organization and partners.

Manage systemic complexity: Put complexity to work for your stakeholders, take advantage of the benefits of analytics.

Promote a mindset of speed and flexibility: Act quickly, push execution speed, course-correct as needed.

Be “glocal”: Leverage the world through partners, constantly tune your operating model – global where possible, local where necessary.

Recommendations

In what ways can you simplify processes, without ignoring underlying complexity, and develop the agility required to execute rapidly?

How can your organization benefit from taking on more complexity on behalf of your clients or customers?

How will you integrate and analyze timely information to gain insight, make quick decisions and enable dynamic course correction?

Have you implemented asset and cost flexibility and defined partnering strategies to compete in your chosen markets?



Agenda




- Complexity challenges are compounded by regional differences








Honor your customers above all else

Use two-way communications to sync with customers

Profit from the information explosion

Embrace ambiguity

Take risks that disrupt legacy business models

Leapfrog beyond “tried-and-true” management styles

Simplify whenever possible

Manage systemiccomplexity

Promote a mindset of being fast and flexible

1 2 3

Be “glocal”

Reinventcustomer

relationships

Buildoperatingdexterity

Embodycreative

leadership


APPENDIX 1

Geographic differences

IBM Institute for Business Value

IBM Strategy & Change


Geographical divergence of perspectives and actions adds another layer of complexity

North America (US, Canada) European Union

Japan

Market factors 45%Regulatory concerns 41%Technological factors 40%

Market factors 57%Technological factors 39%Macroeconomic factors 36%

Market factors 78%Globalization 41%Technological factors 40%

China

Market factors 54%Macroeconomic factors 45%Technological factors 45%

Source: Q1 What are the 3 most important ‘external’ forces that will impact your organization over the next 3 years? n=1,538

Three most important external factors by geography

“Globalization brings complexity. We must localize decision making to where the action is.”

CEO, Retail Company, United States


North America: Concerned about the impact of regulation and government

North America (U.S., Canada)Market factors 45%Regulatory concerns 41%Technological factors 40%

Source: Q1 What are the 3 most important ‘external’ forces that will impact your organization over the next 3 years? n=1,538; Q8.2 Which of these future scenarios of the next five years do you consider more realistic? Small vs. Big government n=1,519; Q13.4 Which of the following dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years? Risk Management n=1,511; Q17.3 To what extent will you make changes to your operating model in the next 5 years? Organization and governance n=1,508; Q19 Which of the following leadership qualities do you think are most important in the next 5 years? n=1,538

“Due to government regulations, cycle time to get our product to market is slowing down.”

CEO, Medical Device Company, United States

3 Most important external factors

NA CEOs expect “big government” and regulation

North America

EU

China

Japan

87%

70%

53%

50%

NA CEOs are least focused on risk management to realize their strategic goals

North America

EU

China

Japan

45%

50%

64%

68%

NA CEOs are least likely to change organization and governance

37%North America

EU

Japan

China

49%

67%

67%

NA CEOs see integrity as top leadership quality

65%North America

EU

China

Japan

48%

30%

29%


European Union: Using middle of the road strategies, balancing all

European Union

Market factors 57%Technological factors 39%Regulatory concerns 35%

Source: Q1 What are the 3 most important ‘external’ forces that will impact your organization over the next 3 years? n=1538; Q9 To what extent will the following factors impact your organization over the next 5 years? Talent Shortages n=1,523, Shift in economic power to rapidly developing markets n=1,499; Q13 Which dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years? Enterprise Model Innovation n=1,491; Q22 What are the 3 most crucial capabilities your organization needs to be successful in executing in the next 5 years? Client connectivity n=1,538

“Technology is already impacting our clients’ behavior, currently clients are price checking over four continents using today's technology.”

Managing Director,Retail, United Kingdom


EU CEOs are least likely to focus on enterprise model innovation

EU CEOs least impacted by shift in economic power

EU

China

North America

Japan

43%

48%

49%

74%

47%EU

North America

China

Japan

59%

69%

73%

EU CEOs consider client connectivity as crucial to executing in the NEE

48%EU

Japan

North America

China

35%

21%

11%

EU CEOs least impacted by talent shortage

EU

North America

Japan

China

45%

58%

71%

78%


China: Increasing global impact but challenged to build capabilities

China

Market factors 54%Macroeconomic factors 45%Technological factors 45%

Source: Q1 What are the 3 most important ‘external’ forces that will impact your organization over the next 3 years? n=1,538; Q7.4 To what extent is the new economic environment different? n=1,514; Q17 To what extent will you make changes to your operating model in the next 5 years? People skills and capabilities n=1,514; Q13 Which of the following dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years? Industry model change n=1,511; Q19 Which of the following leadership qualities do you think are most important in the next 5 years? n=1,538

“China is making leaps in economic development, so the enterprise model has to keep pace with the fast-changing environment. You cannot run a business of 1,000 people with same model as one with 100 people.”

General Manager, Retail, China


CEOs in China are less concerned about volatility CEOs in China are most focused on industry model innovation

CEOs in China are most focused on building new skills and capabilities

CEOs in China see “global thinking” as a top leadership quality

61%China

Japan

EU

North America

42%

33%

33%

72%China

Japan

North America

EU

56%

55%

49%

83%China

Japan

North America

EU

82%

66%

66%

51%China

EU

Japan

North America

70%

71%

75%


Japan: Responding to shift in economic power by increasing execution speed and changes in operating style

Japan

Market factors 78%Globalization 41%Technological factors 40%

Source: Q1 What are the 3 most important ‘external’ forces that will impact your organization over the next 3 years? n=1,538; Q7.2 To what extend is the new economic environment structurally different? n=1,523; Q9 To what extend will the following factors impact your organization over the next 5 years? Shift in economic power from mature to rapidly developing economies n=1,499; Q22 What are the three most crucial capabilities your organizations needs to be successful in executing in the next 5 years? n=1,538; Q13 Which of the following dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years? People skills n=1,526

3 Most important external factors“Rapidly developing markets will achieve growth. It is important that we develop a market for export. Our battlefield will be the world.”

President, Banking, Japan

CEOs in Japan see the New Economic Environment as structurally different

CEOs in Japan are most likely to see execution speed as a crucial organizational capability

The shift of economic power to rapidly developing markets is most acutely felt by CEOs in Japan

CEOs in Japan are most focused on developing people skills to realize their strategy

Japan

China

North America

EU

82%

55%

53%

47%

Japan

EU

North America

China

44%

38%

34%

27%

Japan

China

EU

North America

92%

82%

77%

74%

Japan

North America

China

EU

74%

49%

48%

43%


APPENDIX 2

Backup

IBM Institute for Business Value

IBM Strategy & Change



• Creativity is #1 leadership quality• Drive change in the organization to

stay ahead of market and use of wide range of communication styles and tools

• Break with status quo of industry, enterprise and revenue models

• Simplify operations and products to better manage complexity

• Use iterative strategies, make quick decisions and execute with speed

• Integrate globally, increase cost variability and exploit partnering to increase agility

• “Getting closer to customers” is the single most important theme

• Better understand customer needs through collaboration and info sharing

• Exploit the information explosion to deliver unprecedented customer service

© 2011 IBM Corporation Leadership in a global reality 6th December 2011 Preben Thalund Madsen,...

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Transcript of © 2011 IBM Corporation Leadership in a global reality 6th December 2011 Preben Thalund Madsen,...