Global CEO Study 2010

Capitalizing on Complexity

Insights from the Global Chief Executive Officer Study

This study is based on face-to-face conversations with more than 1,500 chief executive officers worldwide.

Samuel J. PalmisanoChairman, President and Chief Executive Of!cerIBM Corporation

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Samuel J. PalmisanoChairman, President and Chief Executive Of!cerIBM Corporation

Table of contents $

# # \-3#-;(#(&)&+(*%#3+)#*-"0;*$&0# ]#

# # 95&*;$/<&#);44+(6# ^

Introduction Stand out in a complex world 13

Chapter One Embody creative leadership 23

Chapter Two Reinvent customer relationships 37

Chapter Three Build operating dexterity 51

The CEO Agenda How to capitalize on complexity 63

# # Q-(#.;($%&(#/".-(4+$/-"# _N

% Capitalizing on Complexity

How our research was conductedI%/)#)$;06#/)#$%&#.-;($%#&0/$/-"#-.#-;(#G/&""/+1#`1-G+1#89:#W$;06#)&(/&)7# 1&0#G6#$%&#!YZ#!")$/$;$&#.-(#Y;)/"&))#a+1;&#+"0#!YZ#W$(+$&26#b#8%+"2&C

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About our researchMore than &,$'' CEOs worldwide participated in this study.

Figure !

Regions

Growth Markets*

25%North America

21%

Europe

42%

Japan

12%

Sectors

Public

20%Communications

13%

Industrial

24%

Financial Services

18%

Distribution

25%

*Growth markets include Latin America, Asia Paci!c (excluding Japan), Middle East and Africa.

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How our research was conducted (

) Capitalizing on Complexity

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Today’s complexity is only expected to rise, and more than half

of CEOs doubt their ability to manage it. W&<&"$6B"/"&#,&(*&"$#-.#89:)#+"$/*/,+$&#&<&"#2(&+$&(#*-4,1&5/$6#+%&+0C#\-3&<&(7#-"&#)&$#-.#-(2+"/e+$/-")#K#3&#*+11#$%&4#@W$+"0-;$)D#K#%+)#$;("&0#/"*(&+)&0#*-4,1&5/$6#/"$-#'"+"*/+1#+0<+"$+2&#-<&(#$%&#,+)$#'<&#6&+()C#

Creativity is the most important leadership quality, according to

CEOs. W$+"0-;$)#,(+*$/*&#+"0#&"*-;(+2&#&5,&(/4&"$+$/-"#+"0#/""-<+$/-"#$%(-;2%-;$#$%&/(#-(2+"/e+$/-")C#8(&+$/<&#1&+0&()#&5,&*$#$-#4+A&#0&&,&(#G;)/"&))#4-0&1#*%+"2&)#$-#(&+1/e&#$%&/(#)$(+$&2/&)C#I-#);**&&07#$%&6#$+A&#4-(&#*+1*;1+$&0#(/)A)7#'"0#"&3#/0&+)7#+"0#A&&,#/""-<+$/"2#/"#%-3#$%&6#1&+0#+"0#*-44;"/*+$&C

“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 Alaix, President, !"#$%&'()*+,&-$+,./

Executive summary *

The most successful organizations co-create products and services

with customers, and integrate customers into core processes.

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Better performers manage complexity on behalf of their

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How CEOs can capitalize on complexity

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Student perspectives

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Build operating dexterity 89:)#+(&#(&<+4,/"2#$%&/(#-,&(+$/-")#$-#)$+6#(&+06#$-#+*$#3%&"#-,,-($;"/$/&)#-(#*%+11&"2&)#+(/)&C#I%&6#)/4,1/.6#+"0#)-4&$/4&)#4+)A#*-4,1&5/$6#$%+$#/)#3/$%/"#$%&/(#*-"$(-1#+"0#%&1,#*;)$-4&()#0-#$%&#)+4&C#Q1&5/G1&#*-)$#)$(;*$;(&)#+"0#,+($"&(/"2#*+,+G/1/$/&)#+11-3#$%&4#$-#(+,/016#)*+1&#;,#-(#0-3"C

“Insight and foresight are linked with leadership. It’s insight that helps to capture opportunity.”

Zhou Ming,&LJ$:2.);$&N):$&!%$4)9$(.&+(9&8$:%$.+%E&O$($%+,6&K/)(+&K12(:),&?1%&B(.$%(+.)1(+,&B(;$4.*$(.&!%1*1.)1(

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To capitalize on complexity ...

Introduction &"

Most CEOs seriously doubt their ability to cope with rapidly escalating complexity. Yet one set of organizations has consistently performed well. How do these Standouts mitigate complexity and even convert it into opportunity?

Stand out in a complex world

&# Capitalizing on Complexity

“You feel ready, but ready for what?”

Andreas Coumnas, D+(+3)(3&P)%$:.1%&L2%15$6&C+,.)*1%$&')%:1),

A drastically different world

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Stand out in a complex world &$

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Global shifts compound complexity

89:)#$-10#;)#$%+$#$%&#*;((&"$#$(&"0#$-3+(0#21-G+1/e+$/-"#3-;10#"-$#1&$# ;,C#I%&6#+"$/*/,+$&#)%/.$/"2#-.#&*-"-4/*#,-3&(#$-#(+,/016#0&<&1-,/"2#4+(A&$)7#+"0#.-(&)&&#G/22&(#2-<&("4&"$#+"0#%&+</&(#(&2;1+$/-"#+%&+0C#I%&)&#)%/.$)#+(&#;"6/&10/"2#+"0#*-"$(/G;$&#$-#$%&#)&")&#-.#+#3-(10# 2(-3/"2#4-(&#;"*&($+/"7#<-1+$/1&#+"0#*-4,1&5C

Organizations are experiencing signi!cant upheavalChanges in the new economic environment are large-scale, substantial and drastically different.

Figure "

“This economic downturn was far more than just business cycle "uctuations. We view it as a true paradigm shift that is revo lutionizing not only business, but global social structures as well.”

Fumiyuki Akikusa, President +(9&KLM6&D).42=)4/)&QRS&D1%3+(&8.+(,$E&8$:2%).)$4&K1F6&T.9F

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&% Capitalizing on Complexity

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Technology continues to rise

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“The next generation, as natives of the digital world, will have revolutionary implications for politics, the public sector and the way we do business. The citizen will drive change and bring social revolution, not evolution.”

Peter Gilroy, KLM6&U$(.&K12(.E&K12(:),

Stand out in a complex world &(

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Top external factorsThe relative impact of technology as an external factor rises year on year.

Figure #

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&) Capitalizing on Complexity

Deepening complexity

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Expected level of complexityCEOs agree complexity will only continue to rise.

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B(&+&>1%,9&>/$%$&$:1(1*):6&41:)+,& +(9&5/E4):+,&4E4.$*4&+%$&+,,&)(.$%:1(V($:.$96&4.29$(.4&+%$&+:2.$,E&+>+%$&1?&./$&:1*5,$J).E&./$E&>),,&?+:$&)(&./$)%&:+%$$%4F&D1%$&4.29$(.4&4$$&/)3/&)*5+:.&1(&1%3+()#+.)1(4&?%1*&:1*5,$J).E&./+(&KLM4WXI&5$%:$(.&:1*5+%$9&.1&HI&5$%:$(.F&'(9&+*1(3&DC'46&XY&5$%:$(.&4$$&/)3/&)*5+:.&?%1*&:1*5,$J).EF

“My generation has a completely different view and understanding of unbounded, unlimited social connectivity, science and technology, and cultural conglomeration, that leads to more open, interconnected ambitions.”

Student, Q().$9&8.+.$4

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Wrestling with uneasiness: The “complexity gap”

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Stand out in a complex world &*

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Learning from top performers

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The complexity gapWhile eight out of ten CEOs anticipate signi!cant complexity ahead, less than half feel prepared to handle it.

Figure %

30%complexitygap49%

79%

Feel prepared for expected complexity

Expect high/very high level of complexit6#-<&(#'<&#6ears

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

Jacques Pellas, 8$:%Z.+)%$&OZ(Z%+,6&P+44+2,.&';)+.)1(

+' Capitalizing on Complexity

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Standouts: Navigating complexity superbly

8-4,+(&0#$-#$%&/(#/"0;)$(6#,&&()7#W$+"0-;$)#%+0#%/2%&(#/"*(&+)&)#/"#6&+(B$-B6&+(#-,&(+$/"2#4+(2/"C#9<&"#4-(&#)$(/A/"27#0;(/"2#$%&#&*-"-4/*#*(/)/)7#W$+"0-;$)E#(&<&";&#2(-3$%#3+)#)/5#$/4&)#%/2%&(#$%+"#$%&#(&)$# -.#$%&#)+4,1&C#W-7#3%+$#/)#$%/)#2(-;,#0-/"2#$-#$%(/<&J

Standouts are better prepared to manage the expected complexityComplexity gap: Difference between expected complexity and the extent to which CEOs feel prepared to manage complexity.

Figure &

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“We are entering an era of ten to twenty years of new signi!cant investment. There is opportunity and uncertainty that we have not seen before.”

Tom King, !%$4)9$(.6&[+.)1(+,&O%)9&QF8F

Stand out in a complex world +&

W$+"0-;$)#&5,&*$#%/2%#*-4,1&5/$6#+%&+07#G;$#%+<&#+#*-4,1&5/$6#2+,# -.#F;)$#]#,&(*&"$C#I%/)#/)#/"#)$+(A#*-"$(+)$#$-#-$%&(#89:)C#I%/)#);G)$+"$/+1#0/),+(/$6#(&T&*$)#$%&#W$+"0-;$)E#*-"'0&"*&#/"#$%&/(#-3"#*+,+G/1/$/&)# $-#,(-),&(#.(-4#*-4,1&5/$6C#W$+"0-;$)#&5$-1#$%&#<+1;&#-.#4+A/"2# 0&*/)/-")#M;/*A167#$&)$/"2#$%&4#/"#$%&#4+(A&$7#+"0#$%&"#4+A/"2#(&M;/(&0#*-;()&#*-((&*$/-")C

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j Embodying creative leadershipK#8(&+$/<&#1&+0&()#*-")/0&(#,(&</-;)16#;"%&+(0B-.#3+6)#$-#0(+)$/*+116#*%+"2&#$%&#&"$&(,(/)&#.-(#$%&#G&$$&(7#)&$$/"2#$%&#)$+2&#.-(#/""-<+$/-"#$%+$#%&1,)#$%&4#&"2+2&#4-(&#&..&*$/<&16#3/$%#$-0+6E)#*;)$-4&()7#,+($"&()#+"0#&4,1-6&&)C

j Reinventing customer relationshipsK#L/$%#$%&#!"$&("&$7#"&3#*%+""&1)#+"0#21-G+1/e/"2#*;)$-4&()7#-(2+"/e+$/-")#%+<&#$-#(&$%/"A#+,,(-+*%&)#$-#G&$$&(#;"0&()$+"07#/"$&(+*$#3/$%#+"0#)&(<&#$%&/(#*;)$-4&()#+"0#*/$/e&")C#

j Building operating dexterityK#L%/1&#(/)/"2#*-4,1&5/$6#4+6#)-;"0#$%(&+$&"/"2#+$#'()$7#(&.(+4/"2#$%+$#/"/$/+1#(&+*$/-"#/)#.;"0+4&"$+116#/4,-($+"$C#W;**&)).;1#89:)#(&.+)%/-"#$%&/(#-(2+"/e+$/-")7#4+A/"2#$%&4#.+)$&(7#4-(&#T&5/G1&#+"0#*+,+G1&#-.#;)/"2#*-4,1&5/$6#$-#$%&/(#+0<+"$+2&C

“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 McKenzie, !%$4)9$(.&+(9&KLM6&K+(+9)+(&012%)4*&K1**)44)1(&

Chapter One +"

CEOs now realize that creativity trumps other leadership characteristics. Creative leaders are comfortable with ambiguity and experimentation. To connect with and inspire a new generation, they lead and interact in entirely new ways.

Embodycreative leadership

+# Capitalizing on Complexity

Defy complexity with creativity

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Top leadership qualitiesCEOs cited creativity as the most important leadership quality over the next !ve years.

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“Global thinking is a must for leaders, but it should be associated with focus on sustainability and integrity; otherwise businesses will be short lived.”

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Conversations with over ",#$$ CEOsCEOs citing creativity as a top leadership quality provided new insights into leading in the new economic environment.$

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“We cannot globalize without diversity. It leads to new ideas and improves our ability to scale, so we would like to form a matrix organization globally.” Motoki Ozaki, President and CEO, KAO Corporation

“A challenge is to understand the needs and buying behaviors of our children and grandchildren, who have expectations and usage of technology very different from ours.” Alain Weill, President and General Director, NextRadioTV

“Creativity means new ways of solving tough problems. Many challenges require innovative thinking.” David Rankin, Chief Executive, Auckland City Council

+% Capitalizing on Complexity

Commit to upsetting the status quo

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Strategy processStandouts pursue iterative, ongoing strategy development more than other organizations.

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Iterative ongoing strategyBothFormal annual strategy planning

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12% 14% 74%

14% 22% 64%

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“The management environment is rapidly becoming more complex. In these uncertain times, the need for effective and swift decision making is more important than ever.”

Shuzo Sumi, !%$4)9$(.&+(9&K/)$?&LJ$:2.);$&M?":$%6&01@)1&D+%)($&-1,9)(346&B(:F

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Act despite uncertainty

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Decision styleStandouts focus on quick decisions even when facing uncertainty.

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31% 41% 28%

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+) Capitalizing on Complexity

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Break ground with new business models

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Creative leaders experiment to improve the status quoCreative leaders score much higher on innovation as a crucial capability and many more of them expect to change their business models.

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Innovation ascrucial capability 81%

more38%

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Types of business model

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Craft the creative organization

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“You must be a part of, and not apart from, the society in which you operate and this requires humility. The day of the business tycoon is gone. Managers are appointed; leaders are elected. It’s not a question of people following you — they need to be a part of you.”

Ian Tyler, KLM6&C+,?12%&C$+..E&!,:

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How Standouts will enact changeTo change continuously, Standouts will use new leadership styles and balanced communication approaches.

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“For "ight crews, we need a virtual communication environment to pull them into the internal community. With our younger workforce, there is a complete delta in how they expect to communicate. We need to build a multi- generational communication strategy to weave our diverse workforce together.”

David Cush, !%$4)9$(.&+(9&KLM6&N)%3)(&'*$%):+&')%,)($4

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RecommendationsI-0+6E)#89:)#A"-3#$%+$#*(&+$/</$6#/)#+"#&))&"$/+1#+))&$#+"0#$%+$#/$#4;)$#,&(4&+$&#$%&#&"$&(,(/)&C#8(&+$/<&#1&+0&()#K#3%/*%#/"*1;0&#89:)#+"0#$%&/(#$&+4)#K#+(&#*-;(+2&-;)#+"0#</)/-"+(6#&"-;2%#$-#4+A&#0&*/)/-")#$%+$# +1$&(#$%&#)$+$;)#M;-C#!"#+00/$/-"7#$%&6#/"*(&+)/"216#0&,1-6#+#G(-+0#(+"2&#-.#/""-<+$/<&#*-44;"/*+$/-"#$--1)#$-#&"2+2&#3/$%#+#"&3#2&"&(+$/-"C#

Embrace ambiguity

Reach beyond silos.#X;11#*(&+$/<&#&1&4&"$)#-.#6-;(#-(2+"/e+$/-"#-;$#-.#*-4,+($4&"$)#+"0#/"$&2(+$&#$%&4#/"$-#$%&#4+/")$(&+4C#I(+")*&"0#$%&#-G</-;)#$-#.-(4#;"*-"<&"$/-"+1#,+($"&()%/,)C#X(-+*$/<&16#&5*%+"2&#A"-31&02&#+"0#*--,&(+$&#3/$%#/"$&("+1#+"0#&5$&("+1#)$+A&%-10&()7#&1/4/"+$/"2#&<&(6#*-44;"/*+$/-"#G+((/&(#$-#/4,(-<&#6-;(#+G/1/$6#$-#%+"01&#$%&#;"A"-3"C

Exemplify breakthrough thinking. X(+*$/*&#+"0#&"*-;(+2&#&5,&(/4&"$+$/-"#+$#+11#1&<&1)#-.#$%&#G;)/"&))C#Q-(2&#+%&+0#3/$%#(;1&BG(&+A/"2#/""-<+$/-"#$%+$#)&$)#6-;(#-(2+"/e+$/-"#+,+($#.(-4#$%&#*(-30C#W$;06#+"0#M;&)$/-"#3%+$#-$%&()#0-#K#)*-;(#$&*%"-1-26#+"0#*;)$-4&(#$(&"0)C#Y;/10#)*&"+(/-)#$-#,1+"#(&),-")&)#$-#+#(+"2&#-.#,-))/G1&#.;$;(&)C

Act despite uncertainty. Q/2%$#$%&#"+$;(+1#;(2&#$-#3+/$#.-(#*1+(/$6#+"0#)$+G/1/$6H#$+A/"2#*+1*;1+$&0#(/)A)#K#3%/1&#-$%&()#%&)/$+$&#K#*+"#,+6#-..C#Q/"0#+#*(&+$/<&#3+6#$-#$;("#*-4,1&5/$6#/"$-#+"#+0<+"$+2&C#k&16#-"#0&&,16#.&1$#<+1;&)#+"0#+#3&11B0&'"&0#</)/-"#$-#,(-</0&#$%&#*-"'0&"*&#+"0#*-"</*$/-"#$-#&5,1-/$#"+((-3#3/"0-3)#-.#-,,-($;"/$6C

Take risks that disrupt legacy business models

Pilot radical innovations.#W$/4;1+$&#$%&#&5$&"0&0#4+"+2&4&"$#$&+4#$-#G(&+A#$%&#4-10#-.#&5/)$/"2#G;)/"&))#4-0&1)C#I%/"A#@2(&&"#'&10DK#3%+$#3-;10#6-;#0-#/.#6-;#3&(&#+#"&3#&"$(+"$#3/$%#"-#1&2+*6#G;(0&"J#l;&)$/-"#/"0;)$(6#,(+*$/*&)#$%+$#)&&4#-G</-;)C#L%&"#6-;#$%/"A#6-;#%+<&#$%&#+")3&(7#+)A#@3%6JD#+2+/"C

Embody creative leadership ""

Continually tweak your models.#X;)%#$+/1-(/"2#$-#$%&#&5$(&4&C#X&(,&$;+116#(&+))&))#6-;(#&"$&(,(/)&7#/"0;)$(6#+"0#(&<&";&#4-0&1)#$-#'"0#-;$#3%+$#3-(A)#G&)$C#U13+6)#1--A#+%&+0#+"0#G&#,(&,+(&0#$-#)*+1&#;,#-(#0-3"7#+)#"&&0&0C#X(-4-$&#+#4/"0)&$#-.#"&<&(#G&/"2#)+$/)'&0#3/$%#@2--0#&"-;2%CD

Borrow from other industries’ successes.#f&+("#.(-4#+"0#G&#/"),/(&0#G6#*(&+$/<&#+*%/&<&4&"$)#.(-4#-;$)/0&#6-;(#/"0;)$(6C#k&2;1+(16#0/)*;))# *+)&#&5+4,1&)#.(-4#-$%&(#/"0;)$(/&)#/"#6-;(#4+"+2&4&"$#$&+4#4&&$/"2)C# W$+6#+G(&+)$#-.#*;)$-4&(#+"0#$&*%"-1-26#$(&"0)#$%+$#+(&#$(+").-(4/"2#-$%&(#)&*$-()#+"0#*-")/0&(#%-3#6-;#*-;10#+,,16#$%&4C

Leapfrog beyond “tried-and-true” management styles

!"#$%&"'$%()*+#(,-./.")("*(0$#1+,2$(,%2(.%3+$%4$5#9<&"#/.#/$#.&&1)#;"*-4B.-($+G1&7#1&+0#G6#3-(A/"2#$-2&$%&(#$-3+(0#+#)%+(&0#</)/-"C#S+(&#$-#(&1/"M;/)%#)-4&#*-"$(-1#/"#.+<-(#-.#G;/10/"2#4-($;+1#$(;)$#$%(-;2%-;$#$%&#-(2+"/e+$/-"C#S-"E$#,(&)&"$#6-;(#1-2/*H#0/)*-<&(#1-2/*#3/$%#6-;(#$&+4C#

Coach other leaders. W,+(A#$%&#/4+2/"+$/-"#-.#-$%&()C#!")$/11#$%&#,;();/$#-.#*(&+$/</$6#/"$-#6-;(#-(2+"/e+$/-"+1#4/))/-"#$%(-;2%#/".-(4+1#+"0#.-(4+1#$(+/"/"2C#8%+11&"2&#&<&(6#$&+4#$-#,(/-(/$/e&#*(&+$/</$67#+"0#);,,-($#+"0#(&3+(0#&4,1-6&&)#3%-#)$&,#-;$)/0&#$%&/(#*-4.-($#e-"&)#$-#/""-<+$&C#

Use a wide range of communication approaches.#Z-(&#$%+"#G&.-(&7#);,,1&4&"$#$-,B0-3"#-(2+"/e+$/-"+1#*-44;"/*+$/-"#3/$%#1&))#.-(4+17#4-(&#/""-<+$/<&#*%+""&1)C#U**&,$#$%+$#.-(#*;)$-4&()#+"0#&4,1-6&&)#+1/A&7#G1-2)7#!"$&("&$#,(&)&"*&7#/")$+"$#4&))+2/"2#+"0#)-*/+1#"&$3-(A/"2#+(&#4-(&#*(&0/G1&#K#+"0#-.$&"#.+)$&(#K#$%+"#$(+0/$/-"+1#$-,B0-3"#*-44;"/#*+$/-"C#Y&#4-(&#-,&"#/"#2/</"2#)$+A&%-10&()#+**&))#$-#6-;C#

"# Capitalizing on Complexity

Case studyAxiata Group

Writing the future

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:<&(#$%&#,+)$#$3-#6&+()7#U5/+$+#%+)#4+0&#4+F-(#,(-2(&))#$-3+(0#$%+$#2-+1C#!$#G&2+"#3%&"#c+4+1;0/"#!G(+%/4#&4&(2&0#.(-4#(&$/(&4&"$#$-#$+A&#-<&(#+)#89:#/"#Z+(*%#=>>^C#!G(+%/4#3+)#.-(4&(16#%&+0#-.#Z+5/)#8-44;"/*+$/-")#+"07#;"0&(#%/)#1&+0&()%/,7#$%&#*-4,+"6E)#(&<&";&)#2(&3#4-(&#$%+"#$3&"$6B.-10#$-#hWm#=CP#G/11/-"#K#+"#+**-4,1/)%4&"$#$%+$#&+("&0#%/4#$%&#+**-1+0&#-.#Z+1+6)/+E)#@89:#-.#$%&#i&+(D#/"#=>>?C9

!G(+%/4E)#'()$#-(0&(#-.#G;)/"&))#+$#U5/+$+#3+)#$-#/""-<+$/<&16#.-(2&#-"&#$&+47#G(/"2/"2#$-2&$%&(#$%&#-,&(+$/"2#*-4,+"/&)#$%+$#4+0&#;,#$%&# 2(-;,#$-#3-(A#/"#;"/)-"#$-3+(0#+#)%+(&0#</)/-"C#\&#/"</$&0#A&6#)$+A&%-10&()#$-#+#1&+0&()%/,#);44/$#/"#I-A6-C#Y;$7#(+$%&(#$%+"#*-"*&"$(+$/"2#-"#-(2+"/e+$/-"+1#/));&)7#%&#+)A&0#&+*%#,+($/*/,+"$#$-#,(&$&"0#$%&6#%+0#%/)#F-G#+"0#3(/$&#+#'*$/-"+1#,(&))#(&1&+)&#0+$&0#/"#$%&#.;$;(&#&5,1+/"/"2#%-3#$%&6#%+0#+**-4,1/)%&0#$%&#2(-;,E)#2(-3$%#-GF&*$/<&)C#I%/)#*(&+$/<&#+,,(-+*%#.-(*&0#$%&4#$-#(&$%/"A#$%&#status quo +"0#+04/$#$%+$#$%&6#*-;10#"&<&(#0-#)-#+1-"&7#,+</"2#$%&#3+6#.-(#*--,&(+$/-"#-"#<+(/-;)#.(-"$)C

!G(+%/4E)#*-11+G-(+$/<&#+,,(-+*%#$-#G;/10/"2#+#*-44-"#</)/-"#+"0#.-)$&(/"2#*(&+$/</$6#/)#0&1/<&(/"2#(&);1$)C#U5/+$+#(&*&"$16#,-)$&0#)$&11+(#'"+"*/+1# (&);1$)7#3/$%#"&$#,(-'$)#$(/,1/"2#$-#kZ#NC_#G/11/-"#R+G-;$#hWm#d?V#4/11/-"O#.(-4#F;)$#kZ#d?^#4/11/-"#/"#=>>^C10

Embody creative leadership "$

Are you leading creatively?

\-3#3/11#6-;#0&<&1-,#$%&#*(/$/*+1#*+,+G/1/$/&)# $-#&"%+"*&#*(&+$/</$6#+4-"2#6-;(#1&+0&()%/,#$&+4J#

!"#3%+$#3+6)#*+"#6-;#&5,1-(&7#(&3+(0#+"0#21-G+116#/"$&2(+$&#0/<&()&#+"0#;"*-"<&"$/-"+1#,-/"$)#-.#</&3J

L%+$#/)#6-;(#+,,(-+*%#$-#*%+11&"2&#&<&(6#&1&4&"$# -.#6-;(#G;)/"&))#4-0&1#$-#2&$#$%&#4-)$#.(-4#*;((&"$16#;"$+,,&0#-,,-($;"/$/&)J

\-3#3/11#6-;#1&<&(+2&#"&3#*-44;"/*+$/-"#)$61&)7#$&*%"-1-2/&)#+"0#$--1)7#G-$%#$-#1&+0#+#"&3#2&"&(+$/-"#-.#$+1&"$#+"0#&"*-;(+2&#G(&+A$%(-;2%#$%/"A/"2J#

Chapter Two "(

Customers have never had so much information or so many options. CEOs are making “getting connected” to customers their highest priority to better predict and provide customers with what they really want.

Reinvent customer relationships

") Capitalizing on Complexity

Rethink customer relationships

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!$E)#"-$#F;)$#*;)$-4&(#+$$&"$/-"#$%+$#%+)#3+"0&(&0C#!"$&(+*$/-")#%+<&#*%+"2&0#$--C#Q-(#&5+4,1&7#&<&"#$%&#G&)$B0&)/2"&0#(&$+/1#L&G#)/$&)#*+"E$#*-"$(-1#$%&#)%-,,/"2#&5,&(/&"*&7#+)#4-(&#+"0#4-(&#)+1&)#$+A&#,1+*&#$%(-;2%#+;*$/-"#+"0#+.'1/+$&#)/$&)7#1-*+$/-"BG+)&0#)/$&)#+"0#+#4;1$/,1/*/$6# -.#"&3#*%+""&1)C

8;)$-4&()#&"*-;"$&(/"2#"&3#,(-0;*$)7#)&(</*&)#+"0#&5,&(/&"*&)#-"#3%+$#)&&4)#1/A&#+#0+/16#G+)/)#+(&#2(-3/"2#1&))#1-6+1#$-#$%&/(#G(+"0)#+"0#&<&"#$%&/(#-3"#%+G/$)C#k&,;$+$/-")#*+"#G&#G;/1$#+"0#G;("&0#G6#-,/"/-")#)%+(&0#-"1/"&7#@$&5$&0D#+"0#@$3&&$&0D#G6#.(/&"0)7#G1-22&()#+"0#+0<-*+*6#2(-;,)C#89:)#$-10#;)#$%&6#"&&0#$-#(&B/2"/$&#*;)$-4&(#/"$&(&)$#+"0#1-6+1$67#-(#(/)A#1-)/"2#2(-;"0#$-#*-4,&$/$-()C

Get even closer to the customer

8;)$-4&(#/"$/4+*6#/)#.-(&4-)$#-"#89:)E#4/"0)C#9/2%$6B&/2%$#,&(*&"$#-.#+11#89:)7#+"0#+"#+)$-;"0/"2#?V#,&(*&"$#-.#W$+"0-;$)7#,/*A&0#getting closer

to the customer +)#$%&#4-)$#/4,-($+"$#0/4&")/-"#$-#(&+1/e&#$%&/(#)$(+$&26#/"#$%&#"&5$#'<&#6&+()C#I%&)&#89:)#+(&#*-"</"*&0#$%&6#4;)$#"-$#-"16#)$+6#*-""&*$&0#R-(#(&*-""&*$O#3/$%#*;)$-4&()7#G;$#A&&,#-"#1&+("/"2#%-3#$-#)$(&"2$%&"#$%-)&#G-"0)C#

“Our products need to anticipate need, rather than respond to a request.”

Michael D’Ascenzo, K1**)44)1($%&1?&0+J+.)1(6&'24.%+,)+(&0+J+.)1(&M?":$

Reinvent customer relationships "*

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!"#-;(#*-"<&()+$/-")#3/$%#1&+0&()7#3&#)&")&0#89:)#3&(&#4-(&#*-44/$$&0#$%+"#&<&(#$-#$+A/"2#,&()-"+1#(&),-")/G/1/$6#.-(#G&/"2#*;)$-4&(#0(/<&"C#S&*/)/-")#"&&0#$-#G/0&0#,(/4+(/16#G6#*;)$-4&(#"&&0)#K@&<&"#-"#$%&#89:#1&<&17D#+.'(4&0#+#Y+"A/"2#89:#/"#\;"2+(6C#

Top focus areas in next !ve yearsAbove all other priorities, CEOs plan to focus on getting closer to customers to realize their strategy.

Figure !#

“To surprise customers requires unexpected ideas through interactions of people with diverse perspectives. It is urgent for us to develop a system to manage this unexpectedness.”

Shukuo Ishikawa, President +(9&KLM6&]$5%$4$(.+.);$&P)%$:.1%6&['DKM&C'[P'B&-1,9)(346&B(:F

Getting closer to customers tops CEOs priorities.With few exceptions, Standouts place customer relationships above all other focus areas for the next !ve years.

Figure !"

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#' Capitalizing on Complexity

Turn the data explosion into insight

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Leveraging the information explosionCustomer-focused CEOs will use insight and intelligence to better serve customer needs.

Figure !$

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Other CEOs

Impact onorganization of

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intelligence torealize strategy

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Reinvent customer relationships #&

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Generate trust to generate insight

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Y;$#F;)$#$3-#6&+()#1+$&(7#)-*/+1#"&$3-(A/"2#%+)#&5,-"&"$/+116#/"*(&+)&0#$%&#0&2(&&#-.#/"$&(+*$/-"#*;)$-4&()#+"0#*/$/e&")#&5,&*$#-.#-(2+"/e+$/-")C#!$#/)"E$#&"-;2%#F;)$#$-#*-11+G-(+$&#+"64-(&C#I-0+67#$%&#3+$*%3-(0#/)#@*-B*(&+$&CD

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

Michael Ward, K/)$?&LJ$:2.);$6&-+%%194&

#+ Capitalizing on Complexity

!"#.+*$7#;",(&*&0&"$&0#1&<&1)#-.#*;)$-4&(#*-11+G-(+$/-"#+(&#G&*-4/"2# +#(&+1/$6C#U#(&*&"$#!YZ#)$;06#.-;"0#$%+$#+#(&4+(A+G16#%/2%#_^#,&(*&"$#-.#*-");4&()#);(<&6&0#3-(103/0&#3-;10#G&#3/11/"2#$-#*-11+G-(+$&#3/$%#(&$+/1&()#$-#0&<&1-,#,(-0;*$)#+"0#)&(</*&)CNd

CEOs predict what customers will expectAbove all, CEOs think customers want organizations to better understand their needs.

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

69% 20% 11%

70% 20% 10%

New or different services

Better understanding of needs

More collaboration, information sharing

New or different products

New or different channels

Increased focus on social responsibility

Stronger focus on price-value equation

82% 12% 6%

61% 22% 17%

51% 25% 24%

46% 30% 24%

45% 24% 31%

“We are heavily focused on audiences (products, services and markets). Historically, we ran our business somewhat like a utility. Going forward, we are segmenting our products and services for speci!c audiences.”

Glenn Britt, K/+)%*+(6&!%$4)9$(.&+(9&K/)$?&LJ$:2.);$& M?":$%6&0)*$&̂ +%($%&K+=,$

I-0+67#$%&#(&+1#(&3+(0#-.#*;)$-4&(#*-""&*$/</$6#/)#$%&#/"$&11/2&"*&#$-# G&#2+/"&0#.(-4#*;)$-4&()#3%-#$(;)$#$%+$#-(2+"/e+$/-")#3/11#,;$#$%&#/".-(4+$/-"#$%&6#)%+(&#$-#4;$;+1#+0<+"$+2&#K#.-(#$%&47#-$%&()#1/A&#$%&4#

Reinvent customer relationships #"

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W/"*&#3&#$+1A&0#$-#89:)#$3-#6&+()#+2-#+G-;$#*;)$-4&(#1-6+1$67#-"&#-.#$%&#G/22&(#*%+"2&)#%+)#G&&"#$%&#4+))/<&#2(-3$%#/"#)-*/+1#"&$3-(A/"2C#I3/$$&(#2(&3#N7?=^#,&(*&"$#.(-4#c;"&#=>>^#$-#c;"&#=>>?7#+"0#$-0+6#%+)#4-(&#$%+"#=N#4/11/-"#;"/M;&#</)/$-()#&+*%#4-"$%CNV !"#+#)/"21&#6&+(7#.(-4#c+";+(6#=>>?#$-#S&*&4G&(#=>>?7#Q+*&G--A#2(&3#.(-4#NV>#4/11/-"#$-#PV>#4/11/-"CN] !.#Q+*&G--A#3&(&#+#*-;"$(67#/$#3-;10#G&#$%&#$%/(0B1+(2&)$#*-;"$(6#/"#$%&#3-(10CN_#I%&)&#+"0#$%&#)*-(&)#-.#)/$&)#(+,/016#&4&(2/"2#3%&(&#*-");4&()#+"0#*/$/e&")#)%+(&#1/A&)#+"0#0/)1/A&)#3/11#(&M;/(&#+"#&"$/(&16#"&3#+,,(-+*%C

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Question the price-value equation

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“Understanding needs is a very important factor. But it’s important to understand that this must be on a personal level— not simply a ‘buying behavior’ level.”

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## Capitalizing on Complexity

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Standouts are more focused on the price-value equationOrganizations recognize the need to better understand customers’ price-value trade offs.

Figure !&

Design the customer experience

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38%more58%

42%

Standouts

Others

Focus onprice-value

equation

Reinvent customer relationships #$ #$

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

Tony Tyler, KLM6&K+./+E&!+:)":&')%>+E4

13%more51%

45%

Standouts

Others

Use of new ordifferent channels

More Standouts seek new paths to customersFinding new channels to exchange information with customers is fundamental to providing desired customer experiences.

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#% Capitalizing on Complexity

RecommendationsU#"&3#+,,(-+*%#$-#*;)$-4&(#/"$/4+*6#/)#*(/$/*+1#/"#$%&#"&3#&*-"-4/*#&"</(-"4&"$#+"0#$%/)#"&*&))/$+$&)#+#)$(-"2&(#*-44/$4&"$#$%+"#&<&(#G&.-(&C#:(2+"/e+$/-")#$%+$#+(&#G&)$#+$#&5$(+*$/"2#,(&</-;)16#;"0/)*-<&(&0#/")/2%$)#.(-4#<+)$#+4-;"$)#-.#*;)$-4&(#/".-(4+$/-"#%+<&#+#%;2&#+0<+"$+2&#/"#0&&,&"/"2#&5/)$/"2#*-""&*$/-")#+"0#*(&+$/"2#"&3#(&1+$/-")%/,)C

Honor your customers above all else

Establish an unprecedented level of focus.#W$+($/"2#3/$%#$%&#89:7#&<&(6#&4,1-6&&#/"#$%&#-(2+"/e+$/-"#4;)$#G&#%6,&(B.-*;)&0#-"#*;)$-4&()C# Z+A&#*;)$-4&(#<+1;&#6-;(#";4G&(#-"&#<+1;&C#9");(&#&<&(6#&4,1-6&&#/)#(&),-")/G1&#.-(#+"0#+))&))&0#+"";+116#-"#+#*;)$-4&(#)+$/).+*$/-"#-(#*;)$-4&(#<+1;&#4&$(/*C

Heighten customer exposure. Z+A&#/$#&+)6#.-(#*;)$-4&()#$-#*-""&*$#3/$%#$%&#(/2%$#,&()-"#/"#6-;(#-(2+"/e+$/-"C#9<&(6#&4,1-6&)$#%+<&#$%&#/".-(4+$/-"#"&&0&0#$-#&"2+2&#3/$%#*;)$-4&()#+,,(-,(/+$&16#+"0#&..&*$/<&16C#U11#&4,1-6&&)#4;)$#;"0&()$+"0#$%&#1/"A#G&$3&&"#$%&#3-(A#$%&6#0-#+"0# $%&#<+1;&#/$#G(/"2)#$-#*;)$-4&()C

Measure what customers value. `&";/"&16#A"-3#3%+$#4-$/<+$&)#*;((&"$#+"0#,-$&"$/+1#*;)$-4&()#$-#*%--)&#6-;(#,(-0;*$#-(#)&(</*&C#W;(,+))# $-0+6E)#)$+"0+(0)#$-#,(-+*$/<&16#<&(/.6#$%+$#6-;#+(&#,(-</0/"2#3%+$#*;)$-4&()#3+"$#+"0#0&1/<&(/"2#/$#/"#3+6)#$%+$#4+$$&(#$-#$%&4C#h"0&()$+"0#6-;(#*;)$-4&()E#G;)/"&))#2-+1)#+"0#%&1,#$%&4#);**&&0C

Use two-way communication to stay in sync with customers

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Reinvent customer relationships #(

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Profit from the information explosion

Tap the value of limitless data.#!0&"$/.6#+"0#,(/-(/$/e&#%/00&"#-,,-($;"/$/&)#G6#4+"+2/"2#+"0#;)/"2#/".-(4+$/-"#G&$$&(C#Q/"0#"&3#3+6)#$-#&5$(+*$# <+1;&#.(-4#;")$(;*$;(&07#"-"B";4&(/*#R+"0#-.$&"#)%-($B1/<&0O#0+$+C#W3/$*%#.(-4#4&(&16#*-11&*$/"2#0+$+#$-#*-""&*$/"2#/$#K#%&1,#/"$&("+1#+"0#&5$&("+1#)$+A&%-10&()#/"$&2(+$&#.+*$)#/"#+#4&+"/"2.;1#3+6C

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Share information freely to build trust and improve customer relationships.

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#) Capitalizing on Complexity

Case studyCenterPoint Energy and Oncor

Smart meters putting power in the hands of customers

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W4+($#4&$&()#+(&#$%&#1/"A#G&$3&&"#*;)$-4&()#+"0#$%&#)4+($#2(/0)#4+"6#&1&*$(/*/$6#*-4,+"/&)#+(&#"-3#G;/10/"2C#U"0#$%&#2(/0)#$%&4)&1<&)# +(&#+#,&(.&*$#&5+4,1&#-.#%-3#$&*%"-1-26#*+"#G&#;)&0#"-$#F;)$#$-#*-"$(-1#*-4,1&5/$6#G;$#$-#&5,1-/$#/$C#I%&6#0(+3#-"#)-,%/)$/*+$&0#)&")-()#+"0#)-.$3+(&#$-#(-;$&#,-3&(#+)#&..&*$/<&16#+)#,-))/G1&7#2/<&"#$%&#,(&<+/1/"2#*-"0/$/-")C

I%&)&#/"/$/+$/<&)#3/11#2/<&#*-");4&()#+**&))#$-#"&+(B(&+1$/4&#;)+2&#0+$+#K# +#4+F-(#)$&,#$-3+(0#%&1,/"2#*-");4&()#4+A&#)4+($#&"&(26#0&*/)/-")C#I%&6#3/11#+1)-#&"+G1&#(&$+/1#&1&*$(/*#,(-</0&()#K#$%&#*-4,+"/&)#)&11/"2#&"&(26#0/(&*$16#$-#*-");4&()#K#$-#);,,-($#(&$+/1#-..&(/"2)#);*%#+)#&"&(26#+"+16)/)#$--1)7#$/4&B-.B;)&#(+$&)#+"0#,(&,+/0#)&(</*&#$%+$#3/11#%&1,#*;)$-4&()#G&$$&(#4+"+2&#$%&/(#&1&*$(/*/$6#&5,&"0/$;(&)C21

Reinvent customer relationships #*

Are you reinventing relationships with customers?

\-3#3/11#6-;#&"2+2&#*;)$-4&()#/"#"&3#3+6)#$%+$#/"*(&+)&#/"$&(&)$#+"0#1-6+1$6#$-#2&"&(+$&#"&3#0&4+"0#+"0#(&<&";&#)-;(*&)J

\-3#*+"#6-;#/"<-1<&#*;)$-4&()#4-(&#&..&*$/<&16#+"0#0/(&*$16#/"#,(-0;*$#+"0#)&(</*&#0&<&1-,4&"$J

8+"#6-;#%&+(#$%&#<-/*&#-.#6-;(#*;)$-4&()#$%(-;2%# $%&#<+)$#+4-;"$#-.#0+$+J#8+"#6-;#;"0&()$+"0#+"0#+*$#;,-"#$%&#/".-(4+$/-"J

Chapter Three $&

CEOs are mastering complexity in countless ways. They are redesigning operating strategies for ultimate speed and flexibility. They embed valued complexity in elegantly simple products, services and customer interactions.

Buildoperating dexterity

$+ Capitalizing on Complexity

Get ready for growth

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Simplify for speed

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

Brenda Barnes, K/+)%*+(&+(9&KLM6&8+%+&T$$

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Mask complexity for your advantage

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The majority of Standouts intend to simplify operationsFewer than half of other CEOs will emphasize simpli!cation to better manage complexity.

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“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, D+(+3)(3&P)%$:.1%&+(9&KLM6&M%):+&T)*).$9

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“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 Segal, D+(+3)(3&P)%$:.1%&+(9&KLM6&K+,.$J&'24.%+,)+&T)*).$9

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Design for dexterity

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Replacing !xed costs with variable costsThe most dexterous CEOs focus much more on variable cost structures so they can scale up and down more quickly.

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“We are looking at a vast transformation in how we use our existing assets.”

Dr. Stephen Duckett, !%$4)9$(.&+(9&KLM6&',=$%.+&-$+,./&8$%;):$4

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Rebalance global and local

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“An adaptable organization can deal with anything that comes its way, so this is a good skill for any organization at any time. Today, the markets change constantly, so it is even more important. Being able to see what is coming reduces the risk of entering into business and can be easily done to help an organization plan.”

Student, R%+(:$

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Target new growth

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Revenue generated from new sourcesCEOs with greater speed and dexterity expect +' percent more revenue from new sources in the next !ve years.

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“The challenge is the short window of time that exists to take advantage of a situation or strategic opportunity.”

Norman Gerber, KLM6&N$%4):/$%2(3&9$%&8:/>$)#$%& b%#.$&O$(144$(4:/+?.

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Simplify whenever possible

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Simplify products and services by masking complexity. S&1/<&(#(/*%#.;"*$/-"+1/$6#$-#*;)$-4&()#$%(-;2%#)/4,1&#/"$&(.+*&)C#X(-</0&#0&&,16#<+1;+G1&#,(-0;*$)#+"0#)&(</*&)#$%+$#+(&#&+)6#.-(#&"0#;)&()#0&),/$&#$%&#"&*&))+(6#+"0#0&)/(+G1&#;"0&(16/"2#*-4,1&5/$6C#h"0&()$+"0#3%/*%#.&+$;(&)#*;)$-4&()#3+"$#$-#/"T;&"*&#+"0#3%&"#$%&6#,(&.&(#"-$#$-#%+<&#$-#4+A&#*%-/*&)C

Simplify for the organization and partners.#Y&#+G)-1;$&16#*1&+(#/"#*-44;"/B*+$/"2#-(2+"/e+$/-"+1#,(/-(/$/&)#+"0#3%+$#/)#&5,&*$&0#.(-4#3%-4C#91/4/"+$&#G;(&+;*(+*6#+"0#/4,1&4&"$#1&+"#,(-*&))&)C#!"$&2(+$&#.;"*$/-")#$-#*(&+$&#&4,-3&(&0#$&+4)#+"0#&"+G1&#.+)$&(#0&*/)/-")C

Manage systemic complexity

Put complexity to work for your stakeholders.#k&.;)&#$-#+11-3#21-G+1#*-4,1&5/$6#$-#&"*;4G&(#6-;(#);,,16#*%+/"#K#/")$&+07#&5$(+*$#<+1;&#.(-4#$%&#&5/)$&"*&#-.#4-(&#-,$/-")#$-#4+A&#/$#4-(&#&.'*/&"$#+"0#&..&*$/<&C#L/$%#/4,(-<&0#/")/2%$#/"$-#*;)$-4&()7#,(-*&))&)#+"0#G;)/"&))#,+$$&(")7#0(/<&#G&$$&(#(&+1$/4&#0&*/)/-")#+"0#+*$/-")#$%(-;2%-;$#$%&#&"$&(,(/)&C#8-")/0&(#+00/"2#<+1;&#G6#4+"+2/"2#4-(&#*-4,1&5/$6#-"#G&%+1.#-.#6-;(#*;)$-4&()C

Build operating dexterity $*

6,7$(,28,%",&$(*9("'$(-$%$:"1(*9(,%,/)".415(!0&"$/.67#M;+"$/.6#+"0#(&0;*&#)6)$&4/*#/"&.'*/&"*/&)C#91&<+$&#+"+16)/)#.(-4#+#G+*AB-.'*&#+*$/</$6#1/4/$&0#$-#+#%+"0.;1#-.#&5,&($)#$-#+"#+,,(-+*%#$%+$#*+"#&4,-3&(#&<&(6-"&#/"# $%&#-(2+"/e+$/-"#/"#*-"$&5$#-.#$%&#*;((&"$#)/$;+$/-"C

Promote a mindset of being fast and flexible

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Push execution speed. W$(&+41/"&#,(-*&))&)#$-#&"+G1&#(+,/0#0&*/)/-"#4+A/"2#+"0#&5&*;$/-"C#k&4-<&#,(-*&0;(+1#-(#,-1/*6#(-+0G1-*A)#G6#&4,-3&(/"2#&4,1-6&&)#+$#+,,(-,(/+$&#1&<&1)#$-#+*$C#k&*-2"/e&#+"0#(&3+(0#3%&"#T&5/G/1/$6#2&"&(+$&)#<+1;&C

Course-correct as needed. U1/2"#+#.&3#*1&+(#4&$(/*)#3/$%#-GF&*$/<&)#$-#/0&"$/.6#);**&))#,+$$&(")7#$%&"#(&2;1+(16#$(+*A#(&);1$)#+)#,+($#-.#+#*-"$/";+1#.&&0G+*A#1--,C#Z-0/.6#+*$/-")#G+)&0#-"#3%+$#/)#1&+("&0C

Be “glocal”27

Find the right mix of global and local. Y&#21-G+1#3%&(&#,-))/G1&7#1-*+1#3%&(&#"&*&))+(6C#`+/"#+"#/"B0&,$%#;"0&()$+"0/"2#-.#3%+$#(&+116#"&&0)#$-#G&#1-*+1/e&0C#U11-3#.-(#*;1$;(+1#0/..&(&"*&)#+"0#0-"E$#+));4&#3%+$#3-(A)#.-(#-"&#*-;"$(6#-(#4+(A&$#3/11#3-(A#/"#+"-$%&(C#!0&"$/.6#"&3#2(-3$%#-,,-($;"/$/&)#+(-;"0#$%&#3-(10#*-")$+"$16C#

Leverage the world through partners.#Y&/"2#"/4G1&#-.$&"#4&+")#"-$#0-/"2#/$#+1-"&C#o"-3#3%&(&#$%&#G&)$#-,,-($;"/$/&)#1/&#+$#+"6#2/<&"#$/4&7#+"0#,;();&#$%&4C#W$(&"2$%&"#,+($"&(/"2#)A/11)#$-#(&,1+*&#'5&0#*-)$)#3/$%#<+(/+G1&#*-)$)7#+"0#$+A&#+0<+"$+2&#-.#2&-2(+,%/*#&5,&($/)&#+"0#*-)$#+0<+"$+2&)#+)#4;*%#+)#,-))/G1&C

%' Capitalizing on Complexity

Case studyThe Volkswagen Group

Working the world

I%&#a-1A)3+2&"#`(-;,#/)#-"&#-.#$%&#3-(10E)#1&+0/"2#+;$-4-G/1&#4+";.+*B$;(&()#+"0#9;(-,&E)#G/22&)$#*+(4+A&(7#3/$%#(&<&";&)#-.#-<&(#rN>V#G/11/-"#R+G-;$#hWm#Nd>#G/11/-"OC=^#I%&#`(-;,#+/4)#$-#G&*-4&#$%&#3-(10#1&+0&(#G6#=>N^C29#U"07#2/<&"#)1;22/)%#0&4+"0#.-(#"&3#<&%/*1&)#/"#$%&#0&<&1-,&0#&*-"-4/&)7#/$#3+"$&0#$-#G--)$#/$)#,(&)&"*&#/"#&4&(2/"2#4+(A&$)C#I%&#A&6#M;&)$/-"#3+)[#%-3#*-;10#/$#*-4,&$&#+"0#)$/11#G&#,(-'$+G1&J

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I%&#a-1A)3+2&"#`(-;,#+1)-#+0+,$)#/$)#<&%/*1&)#.-(#1-*+1#*;)$-4&()#+"0#%+)#1-*+1/e&0#A&6#&1&4&"$)#-.#$%&#<+1;&#*%+/"7#3/$%#$%&#);,,-($#-.#(&2/-"+1#kbS#$&+4)7#1-*+1#)-;(*/"2#+"0#1-*+1#4+(A&$/"2C#f-*+1#4+$&(/+1)#+"0#);,,1/&()#+**-;"$#.-(#^>#$-#?>#,&(*&"$#-.#$%&#<+1;&#-.#+11#<&%/*1&)#4+0&#/"#Y(+e/17#.-(#&5+4,1&C#I%&#`(-;,#/)#"-3#0&<&1-,/"2#1-*+1#0&+1&(#"&$3-(A)#+"0#'"+"*/"2#.+*/1/$/&)7#/"#*-11+G-(+$/-"#3/$%#1-*+1#G+"A)C31

I%+"A)#$-#$%/)#@21-*+1D#+,,(-+*%7#$%&#a-1A)3+2&"#`(-;,#&"F-6&0#6&+(B-"B6&+(#9Y!I#2(-3$%#G&$3&&"#=>>d#+"0#=>>^C#U"0#/"#=>>?7#/$#)-10#4-(&#<&%/*1&)#/"#8%/"+#$%+"#/"#`&(4+"6#K#,(--.#-.#/$)#.-(&)/2%$#/"#G&/"2#-"&#-.#$%&#'()$#L&)$&("#*+(4+A&()#$-#)&$#;,#-,&(+$/-")#$%&(&C32

Build operating dexterity %&

Are you building operating dexterity?

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Looking ahead, the possibilities for capitalizing on complexity are expanding rapidly. We learned from over 1,500 CEOs how they are making the most of unprecedented opportunities and addressing new challenges.

The CEO Agenda %"

How to capitalize oncomplexity

%# Capitalizing on Complexity

Act on the CEO agenda

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“The complexity our organization will have to master over the next !ve years is off the charts — a #$$ on your scale from # to %.”

Edward Lonergan, !%$4)9$(.&+(9&KLM6&P);$%4$E6&B(:F

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leadership


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How to capitalize on complexity %$

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8-"$/";&#$%&#*-"<&()+$/-"#+$#ibm.comq*+,/$+1/e/"2-"*-4,1&5/$6#

c Embrace ambiguity

c Take risks that disrupt legacy business models

c Leapfrog beyond “tried-and-true” management styles

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c Honor your customers above all else

c Use two-way communications to sync with customers

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c Simplify whenever possible

c Manage systemic complexity

c Promote a mindset of =$)(3&?+4.&+(9&`$J)=,$

c Be “glocal”


%% Capitalizing on Complexity

AcknowledgmentsL&#3-;10#1/A&#$-#$%+"A#$%&#N7VdN#89:)#+(-;"0#$%&#3-(10#3%-#2&"&(-;)16#)%+(&0#$%&/(#$/4&#+"0#/")/2%$)#3/$%#;)C#W,&*/+1#+,,(&*/+$/-"#2-&)#$-#$%&#89:)#3%-#+11-3&0#;)#$-#/"*1;0&#M;-$&)#.(-4#$%&/(#/"$&(</&3)#$-#%/2%1/2%$#4+F-(#$%&4&)#$%(-;2%-;$#$%/)#(&,-($C#

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f&+0&()%/,#$&+4[#W+;1#Y&(4+"#+"0#X&$&(#o-()$&"#RW$;06#95&*;$/<&#S/(&*$-()O7#`(+*&#8%-,+(07#\+")B\&"(/A#cs(2&")&"7#k6;/*%/#o+"&4+A/7#W+(+#f-"23-($%7#S+<&#f;G-3&7#9(/*#k/001&G&(2&(7#k-1+"0#W*%&.T&(# +"0#Z/*%&1#a1+))&1+&(#

X(-F&*$#$&+4[#k+2"+#Y&11#RW$;06#S/(&*$-(O7#S&"/)&#U("&$$&7#W$&<&#Y+11-;7#k+F&&<#c+/"7#S&G-(+%#o+)0+"7#8%(/)$/"&#o/")&(7#o&/$%#f+"0/)7#o+$%1&&"#Z+($/"7#c-"/#Z*S-"+107#W;)+"#k+".$7#8%(/)$/+"#W1/A&7#k+2%;(+4#W;0%+A+(7#`+;(+<#I+13+(#+"0#a+"&))+#<+"#0&#a1/&$

U"0#$%&#%;"0(&0)#-.#!YZ#1&+0&()#3-(103/0&#3%-#*-"0;*$&0#$%&#/"B,&()-"#89:#/"$&(</&3)C

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The right partner for a changing worldU$#!YZ7#3&#*-11+G-(+$&#3/$%#-;(#*1/&"$)7#G(/"2/"2#$-2&$%&(#G;)/"&))#/")/2%$7#+0<+"*&0#(&)&+(*%#+"0#$&*%"-1-26#$-#2/<&#$%&4#+#0/)$/"*$#+0<+"$+2&#/"#$-0+6E)#(+,/016#*%+"2/"2#&"</(-"4&"$C#I%(-;2%#-;(#/"$&2(+$&0#+,,(-+*%#$-#G;)/"&))#0&)/2"#+"0#&5&*;$/-"7#3&#%&1,#$;("#)$(+$&2/&)#/"$-#+*$/-"C#U"0#3/$%#&5,&($/)&#/"#N_#/"0;)$(/&)#+"0#21-G+1#*+,+G/1/$/&)#$%+$#),+"#N_>#*-;"$(/&)7#3&#*+"#%&1,#*1/&"$)#+"$/*/,+$&#*%+"2&#+"0#,(-'$#.(-4#"&3#-,,-($;"/$/&)C#

About IBM Global Business Services Strategy & Change!YZ#`1-G+1#Y;)/"&))#W&(</*&)#-..&()#-"&#-.#$%&#1+(2&)$#W$(+$&26#b#8%+"2&#-(2+"/e+$/-")#/"#$%&#3-(107#3/$%#-<&(#P7=V>#)$(+$&26#,(-.&))/-"+1)C#!YZ#W$(+$&26#b#8%+"2&#,(+*$/$/-"&()#%&1,#*1/&"$)#0&<&1-,7#+1/2"#+"0#/4,1&4&"$#$%&/(#</)/-"#+"0#G;)/"&))#)$(+$&2/&)#$-#0(/<&#2(-3$%#+"0#/""-<+$/-"C

About the IBM Institute for Business ValueI%&#!YZ#!")$/$;$&#.-(#Y;)/"&))#a+1;&7#,+($#-.#!YZ#`1-G+1#Y;)/"&))#W&(</*&)7#0&<&1-,)#.+*$BG+)&0#)$(+$&2/*#/")/2%$)#.-(#)&"/-(#G;)/"&))#&5&*;$/<&)#+(-;"0#*(/$/*+1#/"0;)$(6B),&*/'*#+"0#*(-))B/"0;)$(6#/));&)C#I%/)#`1-G+1#8%/&.#95&*;$/<&#:.'*&(#W$;06#/)#,+($#-.#-;(#-"2-/"2#8BW;/$&#W$;06#W&(/&)C

%) Capitalizing on Complexity

Notes and sourcesN# I%&#,&(/-0#.-(#1-"2B$&(4#,&(.-(4+"*&#+"+16)/)#-.#.-;(B6&+(#-,&(+$/"2#*-4,-;"0#+"";+1#

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P# !ZQ#L-(10#9*-"-4/*#:;$1--A#S+$+G+)&7#=>>^#U*$;+1#k&2/-"+1#`SX7#:*$-G&(#=>>?C# %$$,[qq333C/4.C-(2q&5$&("+1q,;G)q.$q3&-q=>>?q>=q3&-0+$+q/"0&5C+),5#

d# Q-(#(&+0+G/1/$67#3&#(&.&(#$-#$%/)#*-11&*$/<&#2(-;,#+)#@89:)D#$%(-;2%-;$#$%/)#(&,-($C

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_# `/&)&"7#903+(07#9(/*#k/001&G&(2&(7#k/*%+(0#8%(/)$"&(#+"0#k+2"+#Y&11C#@W&/e/"2#$%&#+0<+"$+2&[#L%&"#+"0#%-3#$-#/""-<+$&#6-;(#G;)/"&))#4-0&1CD#!YZ#!")$/$;$&#.-(#Y;)/"&))#a+1;&C#g-<&4G&(#=>>?C#%$$,[qq333C/G4C*-4q)&(</*&)q2G)qG;)/"&))4-0&1/""-<+$/-"#

^# 8-4,+"6#,(-'1&C#U5/+$+#L&G#)/$&C#%$$,[qq333C+5/+$+C*-4q+G-;$B;)q+$B+B21+"*&

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N># I%&+"#9;7#`-%C#@U#n),&*$+*;1+(E#6&+(#.-(#U5/+$+CD#Y;)/"&))#I/4&)C#Q&G(;+(6#=V7#=>N>C#%$$,[qq333CG$/4&)C*-4C46q8;((&"$tg&3)qYI!Z9Wq+($/*1&)q+5/+$+=dB=qU($/*1&q/"0&5t%$41

NN# `-"e+1&eBL&($e7#8(/)$&"&C#@I%&#,+$%#.-(3+(0[#g&3#4-0&1)#.-(#*;)$-4&(B.-*;)&0#1&+0&()%/,CD#!YZ#!")$/$;$&#.-(#Y;)/"&))#a+1;&C#:*$-G&(#=>>?C#%$$,[qq333B?PVC/G4C*-4q)&(</*&)q;)q2G)qG;)q%$41q*(4B,+$%B.-(3+(0B3%/$&,+,&(C%$41J*"$5$u+N>>V=]N#

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P># Xv$)*%7#\+")#S/&$&(C#@a-1A)3+2&"[#)$(-"2#.-;"0+$/-")K,(/4&0#.-(#$%&#.;$;(&CD# S&;$)*%&#Y+"A#!UU#!"<&)$-(#+"0#U"+16)$#8-".&(&"*&7#W&,$&4G&(#NV7#=>>?C#%$$,[qq333C<-1A)3+2&"+2C*-4q<3+2q<3*-(,q/".-t*&"$&(q0&q$+1A)t+"0t,(&)&"$+$/-")q=>>?q>?q!UUtZ(tX-&$)*%CBG/"C+*MqM;+1BY/"+(6W$-(+2&!$&4CW/"21&CQ/1&q!UUw=>S&;Y+w=>X(w8PwUd)&"$+$/-"w=>L&G)/$&w=>C,0.

PN# L/"$&(A-("7#S(C#Z+($/"#+"0#\+")#S/&$&(#Xv$)*%C#@a-1A)3+2&"KI%&#!"$&2(+$&0#U;$-4-$/<&#`(-;,#W$(+$&26#=>N^[#9");(/"2#X(-'$+G1&#`(-3$%#+"0#8(&+$/"2#W;)$+/"+G1&#a+1;&CD#X(&)&"$+$/-"#$-#/"<&)$-()C#I%&#k-6+1#:,&(+#\-;)&7#f-"0-"C#Q&G(;+(6#P7#=>N>C#%$$,[qq333C<-1A)3+2&"+2C*-4q<3+2q<3*-(,q/".-t*&"$&(q&"q$+1A)t+"0t,(&)&"$+$/-")q=>N>q>=q!"<&)$-(tS+6CBG/"C+*MqM;+1BY/"+(6W$-(+2&!$&4CW/"21&CQ/1&q!"<&)$-(w=>S+6C,0.

P=# @8-")-1/0+$&0#Q/"+"*/+1#W$+$&4&"$)[#U"";+1#k&,-($#=>>?CD#a-1A)3+2&"C#%$$,[qq+"";+1(&,-($ =>>?C<-1A)3+2&"+2C*-4q'"+"*/+1)$+$&4&"$)C%$41

(&

For further informationQ-(#4-(&#/".-(4+$/-"#+G-;$#$%/)#)$;067#,1&+)&#*-"$+*$#-"&#-.#$%&# !YZ#1&+0&()#G&1-3C#:(7#</)/$#ibm.comq*+,/$+1/e/"2-"*-4,1&5/$6#-(#)&"0#+"#&B4+/1#$-#$%&#!YZ#!")$/$;$&#.-(#Y;)/"&))#a+1;&#+$#//G<x;)C/G4C*-4C

Americas Saul Berman# )+;1CG&(4+"x;)C/G4C*-4

;1.,(<,4.:4 Grace Chopard# 2(+*&C*%-,+(0x+;NC/G4C*-4

Japan Ryuichi Kanemaki# A+"&4+A/xF,C/G4C*-4

Northern Europe Sara Longworth# )+(+1-"23-($%x;AC/G4C*-4

Southern Europe Michel Vlasselaer# 4/*%&1C<1+))&1+&(xG&C/G4C*-4

IBM Institute for Business Value Peter Korsten # ,&$&(CA-()$&"x"1C/G4C*-4

For further information (&

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