Most companies are looking to drive purposeful innovation to stay competitive in an uncertain future. But when it comes to strategy, there are clear gaps between CEOs’ aspirations and reality.
Half of CEOs believe innovation is central to their company’s business strategy, but fewer said their organisations have implemented proven innovation practices to fulfil their ambitions, according to PwC’s latest Global CEO Survey.
Specifically, fewer than half said their companies implemented practices to collaborate with external partners to accelerate innovation (32%), tested new ideas rapidly with customers or end-users (30%), tolerated high risk in innovation projects (26%), adopted routine processes to stop underperforming research and development projects (24%), and created a defined innovation centre, incubator, or corporate venturing division (23%).
In addition, fewer than one in ten CEOs (8%) said their company has implemented at least five of the six practices to a large or very large extent, the survey said.
“The practices we asked about in this year’s survey aren’t a foolproof recipe for innovation success,” the survey said. “But they’re a good starting point for frank discussions among CEOs, their top teams, and boards about whether innovation is more than a rhetorical priority.”
Furthermore, most companies lack sufficient sustainability-related processes. Less than one-quarter of CEOs agree to a large or very large extent that their organisation has defined processes to account for the climate opportunities and risks associated with supply chain and sourcing (24%), product design and development (24%), and capital allocation, including mergers and acquisitions (20%).
“A byproduct of new sustainability reporting requirements is the expanded stores of sustainability data now available to many companies that can be fed into decision-making processes,” the survey said. “With better data at hand, these companies have an opportunity to move from a risk management mindset to active value creation.”
Confidence drops as risks rise
Although CEOs remain generally optimistic about growth prospects for the global economy, they’re less confident in many countries about the local economic outlook.
Compared to last year’s findings, leaders are significantly less confident about their company’s revenue growth outlook over the next 12 months, the survey found. Across sectors, CEOs are generally more concerned about near-term threats such as macroeconomic volatility, cyber risk, technology disruption, and geopolitical conflict.
“Almost a third (31%) say their company is highly or extremely exposed to the risk of a significant financial loss from cyber threats in the year ahead, up from 24% in last year’s survey and 21% two years ago,” the survey said. Adding to economic uncertainty, 29% globally said tariffs will reduce their company’s net profit margin in the year ahead, versus 60% expecting little to no change and 6% anticipating margin improvement.
Uncertainty is always present, the survey added. CEOs need to consider how to avoid becoming frozen in a world where dynamism pays and whether their perceptions and plans are based on current and relevant intelligence.
Stakeholder trust wavers
Many companies experienced stakeholder trust concerns in the last 12 months.
Two-thirds of CEOs (66%) said their company experienced trust concerns to at least a moderate extent in the last year on topics such as data privacy and transparency (both 38%), AI safety (37%), leadership decisions (36%), the impact of climate change on business performance (32%), and withdrawal of support or investment in the company (26%).
“Stakeholder trust has never been easier to lose … A single misstep … can precipitate a cascade of stakeholder concerns with damaging consequences for trust and value,” the survey warned.
Companies can build and preserve stakeholder trust through deliberate investments in data, processes, and controls, the survey said.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.