Transforming: technology, innovation and talent

Transforming: technology, innovation and talent

CEOs are using technology to get closer to consumers but are being challenged to align all parts of their operating model behind customer strategies.

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CEOs are using technology to get closer to consumers but are being challenged to align all parts of their operating model behind customer strategies. Some companies are bridging what we call an ‘execution gap’ by shaping their entire value proposition, strategy, operations and capabilities tightly around a strong commitment to what they stand for. They’re also looking to build better innovation and people capabilities to address changing customer expectations.

"Our company was founded by Thomas Edison almost 130 years ago and he has a great quote that I like repeating very much. He said: “I find out what the world needs. Then, I go ahead and invent it.” And that has been exactly the core value of our company over 130 years. We listen to our customers. We understand what they need and we continuously innovate around customer needs. While we’re doing that, the area that we have chosen for ourselves is solving tough world problems."

Canan M. Özsoy
President and CEO, General Electric Turkey

Walking the talk

It’s evident that most businesses today, in defining what they stand for, recognise the needs of a wider set of stakeholders – and their customers’ expectations about how they address those needs. Translating a broader corporate purpose into the everyday, however, is another matter entirely. Even the most committed can find it challenging in the extreme to reshape their company while facing day-to-day battles on every front to fight off competition, grow revenues and cut costs.

There are a number of barriers that CEOs say they’re encountering when responding to the changing expectations of customers and other stakeholders. Chief among these are the additional costs of doing business, cited by 45% of CEOs. Compliance with unclear or inconsistent regulations, cited by 42% of CEOs, also incur costs, which are often passed onto customers via higher prices. This adds to the premium that customers often have to pay for goods and services deemed sustainable – something that 31% of CEOs don’t think they’re willing to pay.

These barriers to execution are creating conflicts for companies trying to balance changing stakeholder expectations with pursuing business growth and profitability over both the short and long term.

Nevertheless, CEOs are increasingly aware that they must overcome these barriers in order to transform their businesses and align them fully behind broader strategies.

Putting technology to work

Technology, as in most situations nowadays, can help.

As we’ve seen in the previous section, business leaders understand all too well how technology is transforming their relationship with customers as well as other stakeholders. So it makes sense that they see technology as the best way to assess and deliver on changing customer expectations, with 51% of CEOs making significant changes in this area.

At the top of CEOs’ minds is the use of technology to better interpret the complex and evolving needs of customers in order to better engage with them. Nearly a quarter of CEOs (24%) feel they don’t have enough information about what customers or other stakeholders want, and a recent PwC survey showed that the top-three challenge most cited by global operations leaders (63%) is understanding what customers value. Sixty-eight percent of CEOs back the power of data and analytics to deliver these results and 65% favour customer relationship management (CRM) systems.

Indeed, CEOs’ growing faith in, and dependence on, data and analytics signals just how far a data-based, scientific mindset has penetrated even the complex world of stakeholder management. And as big data, cloud computing and the Internet of Things become even more important in modern business, the role that technology plays in helping understand wider stakeholder expectations is also being applied to meeting and even surpassing those expectations.

Most CEOs see data and analytics technologies as generating the greatest return for stakeholder engagement

"...the biggest opportunity for us is digitalisation ... and based on [that] we will improve all our business and create added value for all our stakeholders."

Mikko Helander
President and CEO, Kesko Corporation, Finland

The innovation edge

Over half of CEOs ranked R&D and innovation technologies as generating the greatest return in terms of successful stakeholder engagement. The winners in the innovation game, however, will be those that harness technology and innovation to deliver products and services that are cost-effective, convenient, functional and sustainable.

Today, some of the most in-demand products reflect customers’ changing values. Take Nest’s energy efficiency home monitors for example, or Nike’s shoes and clothing developed with tools enabling suppliers and designers to quickly assess sustainability criteria. Companies like GE, meanwhile, are pioneering innovation in healthcare and smart cities.

Digitisation is central to these efforts, allowing companies to obtain and utilise data about business processes that’s necessary to support innovation efforts, and to remove costs from the system through greater efficiencies.

And while technology plays a critical role in innovation, often it’s in conjunction with business model change as epitomised by the likes of Airbnb and its ‘sharing economy’ peers.

Most companies, however, struggle to achieve innovation-led growth. Innovating to meet customers’ changing demands for sustainable and ethical goods and services adds a challenging dimension to this pursuit, one that many companies are only just beginning to address. This probably explains why fewer numbers of CEOs are making significant change in maximising the societal value of their R&D and innovation and developing ethical products and services.

The people edge

As companies look to meet the complicated expectations of stakeholders and society, they will need a new generation of people with an entrepreneurial mindset who can harness technology and drive innovation.

Sometimes it’s easy to equate technology-led success solely with Silicon Valley internet models. However, PwC’s comprehensive study of the world’s self-made billionaires showed that over 80% of these mega-wealthy individuals made their fortunes in highly competitive markets like consumer products, retail or business services. This means that almost any market can be reinvented.

It’s no wonder, then, that 72% of CEOs are concerned about the availability of key skills, particularly with 48% planning to increase headcount in the coming year. And it explains why by far the most CEOs (75%) say that a skilled, educated and adaptable workforce should be a priority for business in the country where they’re based. This is such a vital factor that CEOs see it as a top priority for both business and government – together. Brian Moynihan, Chief Executive Officer at Bank of America Corporation acknowledges the importance of people, “Even with all the new technology, people skills are actually more important now. Whether it’s providing day-to-day services in our bank branches or managing our data analytics: it’s all about people.”

So what are CEOs doing to develop the workforce they need for today and tomorrow? Nearly half are making changes to how they develop their leadership pipeline. It’s not hard to understand why. This new generation of leaders has grown up in a different world and is better equipped to tackle thorny societal issues.

Think about the new skills that CEOs need to be comfortable with, if current CEO predictions are right. They'll need to be able to operate in a world with multiple stakeholders, different values and diverse attitudes toward law and rights, all in an increasingly volatile economic context. In addition, they will have to be comfortable with data, analytics and many new technologies. This type of leader will also need to be able to develop new leaders with the right skills and adaptability to deliver the ‘people edge’ required.

Focusing on the leadership pipeline will also help ensure that future leaders can present consistent messages to the wider employee base, and the visibility and ‘tone from the top’ that’s necessary to turn words into action.

The ability to align the entire workforce behind business and growth goals, however, is also critical to execution. As Susan Lloyd-Hurwitz, CEO and Managing Director of Australia-based asset management company Mirvac Group says, “Aligning people to the business, the changes, the expectations and our purpose is absolutely key.”

This is, however, proving challenging for organisations to achieve. Despite the importance of getting the right talent, just 30% of CEOs are making changes to their focus on skills and adaptability in their people. And despite their embrace of technology in all things customer-related, companies are doing little to change either how they use technology to improve productivity or their use of workforce analytics, with only 4% of CEOs seeking change in that area.

CEOs also recognise the importance of tying workplace culture to behaviour, with 41% making changes to this aspect of their talent strategies. Indeed, companies that are highly coherent – those with strong alignment between their value proposition, capabilities, and products and services – view their culture as their greatest asset. But despite the cultural changes that CEOs are making in their people strategies, such developments don’t loom large in the context of the wider organisation. Just 31% of CEOs are pursuing significant changes to values, ethics and codes of conduct – compared to 51% for technology.

What aspects of your talent strategy are you changing to make the greatest impact on attracing, retaining and engaging the people you need to remain relevant and competitive?t


Why government and business need to work together

Across every industry, tensions abound between companies, who believe they can be trusted to do the right thing, and governments that aren’t so sure. The regulations governments are trying to enforce are intended to be in the best interests of the public, as consumers or employees. But they can involve reforms, penalties or higher taxes for business that result in higher costs - including those that arise when business doesn’t have enough clarity about how regulations should be interpreted and implemented. These costs, in turn, are likely to be passed onto customers in the form of higher prices.

This no doubt contributes to CEOs’ near universal frustration that over-regulation is a threat to their company’s growth, and why 42% cite unclear or inconsistent regulations as a barrier to responding to changing customer expectations. What’s more, increasingly divergent political and legal systems around the world make it harder for multinationals to comply with rules or standards in their countries of operation without falling foul of their home country’s laws.

But viewing government through a combative lens is unlikely to help companies in the long run. For one thing, government and regulators have a big impact on companies, with 69% of CEOs citing them as highly influential on business strategy. And, despite their complaints about government interference, many companies expect the state to provide considerable help, whether it’s improving workforce skills and education or the infrastructure needed by any modern economy.

As both business and government navigate changing public expectations, they’re going to need each other more than they might think. In the end, businesses want to create the best value they can for customers, and doing that increasingly means creating the best value they can for society at large. These are the same goals government shares – a win-win.

For business, understanding why regulation is there in the first place, rather than focusing only on interpretation and compliance can help ease the stand-off. Regulations are often first introduced in response to a market failure or to embed good business practice in legislation. Recognising the spirit of what government is trying to achieve can help businesses pre-empt the need for regulation by establishing core principles and values to guide decision-making. It also paves the way for active alignment with government goals and programmes in order to help shape them and improve their effectiveness. Such actions will also serve to rebuild trust with regulators. 

On the other hand, more recognition is needed by government of the extent to which regulation can create additional burdens and costs, which must be weighed against societal benefits. If business expects constant legislative change, a climate of uncertainty will threaten investment, national growth and competitiveness. What’s needed is regulation that’s proportionate, accountable, consistent, transparent and targeted. Streamlining public sector processes through digitisation − and involving business in the co-design of implementation − can also go a long way toward enabling this process and easing the compliance burden for companies.

 

Tough questions to ask about focusing on transforming with technology innovation and talent

How are you ensuring you’re investing in the right technologies to enable open engagement with your customers and wider stakeholder groups?

Have you identified the right capabilities to support you from strategy to execution?

Is your innovation geared towards generating offerings that meet big societal needs and generate good long-term ROI?

What are you doing to enable your people to work towards better meeting new and wider stakeholder expectations?

How are you working with government to create better outcomes for customers and employees?

Contact us

Suzanne Snowden
Director, Global Thought Leadership
Tel: +44 (0) 20 7212 5481
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