Inside the mind of the CEO

Leading the Way is a column written by PricewaterhouseCoopers professional staff. It appears in the Business section of the Bangkok Post twice each month. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.

This article appeared in the February 19, 2008 issue of the Bangkok Post.

By Matthew Wyborn

Picture this: You are the CEO of an Asian company. While confident of growth in the next year, you are concerned about the effects of a possible recession in the West. You are also beginning to think about how you can build better networks to support your business, and you are finding it increasingly difficult to recruit the right people for your organisation.

Does this sound plausible? According to the results of our recent CEO survey , it may be spot on.

For the past 11 years, PricewaterhouseCoopers has conducted an annual survey of CEOs worldwide to better understand the forces they believe will shape the future, and to shed light on emerging opportunities and risks. The results of this year's survey suggest that while the views of CEOs on growth prospects vary by region, across the globe they are identifying similar potential risks, eyeing the same future business model, and have many human capital issues in common.

Business confidence up in the ''new'' world, down in the ''old'' world

CEO confidence in growth showed marked increases in the surging economies of Asia Pacific, Latin America and Central and Eastern Europe, rising to about 55% of respondents in each of these regions. In China and India, 73% and 90% of CEOs, respectively, professed themselves ''very confident'' about the prospects for growth in the next year.

In contrast, only 35% of North American CEOs are ''very confident'' about the short-term outlook, down from 53% in 2007. In Western Europe the corresponding figure is below 50%.

Various factors help to explain this overall air of caution, including the collapse of the US sub-prime mortgage market and ensuing credit crunch; rising energy prices; the shift in the global balance of economic power; and the recent weakness of the US dollar. Given all these challenges, it is not surprising that CEOs in the Western world are nervous about the state of the economy.

M&A activity is moving east

A further reflection of Asian CEOs' higher levels of business confidence is that interest in cross-border mergers and acquisitions (M&A) is highest in Asia, where Asian companies have increasingly become the acquirers rather than the acquired. Whereas Western European CEOs were the most likely to have participated in cross-border M&A activity in the past 12 months, our findings show they are now set to hand the mantle to Asia. Only 23% of Asian CEOs have completed at least one cross-border deal within the past year, but 34%, a higher percentage than in any other region, say that they intend to do so within the next 12 months.

Global risks are changing

When asked what they think are the biggest threats to business growth, CEOs have regularly put overregulation and the availability of key skills at the top of the list in recent years. Now, however, they are equally anxious about the risk of a potential downturn in the world's major economies.

They are much less worried about overregulation; only 59% see it a business threat, compared with 73% in 2007. They are also noticeably less concerned about terrorism. And, despite growing public concern about climate change, many CEOs clearly do not think that global warming will have a direct impact on their companies' potential for growth in the medium term.

This is understandable. As the economy moves to centre stage, more intangible risks are likely to seem less pressing. Furthermore, in today's highly connected world, the potential for ''economic contagion'' is much greater than before. If North America goes into recession, for example, the volume of US imports would shrink, thus dampening growth in exporting economies. The prospect of a recession was the only growth risk to increase in concern among CEOs.

Collaborative networks on the rise

The emergence of collaborative business networks as a front-line response for managing risks and exploiting opportunities is one of the clearest findings of this year's survey. More than half of the CEOs think that collaborative networks will be a defining organisational principle for business, although actual implementation still lags behind expectations.

Deeper analysis of the data provides clues as to how the use of networks is evolving in different regions, 53% of CEOs in North America believe that networks will be a defining organisational principle, while 63% in Asia Pacific and 83% of Indian CEOs support the idea.

Finding the right people is challenging

Collaborative networks can connect more people, more rapidly and more effectively. Therefore, CEOs are placing a high premium on recruiting people who are able to collaborate, who can adjust rapidly to internal and external change, and who are able to lead and develop others.

However, some of the strengths CEOs value are proving hard to find. More than two-thirds of respondents say it is difficult to recruit people with the right combination of technical and commercial expertise. At least 60% say that global experience, leadership, and creativity are all in short supply. CEOs in Asia were the most concerned over the availability of key skills, with nearly four-fifths citing this as a worry.

The war for talent remains a key concern among CEOs worldwide, ranking second only to a potential economic downturn as a threat to business growth.

The way forward: connect and succeed

Overall, perhaps the most pervasive theme of this year's survey is the tension between collaboration and collective action on the one hand, and competition and individualism on the other. This tension reflects the fact that the connected world is still largely uncharted territory, and that many of the changes currently taking place are not merely refinements of traditional business practice.

Put simply, the world is connected as never before. And as this year's CEO survey shows, the full power of collaboration is now beginning to emerge.