Over the past 20 years CEOs have witnessed huge upheavals as a result of globalisation and technological change. Both were core to our enquiries when we conducted our first Annual Global CEO Survey in 1997. Since then, trade flows have quadrupled, the emerging economies have mushroomed and a billion people have been lifted out of poverty. But the benefits have been unevenly distributed. Research by economist Branko Milanovic, whom we interviewed for this year’s study, shows the super-rich and Asia’s expanding middle class have fared well, while those of modest means in developed countries have missed out.
Now, anger over the way the pie has been sliced is increasingly shaping our political discourse – just as CEOs foresaw nearly a decade ago when they predicted a growing gap between rich and poor and warned of rising political and religious tensions. By 2016, most CEOs anticipated a world in which multiple beliefs, value systems, laws and liberties, banking systems and trading blocs would prevail.
In short, greater convergence has come with greater divergence. So how are CEOs competing in a world that’s simultaneously becoming more connected and more divided?
Ironically, our research shows that growth in global trade is slowing, even as public discontent mounts. CEOs are changing their growth strategies accordingly. Twenty years ago, they saw emerging markets as the ticket to success. As recently as 2014, China was their first choice. Brazil, India, Russia and Mexico also featured high on their list of top spots. But CEOs are now turning to a broader mix of countries.
They’re targeting the US, which is prospering despite the challenges it faces as it redefines its role on the world stage. China also remains a priority, for all that it’s dealing with a worrying debt bubble. Germany is a steady favourite, and the UK has soared in popularity – an ascent that’s particularly noteworthy, given the vote to leave the EU. However, over time, CEOs have become much less enthusiastic about the prospects in Brazil, India and Russia. In other words, they’re shopping around carefully, as the opportunities and risks in different markets become both more distinctive and more changeable, rather than heading straight down the BRIC road.
Of course, CEOs worry about economic and geopolitical uncertainties. Nevertheless, they’ve become surprisingly optimistic. In 1997, only a third of the business leaders we surveyed were very confident about their company’s three-year revenue outlook, even though they were riding the wave of an extraordinary bull market. This year, by contrast, 51% are very positive about the longer-term prospects for growth.
Why such optimism? CEOs have undoubtedly had to cope with stormy conditions, so perhaps natural selection has played a part; anyone who reaches the top has already adapted to uncertainty. Alternatively, perhaps, CEOs have learned to look for the upside and seize on the opportunities uncertainty brings. One thing is clear; they’re not waiting things out. CEOs recognise that it’s not enough to focus on organic growth and cost reductions, important though these are. So they’re prioritising investment in innovation and digital capabilities.