Reinvention on the edge of tomorrow

Last year, 56% of CEOs based in Indonesia anticipated a contraction in global economic growth. This sentiment was echoed by their counterparts globally and across  Asia-Pacific, where 45% shared similar concerns. ​

However, the outlook among Indonesia-based CEOs has taken a positive turn this year. More than a third (36%) of Indonesia-based CEOs are now confident that global economic growth will improve over the next 12 months. This represents a shift in sentiment among Indonesian business leaders, despite the fact that their optimism still lags behind the global and Asia-Pacific averages, where 58% and 55% of CEOs, respectively, express optimism. ​

This sentiment change reflects a cautious but growing confidence in the resilience of the global economy and its potential for recovery. Notably, this increase in optimism is supported by strong investments in diverse sectors and ASEAN's rise as a global hub for finance, digital services and manufacturing. These developments have undoubtedly contributed to a more positive outlook, even if tempered by caution.

Despite the renewed optimism, concerns remain prevalent. Indonesia CEOs continue to view macroeconomic volatility and geopolitical conflict  as the most significant threats, with 28% identifying it as top risks. In contrast, CEOs globally (29% vs. 26%) and in Asia-Pacific (32% vs. 30%) are more concerned about macroeconomic volatility and inflation, citing these as the biggest challenges in the year ahead. This divergence in perceived threats highlights the varied regional dynamics and priorities that business leaders must navigate. As they steer their companies through a complex global landscape, understanding these regional nuances becomes vital for strategic planning and adaptability.

In the dynamic landscape of business, Indonesia-based CEOs have been primarily
focused on acquiring new customers and exploring novel market routes. This
strategic emphasis reflects a proactive approach to business expansion and
customer engagement. Interestingly, while 29% of Indonesia-based CEOs
prioritise targeting new customers and 28% focus on exploring new market
routes, their global and Asia-Pacific counterparts are more inclined towards product
and service innovation, with 38% and 34% respectively emphasising this strategy.
This divergence in focus underscores the varied strategic priorities that shape
business reinvention across different regions.

Furthermore, a notable 45% of Indonesia-based CEOs acknowledge that their companies have ventured into at least one new sector within the last five years. This figure is slightly higher than the global average of 38% and the Asia-Pacific average of 35%. The sectors drawing the most new competitors from other industries include business services, health services, and consumer markets.

Despite these concerted efforts to reinvent their business models, Indonesia-based CEOs report that only 5% of their revenue over the past five years has originated from entirely new businesses. This figure closely aligns with the global and Asia-Pacific averages, highlighting a common challenge faced by leaders worldwide: the difficulty of generating significant revenue from nascent business ventures. It underscores the critical need for innovation and strategic foresight in fostering new growth avenues.

While many CEOs recognise the necessity for transformation, few have made bold moves, resulting in a slow pace of reinvention. Starting with resource allocation, approximately half of Indonesia-based CEOs report reallocating 10% or less of their financial resources (47%) and human resources (62%) annually. These figures are comparable to the global and Asia-Pacific averages, suggesting a shared cautious approach to resource management amid the pressures of business transformation. Such conservative resource allocation may reflect the broader uncertainty characterising the current economic climate, necessitating careful planning and strategic prudence.

One strategy for reinvention involves looking beyond a company’s internal boundaries and across industry lines to create value. However, Indonesia-based CEOs have not yet consistently employed a wide array of best practices in their strategic decision-making processes. Compared to 50% globally and 52% in the Asia-Pacific, only 44% of Indonesia-based CEOs typically incorporate information that could contradict their investment hypotheses. Additionally, only 37% of Indonesia-based CEOs determine the quality of the decision by its outcome rather than its process—a figure that lags behind the global (59%) and Asia-Pacific averages (51%). These insights suggest an opportunity for Indonesian business leaders to enhance their strategic frameworks and decision-making processes, potentially unlocking greater value and innovation.

Finally, despite the need to reinvent business models for long-term viability, most CEOs expect to remain in their roles for five years or less. This sentiment is more pronounced in Indonesia, where 68% of CEOs express this expectation, compared to 55% globally and 42% in the Asia-Pacific region. This trend suggests a potential constraint on the continuity needed for sustained transformative efforts. The shorter tenure expectations may also reflect the increasing pressure on leaders to deliver rapid results amidst an ever-changing business landscape, where adaptability and innovation are key. The challenge lies in aligning the short-term goals of CEOs with the long-term vision required for meaningful transformation.

To conclude, the pace of reinvention is hindered by several barriers, including weak decision-making processes, insufficient resource reallocation year to year and a mismatch between the short-expected tenure of many CEOs and the powerful long-term forces, or megatrends, at work. 

In the rapidly evolving technological landscape, enthusiasm for generative AI (GenAI) remains robust, yet trust issues continue to impede its full potential. Just two years after GenAI emerged on the radar of most executives, companies worldwide are adopting it at scale. More than half of Indonesia-based CEOs (59%+) have reported that GenAI has increased their company’s efficiency. Furthermore, approximately one-third have observed increased revenue (31%) and profitability (29%) as a direct result of GenAI integration. This improvement is largely attributed to the use of GenAI for non-core activities, including administrative functions. Furthermore, these results align closely with the global and Asia-Pacific averages, underscoring a widespread recognition of GenAI’s capabilities and its transformative potential.

Despite the promising figures, there is a noticable gap between GenAI's current achievements, and the initially high expectations held by many. Last year, 47% of Indonesia-based CEOs expressed optimism that GenAI would enhance their company's profitability. However, this year, only 35% maintain similar confidence for the next 12 months. This cautious outlook is due to CEOs being more selective about the use cases for GenAI and its potential impact on profitability.

The successful deployment of GenAI depends on its seamless integration within the workforce. However, only a small fraction (15%) of Indonesia-based CEOs plan to incorporate AI into workforce development and skill enhancement. Instead, a larger proportion (39%) aim to leverage AI primarily within their technology platforms. This trend reflects a growing focus on specific use cases and AI-powered technology solutions.

Trust, a crucial component for the successful implementation of AI, remains elusive. Only 15% of Indonesia-based CEOs report a high degree of trust in embedding AI into key business processes. In contrast, this level of trust is significantly higher in other regions, with one in three CEOs globally (33%) and in the Asia-Pacific (34%) expressing similar confidence. Data and infrastructure readiness are primary concerns that hinder trust in AI adoption. Furthermore, the challenge of identifying use cases with high return on investment (ROI) and navigating local regulatory landscapes significantly impacts the implementation of AI solutions.​

In the realm of climate-friendly investments, 27% of Indonesia-based respondents reported a positive impact on revenue. However, 42% of CEOs in Indonesia experienced increased costs, indicating that the financial burden of such initiatives still outweighs their benefits. This is partly due to inconsistent  policy implementation and enforcement. This situation affects clients' willingness to invest in sustainable products and services, impacting overall profitability. Enhancing policy consistency and enforcement could improve the effectiveness of these investments.

Although global results reveal a similar trend, the disparity in Indonesia is more pronounced, underscoring a unique regional challenge. In contrast, the Asia-Pacific region presents a different narrative, with more CEOs reporting revenue increases than cost hikes (39% vs. 34%), indicating a more favourable balance between investment and return. This contrast in experiences across regions underscores the necessity for customised approaches to climate initiatives.

These insights collectively illustrate the complex landscape that CEOs navigate, balancing innovation and sustainability with financial performance. As they strive to overcome these challenges, fostering an environment conducive to experimentation and growth becomes essential.