By an overwhelming majority (97%) CEOs at US-based technology, media and telecom (TMT) companies are confident about growth, both in the short term (12 months) and further out (three years), according to PwC’s 24th annual Global CEO Survey.
They have good reason for confidence. The flexible, resilient business models they already had in place before the pandemic allowed them to pivot to hybrid remote-work arrangements while shoring up customer experience for consumers who spent vast amounts of time online. Many have also made forward-looking acquisitions.
Yet, like all sectors, TMT companies also face challenges, some old, some new and some accelerating. TMT CEOs are, for example, very concerned about environmental threats and the likelihood of tax policy changes to address government debt. Our analysis of the survey reveals how TMT CEOs see the world as well as potential paths to overcome challenges and make growth ever-more sustainable.
More so than their global counterparts, US TMT leaders plan to drive growth over the next 12 months via several major initiatives. At the top of the list is organic growth — both to accelerate their own transformation and to meet customer demands.
They’re also leading the way on consumer privacy. Ahead of all sectors in adapting hybrid work models for operational efficiency and employee satisfaction, TMT companies are raising the bar for operational efficiency via cloud migration.
In pursuit of growth, 62% of US TMT companies plan to seek new deals in 2021 (compared with 34% of their global counterparts). PwC analysis of our Global M&A Integration Survey indicates that TMT companies often aim high with acquisitions, which can command high valuations — yet many then see results that fall short of expectations. Hopes for post-deal market share growth and revenue synergies tend to be particularly hard to fulfill.
With growth a priority, many leading TMT companies are turning to the cloud for operational efficiencies as well as to accelerate business transformation. Meanwhile, it’s critical to take measures to boost the go-to-market payoff from acquisitions.
The pandemic laid bare the need for accelerated investment in key initiatives over the next few years. Already ahead of the curve, TMT leaders in the US will continue to shore up digital transformation, including cloud-based initiatives.
For leadership and talent development, another key area of investment, PwC’s analysis of responses from chief human resource officers identified priorities: driving inclusive leadership, maintaining organizational culture and standardizing technology platforms to support both in-office and remote workers.
Cybersecurity and privacy continue to be long-running challenges. Given the ongoing risks, regulations and consumer pressure, one growing response is to integrate cybersecurity and data privacy investments with business growth initiatives.
Rather than first rolling out a digital transformation initiative and then having cyber and privacy teams collaborate to make it secure and compliant, forward-looking TMT firms are giving cyber and privacy experts a seat at the table from the outset. The result: data-driven business models with built-in trust.
Despite optimism about the pandemic response, public health remains top of mind for 100% of TMT leaders in the US with pandemics and health threats topping their list of concerns. A close second at 97% is cyber risk. The rise of remote work and cloud computing has led to new challenges as both these shifts may involve more sensitive data leaving corporate premises.
Meanwhile, even though they are optimistic about their own prospects for growth, TMT leaders are concerned about the lingering effects of the pandemic on overall economic growth, with 94% saying uncertainty in economic growth is a concern. Over-regulation, typically a key concern, dropped down on this year’s list of risks.
As they delve deeper into digital transformation, TMT leaders will need to shore up cyber resilience. On the regulatory front, some companies have already begun working with industry partners and policymakers to create an alliance of advocacy.
Some two-thirds of US TMT leaders (68%) are concerned about tax policy uncertainty while 65% are anxious about a possible increase in their tax obligation. Perhaps reflecting effective tax planning on the part of many US TMT companies, these levels of concern are slightly lower than other US sectors as well as among global TMT peers.
Looking further down the road, however, US TMT CEOs are very concerned about possible tax policy changes in response to rising government debt levels. The vast majority (94%) say such changes would lead to increased tax obligations for their companies.
Many leaders are already considering their response: More than 60% told us such tax policy changes would influence planning and decision-making, causing them to reconsider cost structure. More than 40% say such changes in tax policy would lead them to reconsider their geographic footprints and workforce strategies.
With most TMT CEOs convinced that higher taxes are likely, and with tax policy still uncertain, actions tax leaders can take now include modeling and planning for proposed changes.They can also communicate the potential impact of tax proposals on jobs and business operations. Where interests are aligned, coalitions and trade organizations offer additional ways for companies to engage on key issues to bring meaningful change.
Tax policy uncertainty
Increasing tax obligation
TMT companies are not just leaders in innovation. They’re also preparing to lead — and communicate their leadership — on sustainability. Indeed, 76% of US TMT CEOs told us they’re concerned about climate change and environmental damage versus 65% of their global peers.
Responding to strong investor and consumer interest in their environmental, social and governance (ESG) policies, TMT companies plan to improve reporting and transparency, with 65% saying they will adopt new ESG disclosure policies in 2021, compared to 37% all US sectors.
By evaluating business performance through an ESG lens, TMT leaders have an opportunity to reframe the story — including their company’s purpose and how it adds value for shareholders, customers and the wider community. Ultimately, the ESG lens is an increasingly important element of go-to-market and talent strategies for TMT companies.
The optimism of US TMT CEOs is built on solid foundations. As their investments in the cloud, artificial intelligence and other digital initiatives increasingly move from the back office to the business, TMT companies are ever-more-prepared to satisfy business customers and consumers.
With proactive measures to address health issues, cybersecurity, regulatory compliance, environmental impact and tax challenges, as well as a strategic approach to M&A and post-deal integration, the coming years appear ripe with possibility for the sector.