articles | 29 July 2021 | EY Cyprus

EY: CEOs understand transformation cannot be put off following COVID-19 pandemic

More than two-thirds (68%) of CEO respondents from the world’s largest companies say that they plan to take on a major investment in data and technology over the next 12 months, while 61% plan to undertake a major transformation initiative over the same period, according to the global EY CEO Imperative Study 2021. The survey of 305 CEOs (from the Forbes Global 2000) also found that within three years, 42% of respondents expect to make changes to their organization’s risk management processes.

  • The COVID-19 pandemic has created an urgent need for businesses to accelerate their transformation efforts as 66% of companies fall further behind in growth 
  • Only 34% of CEOs state their companies enjoy customer trust related to data — a challenge that could limit growth and stall transformation efforts 
  • Study shows a clear, long-term value “say-do,” or intention and execution gap despite an appetite to drive long-term value over the next five years 

While digital-led business transformation (incorporating fundamental changes to business and operating models) has been on the CEO agenda for years, the impact of the COVID-19 pandemic has moved this imperative from important to urgent. 

Central to this, many CEOs recognize the importance of human factors to the success of their transformation projects, with 68% of respondents saying they have at least one transformation priority related to the importance of people, the cultivation of future talent and organizational culture. 

Diverging “Thrivers” and “Survivors”

The research looked at the revenue growth rate of companies across the timeline of the COVID-19 pandemic, prior to, at its height and ahead to the next three years. EY segmented them into three distinctive groups and analyzed their respective growth priorities and prospects:

  • Thrivers: Thirty-four percent of businesses were already benefiting from a period of financial growth before the pandemic hit, and this group will continue outpacing their peers over the next three years. CEOs of those businesses are actively leaning into this pivotal moment and accelerating their transformation agendas. 
  • Maintainers: Thirty-four percent of companies that had low or flat growth prior the pandemic and expect to remain there for the next three years and expect no change to their transformation agenda over the same period. 
  • Survivors: Thirty-two percent of leaders outlined that prior to the pandemic, their organizations were experiencing a decline in revenue and expect that their revenue would either continue to shrink, or level off over the next three years, and over the same period CEOs in this group will slow their transformation agendas. 

This analysis highlights that while the CEOs of Thrivers are already taking advantage of the present opportunity, those within the Survivors and Maintainers groups must immediately act to avoid falling further behind.  

Data trust gap threatens transformation, competitiveness

As data security and privacy regulations move to the forefront of public discourse, there remains a considerable trust gap between the capabilities of intelligence technologies and what people are willing to let these innovations do. Only 34% of respondents affirm that customers trust them with their data, reinforcing the need for CEOs and the C-suite to scrutinize processes around data collection, management and use, while increasing transparency with customers and other stakeholders. If left unaddressed, this issue could limit growth, slow innovation and stall transformation efforts.

Despite this gap, 88% of respondents state that the use of data science to anticipate and fulfill individual customer needs will be a main differentiator in the next five years; while 87% of respondents say delivering data-driven experiences will drive competitive advantages during the same period. In the more immediate term, 41% of respondents believe artificial intelligence (AI) and data science requires increased attention from the C-suite over the next 12 months.

Stark divisions in sector transformation priorities

While digital innovation was the top transformation driver overall and the greatest area of increased focus to generate growth, there were important distinctions among different sections. Most notably in the Energy sector, where less than one-third (32%) of respondents believe digital transformation requires attention. Instead, respondents within the Energy sector are more focused on climate change and geopolitical risk. In the Finance sector, just over half (51%) of respondents were focused on digital, while two-thirds (67%) look to cybersecurity. 

Among the starkest divides is in the area of long-term value, where 69% respondents in the Manufacturing sector believe this is where their focus should be, compared with just 17% of respondents in the Technology sector. 

The long-term value creation “say-do” gap

The research found that over the next five years, 87% of respondents believe the creation of long-term value across stakeholders will be welcomed and rewarded by the market, while 91% of respondents believe new business models will increasingly incorporate aspects of the circular economy. Alongside this, 80% agree there is likely to be a global standard for measuring and reporting long-term value creation and 80% agree that their organizations will take significant new steps to take environmental, social and corporate governance (ESG) responsibility inside their operations. However, analysis of responses against key long-term value dimensions such as societal, human, financial and customer, revealed a clear “say-do” or intention-action gap. 

DNA of the future enterprise

The research found leaders face key capability and execution gaps, with actions failing to meet intentions when it comes to generating long-term value, changing organizational structures from inhibiting agility, and sluggish investment in ecosystems hampering resilience. Addressing these gaps will require a top-down strategy focused on three interconnected value drivers: 

1.    Placing humans at the center of everything the organization does, increasing agility to react to changing market and consumer demands. 

2.    Technology at speed, empowering organizations to deploy new solutions faster.

3.    Innovation at scale, collaboration among organizations across an ever-increasing ecosystem to move into new markets. 

By focusing on these value drivers, CEOs can reorient their organizations around a culture built for continuous transformation and set their businesses up to outperform competitors in the short-, medium- and long-term.

Commenting on the findings of the survey, Ronald Attard, Country Managing Partner of EY Cyprus, noted: “The pandemic has brought CEOs worldwide under renewed pressure to balance their companies’ efforts to create long-term growth with shareholders’ expectations for short term profits. While CEOs appear to realise the need to transform their companies in order to pursue this agenda, create long-term values and address ESG issues, their intentions are not always matched with the necessary actions at the execution level. Leaders need to follow through their public commitments with action to demonstrate they are taking the bold steps needed to drive long-term value and necessary change.”      

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