2021 CEO Study: Find your essential

After the uncertainty of the past year, CEOs stress organizational agility–the capability of an organization to respond quickly and pivot without losing momentum–as a top priority for leaders to an unprecedented degree.

The challenge often lies in identifying the clear impact of agile initiatives, while in some cases, even “agile chaos” has resulted. Therefore, agile ways of working need to be more purposeful. They should include a clear focus on business outcomes and guidelines that indicate where innovation will lead to essential next-level advantages—so that agile initiatives result in material, valuable changes and real-world impact.

CEOs recognize that this new way of driving flexibility and delivering innovation can only be realized with an empowered remote workforce. While 2020 amplified a host of strategic priorities, empowering remote work was noted by CEOs as their top concern more frequently than anything else.

Over the past 17 years of CEO research by the IBV, regulatory concern has never finished above the fourth position among expected top external forces cited by respondents. For nearly a decade, the first and second spots jockeyed between technology factors and market factors. But this year, regulation leapfrogged to second, cited as a priority by more than half of the CEOs in our study.

This unquestionably reflects a rising assertiveness by governments around privacy, data, trade and— amplified by COVID-19—health. Lockdowns and quarantines set a new precedent for government’s power over business that has at least one out of two CEOs looking over their shoulders.

Across our study, Outperformers demonstrate a far more focused set of priorities compared to Underperformers, whose responses are more distributed. The Outperformers are not passively gathering information or hedging their bets waiting for the dust to settle. Regardless of their specific areas of focus, we consistently see the decisive strategic leadership that sets Outperformers apart. In fact, 85% of Outperformers overall cite leadership as critical to business performance. Only 69% of Underperformers report the same priority.

Outperformers also identify a sense of purpose and mission as critical to engaging employees at a rate 53% higher than Underperformers. In today’s trust climate, where faith in institutions overall has been declining, that is an emerging competitive advantage.

“There’s a higher expectation about the role of business in society than a year ago,” says Alex Gorsky of Johnson & Johnson. “It’s become part of the vernacular in a much more significant way. Expectations have changed.”

When it comes to the workplace, the perspectives of Outperformers and Underperformers diverge sharply. The pandemic-fueled, remote “anywhere” workplace is among the most cited areas of future focus by Outperformers, with 50% of CEOs identifying it as a key challenge. Underperformers identify the anywhere workplace at half that rate—on a par with topics such as tariffs.

Surprisingly, despite inherent differences across industries when it comes to the issues associated with a hybrid workforce, in only one industry, local government, do more than 50% of Underperformers identify this challenge. Even in the other industries with relatively high percentages of Underperformers focused on the anywhere workplace—retail/consumer banking, IT services, and retail—Underperformers still consistently lag behind their outperforming competitors on this issue. In other words, while Outperformers are actively preparing for the challenges and opportunities associated with the anywhere workplace, Underperformers risk falling further behind.

Outperformers also focus more on employee well-being, with 97% more of them than Underperformers supporting workforce health and wellness even if it costs near-term profit. “The far most important capability is human capability,” says Younis Al Nasser, CEO of Smart Dubai, a government agency that facilitates digital transformation. “Technology advancements come when you have the right human capabilities.”

In parallel with their deeper focus on ecosystems, remote activities, and technology overall, Outperformers distinguish themselves from Underperformers in one more significant area: a heightened focus on cybersecurity. 26% more Outperformers than Underperformers identify cyber risk as among their greatest challenges over the next two to three years. The number two factor Outperformers will aggressively pursue is securing data and systems. Furthermore, 31% more Outperformers than Underperformers cite security and risk as an area where they expect technology to have the greatest impact.

Outperformers appear to recognize that digital security and trust need to be integrated into strategy, given the essential reliance on technology for partnering, culture, customer engagement, and more. The importance and impact of tech is so important, so central, that cybersecurity is elevated to a justifiably highest-order priority. This is consistent with research from the IBV “Digital acceleration” study, which found top performers to be 72% more likely to use AI to gather and assess threat intelligence. By not preparing, Underperformers reveal their tech naiveté. They also may be creating exposure for themselves—because even less tech-mature businesses are still, essentially, tech-dependent.

While all organizations are active in this vector, CEOs in this category give heightened attention to customer relationships. During 2020, they stressed virtual engagement with end users 50% more than other CEOs. For example, they are more likely to include customers in development and testing as well as in validating privacy and security policy.

The customer-related lessons become acute when comparing Outperformers in the group to Underperformers. Consider acting on customer feedback, a logical and expected priority for this realm. This is cited as the most important method of creating a differentiated consumer experience—but by the Underperformers.

Of course, Outperformers value customer feedback too, but their first and second priorities when it comes to customer experience are customer-service etiquette and dynamic feedback—feedback that's smart, curated in real time, and fueled by technology such as AI. The message is that simply giving customers what they say they want isn’t enough. The goal should be to delight customers at every interaction by treating them better than they expect, acknowledging that a customer’s impression of the organization is only as good as their last experience. “The bar has been raised higher,” says CEO Piyush Gupta of DBS Bank.

“The big change,” Gupta says, “is hyper-digitalization.” When asked where technology would have the greatest impact over the next two to three years, customer-focused Underperformers cited consumer insights. Yet for outperformers, the by-far dominant answer was consumer experience. The lagging organizations look to data for competitive clues. They collect data and use it to give consumers what they ask for. Outperformers take it one giant step further. They are proactive in how they apply data, using it to emphasize engagement. Rather than simply respond to data, Outperformers use it as a tool to build and shape customer relationships.

Operators stress efficiency, distribution, pricing structure, and transparency. But while the laggards are prioritizing short-term issues, such as budgets, leaders are taking a more proactive, forward-looking perspective. They’re positioning themselves for a prosperous tomorrow by emphasizing factors such as emerging technologies. It’s the difference between surviving and thriving.

Perhaps unsurprisingly, process automation is identified as an expected driver of results, as well as cloud computing and AI. Technology will drive improving business agility, say the operations-focused CEOs.

“Shifting the mindset from engineering something to death to experimenting and failing quickly is the opposite of the way we’ve worked culturally,” says Mark Little of Suncor. “It’s a very different approach.”

Much of the solution, Little says, revolves around technology and the proper approach to implementing it: “We’re trying to accelerate investments in the intangible world. How do you generate value?”

A second critical differentiator among operations-focused Outperformers: partnerships. Outperformers designate partners and ecosystems as a key tool at double the level of Underperformers. In fact, when identifying ways to build trust with customers and meet expectations, Outperformers rank partnerships as first on their list among eight choices; for Underperformers, it ranks dead last, at eighth.

Even amid the darkest pandemic-disrupted moments, operations-focused Outperformers stuck with partners, responding to a challenging economy by renegotiating partnerships 44% more than Underperformers. “If I work with partners, then I can be successful faster,” says Daimler Mobility CEO Franz Reiner. “And I don’t have to have every competency on board here.”