Over the last few years of economic instability, labor force shortages and continual and exponential advances in technology, Canadian CEOs have moved toward a more even split in prioritizing their investments between technology and people.
It’s crystal clear the pandemic tipped the scales: in our 2022 Canadian CEO Outlook, 80 per cent of respondents said they were prioritizing tech. This year, that’s down to 59 per cent, with 41 per cent prioritizing investment in people.
This more uniform strategy is expected to fill critical gaps, address inefficiencies and set the terms for continuing success.
Balancing act: Canadian investment priorities in talent and tech over the past five years
Source: KPMG Canadian CEO Outlook 2020-2024
As CEOs plot this rebalanced course, it’s up to their tech leaders to navigate it and ensure efficiency and growth. In KPMG’s 2024 Global Tech Survey, we spoke to tech and IT leaders to understand the opportunities as well as the challenges they are seeing as they work to modernize their operations, implement new technology and upskill their people.
Top technology investment priorities for tech leaders
Source: 2024 KPMG Global Tech Survey
On the talent side of the equation, many CEOs and tech leaders are also prioritizing efforts to find the people necessary to achieve their ambitions. Ninety-six per cent of CEOs plan to increase headcount over the next three years and 80 per cent recognize that the challenges of recruiting and retaining top talent is a threat to organizational prosperity.
96% of Canadian CEOs plan to increase headcount over the next three years
80% of Canadian CEOs recognize that the challenges of recruiting and retaining top talent is a threat to organizational prosperity
A lot of technology was deployed quickly over the pandemic as a means of survival. Now, CEOs have a moment to take a breath and figure out how to get the most return on their investment, whether that's through AI, upskilling talent, industry partnerships or all of the above.
Rigour and ROI
In this uncertain economic environment, CEOs are looking to their tech leaders to be more intentional with their tech investments. As a result, Canadian tech leaders are taking a more data-driven approach, with successful proofs of concept being the top reason for investment rather than response to customer demands. They are, in other words, becoming more proactive than reactive.
This rigour is paying off. In 2023, approximately 35 per cent of Canadian tech leaders reported no increase in profitability across technology categories. In 2024, this number was down to three per cent, with most leaders estimating a five-to-15 per cent increase in profitability across tech categories.
However, tech leaders are wary of the sharpened focus on returns: 91 per cent are concerned about the impacts of prioritizing short-term gains over long-term benefits.
AI ambitions . . .
Big investments in technology, especially AI, come with bigger expectations. Seventy-two per cent of Canadian CEOs expect to see a measurable return on their AI investments over the next three to five years, with increased profitability at the top of their wish lists. As such, 71 per cent have trained their sights for maximum AI investment return on IT and 64 per cent on sales and marketing.
The pressure is now on for tech leaders to deliver—and they are stepping up. Their progress on AI implementation has quickly aligned to that of other priority technologies in their organizations, including data and analytics, cybersecurity, Web3, XaaS and others. In fact, as many as 78 per cent say they have the necessary support and funding, and that they’re making progress with AI implementation.
72% of Canadian CEOs expect to see a measurable return on their AI investments over the next three to five years
. . . vs AI realities
Critically, though, while Canadian CEOs are embracing AI, they aren’t blind to its hazards. They recognize that AI can pose substantial risks to their organizations and that plenty of hurdles stand between them and successful implementation.
Only 40 per cent say their organization is ready to deploy generative AI with a robust governance framework, and 67 per cent believe the pace of progress on AI regulation will be a barrier to their success.
The worries are not unique to CEOs. Canadian tech leaders are also struggling to address some of these barriers as they look to operationalize technologies and deliver on their KPIs. About half (51 per cent) are concerned about a gap in technical capabilities and skills required to implement AI successfully.
That’s why Canadian tech leaders are turning their focus over the next 12 months to what they see as a key gap: data management. Fewer than half of tech leaders believe in the effectiveness of their data systems (47 per cent), their data governance (48 per cent) or their data security protocols (46 per cent).
When looking to derive value from AI and related investments, balancing the equation between data management and data hygiene will depend on pairing the right policies and protocols with the right tools and operational acumen. Once again, people will make the difference.
67% of Canadian CEOs believe the pace of progress on AI regulation will be a barrier to their success
Working together is better
CEOs are also keen to reverse the pandemic-led drive to remote work: most Canadian CEOs envision an in-office workforce within the next three years (83 per cent, up from 64 per cent), while 13 per cent see a hybrid workforce scenario and only four per cent envision a fully remote workforce.
In-person interaction is a tried-and-true way to build a culture of innovation, collaboration—and, critically, knowledge transfer, which CEOs rank as the top factor impacting company growth. With the pace of change being what it is and the continuous need for learning and upskilling, CEOs are increasingly aware of the value of institutional memory in maintaining organizational continuity and prosperity.
But whether their dollars are going more to technology or to talent, CEOs and their tech leaders acknowledge that the face of their growing workforce is changing. Seventy-nine per cent of Canadian CEOs and 89 per cent of tech leaders agree that AI may not fundamentally alter the number of jobs, but it will require significant upskilling and redeployment of roles.
This underscores the enduring fact that the greater the degree of harmony CEOs and tech leaders can achieve between their ROIs in tech and in people, the more even their path to success will be.
79% of Canadian CEOs agree that AI may not fundamentally alter the number of jobs, but it will require significant upskilling and redeployment of roles
89% of tech leaders agree that AI may not fundamentally alter the number of jobs, but it will require significant upskilling and redeployment of roles
Rapid and continuous change in technology has created not only new opportunities but also new risks. As organizations increasingly come to benefit from the technologies they’re deploying, so, too, do their competitors—and their adversaries. Balanced investment in both technology and talent is fundamental to matching speed with stakeholder expectations and mitigating the repercussions of potential missteps.
Steady as you grow
As organizations work to balance risk and reward, they should keep the following in mind:
- Ensure alignment between firm and tech leaders. It takes a united C-suite to advance technological adoption and generate a return on your tech investments. That means gaining and preserving alignment between CEOs, CIOs and business leaders across the organization. Regular communication on priorities, objectives and implementation progress along the way is key.
- Remember that AI is only as useful as its inputs. AI can spark efficiency, connect data and provide better insights than manual processes and conventional tools. But you still need human experience and judgement to challenge and validate both your inputs and your results.
- Remember that tech is only as good as the people using it. Buying a piece of technology doesn't mean your organization is ready to make the most of it. Sit down with your business leaders and figure out how it can be deployed in a way that both mitigates risk and maximizes return.
- Embed cybersecurity in both tech and culture. To continuously defend against evolving forms of ransomware, phishing attacks, deepfakes and other fraudulent ploys, you’ll also need to invest continuously—in both the tools and skills needed to keep cybersecurity at the top of everyone’s mind.
- Keep people at the core. Continue to invest in your people and your culture. Retaining top talent is cheaper than recruiting it and helps ensure knowledge transfer within the organization. Investing in lifelong learning and building opportunities for collaboration can help you nurture a more resilient and innovative workforce.
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About our surveys
The 10th edition of the KPMG CEO Outlook, conducted with 1,325 CEOs between July 25 and August 29, 2024, provides unique insight into the mindset, strategies, and planning tactics of CEOs. All respondents oversee companies with more than US$500 million in annual revenue and a third of the companies surveyed have more than US$10 billion in annual revenue. The survey by KPMG International included CEOs from 11 key markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the U.K. and the U.S.) and 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications). NOTE: Some figures may not add up to 100 per cent due to rounding.
KPMG Private Enterprise™ surveyed 735 business owners or executive level C-suite decision makers at small-and-medium-sized Canadian companies between August 13 and Sept. 4, 2024, using Sago's premier business research panel. Thirty-seven per cent helm companies with more than C$500 million and less than C$1 billion in annual revenue, a quarter have more than C$300 million and less than $500 million in annual revenue, 26 per cent have between C$100 million and C$300 million in annual revenue, and 13 per cent have between C$10 million and C$50 million in annual revenue. No companies were surveyed under C$10 million.