Emerging technology lands as top growth risk

CEOs are keeping technology risk front of mind in the short and long term. Disruptive technology has emerged as the top risk and greatest threat to organizational growth over the next 3 years. And while pandemic fatigue and economic factors like rising interest rates and inflation are top of mind over the next 6 months, emerging and disruptive technology is a close third. In the face of these risks, CEOs continue to prioritize digital investment — with 72 percent agreeing they have an aggressive digital investment strategy, intended to secure first-mover or fast-follower status.

Furthermore, advancing digitalization and connectivity across the business is tied (with attracting and retaining talent) as the top operational priority to achieve growth over the next 3 years. This focus on digital transformation may be driven by increasingly flexible working arrangements and heightened awareness of cyber security threats, exacerbated by geopolitical uncertainty.

At Fujitsu Limited, CEO, Takahito Tokita is on a mission to transform the organization from a traditional IT company into a purpose-driven digital experience organization. “We have always been confident in our technology and innovations, but in our conversations with clients, we realized they needed more than just products — they needed integrated, value-adding capabilities to help advance their own digital transformations. I said that we would change from an IT to digital experience company to meet that demand and reflect a sense of urgency that we are not going to be a company that just follows old traditions.”

This article was originally published on kpmg.com.

Staying on the right track

The anticipated recession may be pushing businesses to reconsider their strategies over the short term. Four out of five CEOs note that their businesses are pausing or reducing their digital transformation strategies to prepare for the anticipated recession (40 percent have paused or reduced, and 37 percent plan to pause or reduce over the next 6 months). In fact, 70 percent say they need to be quicker to shift investment to digital opportunities and divest in those areas where they face digital obsolescence.

Digital transformation has become more expensive in recent years, so more than ever, investment should be prioritized in those areas that help drive growth — and potentially slowed or reconsidered on efforts that may be considered non-critical. In uncertain times, it’s imperative businesses focus their digital investments on impactful, and measurable, value creation opportunities most able to support their strategic goals.

Bringing people and technology together

CEOs continue to narrow the gap between their digital transformation objectives and investing in their workforce. CEOs were offered a binary choice: whether they were placing more capital investment in new technology (56 percent) or developing their workforce’s skills and capabilities (44 percent). This gap has narrowed from 2021, when 60 percent prioritized technology investment over workforce-related investments (40 percent).

As businesses have implemented their digital tools, their attention has shifted to adoption, engagement and change management of their people to support working in a very different world. To drive their growth, CEOs may be looking to make their existing people more productive through transformation.

Have CEOs taken steps to pause or reduce digital transformation strategies to prepare for a recession?

Have taken

Plan to take in the next 6 months

No action planned

Source: KPMG 2022 CEO Outlook

Building successful partnerships

Few organizations can succeed on their own. Businesses rely on their ecosystems as building successful partnerships can help a company deliver a competitive edge. Increasingly, CEOs view partnerships as an important means to continue the pace of their digital transformation (71 percent, compared to 59 percent in February 2022). CEOs also say building strategic alliances with third parties is the most important strategy to help them reach their growth objectives over the next 3 years. It has become more important for businesses to partner with companies (e.g. start-ups, fintech and more) that can help them, bringing agility and resilience to growth. To bring everything together and drive a successful transformation, CEOs need the right partners — and the ability to connect it all.

It's no surprise that more than half of CEOs responded that they are placing more capital investment in buying new technology. These investments include an emphasis on cyber security culture, which CEOs say is just as important as building technological controls as fears of a cyber attack grow as a result of geopolitical uncertainty.

Carl Carande
Global Head of Advisory

Cyber as a strategic function

While other risks may now feature as top concerns for global CEOs, the cyber environment is evolving quickly — and 77 percent see information security as a strategic function and a potential competitive advantage. Geopolitical uncertainty is increasing worries over corporate cyber attacks for many CEOs (73 percent) compared to previous years (61 percent in 2021). In fact, three out of four CEOs (76 percent) say that protecting their partner ecosystem and supply chain is just as important as building their own organization’s cyber defenses.

Growing experience of the challenges of cyber security is also giving CEOs a clearer picture of how prepared — or underprepared — they may be. More CEOs recognize they’re underprepared for a cyber attack, with 24 percent admitting so in 2022, compared to 13 percent in 2021; this year, 56 percent say they’re prepared, about level with last year. And nearly three-quarters (72 percent) say their organization has a plan in place to deal with a ransomware attack, compared to 65 percent in 2021. The rapid increase in cyber attacks, coupled with the increasing difficulty of detecting attacks on time, calls for automation and innovation in dealing with cyber incidents.

Alexis George, CEO of AMP, acknowledges that cyber security risk is increasing as AMP grows its digital capabilities. “Cyber security is absolutely one of the biggest risks for our industry as we face the future. We manage our risks well, but like any organization our data is a target. Privacy breaches and scams are threats, and cyber criminals are increasingly sophisticated, but that is the nature of the digital financial landscape. We must continue to adapt, prepare and respond.”

Alexis George Quote

Exploring opportunities for growth

  • Bring your people and technology together: Organizations have invested so much in digital transformation that they need to make sure people adopt these technologies and use them to their full potential.
  • Work with partners to drive value: With CEOs increasingly interested in partnerships, identifying, integrating and managing third parties effectively can help increase speed to market, reduce costs, mitigate risks and supplement capability gaps in delivering the customer promise.
  • Get closer to customers: Orchestrating compelling customer experiences requires companies to begin with the customer and work backwards, taking an outside-in perspective to reverse-engineer and shape what the experience should be; then, they should adopt an inside-out view to define how the experience should be delivered.
  • View cyber security as a strategic function: Increasingly cyber is no longer seen as only an IT issue, it’s a fundamental business operation imperative. The exponential increase in cyber attacks, coupled with the difficulty of detecting an attack in a timely manner, calls for automation and innovation in dealing with cyber incidents.

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