Competition, over-regulation, geopolitical uncertainty – if you’re a CEO, there’s no shortage of concerns to keep you awake at night.
When PWC did its annual survey of over 1,300 CEOs in 77 countries (including New Zealand), these were their top 10 concerns:
Over-regulation: 78% of CEOs agreed that this threat was a concern
Availability of key skills: 73%
Government response to fiscal deficit and debt burden: 72%
Geopolitical uncertainty: 72%
Increasing tax burden: 70%
Cyber threats, including lack of data security: 61%
Shift in consumer spending and behaviours: 60%
Social instability: 60%
Speed of technological change: 58%
New market entrants: 54%
What are New Zealand’s CEOs worried about?
Meridian Energy’s Mark Binns agrees that over-regulation is at the top of his list of concerns: “Without a doubt, the prospect of over-regulation would be my main concern,” says Binns. “And specifically, poorly thought-through policies that could have a major effect on the New Zealand electricity industry.”
For Xero CEO Rod Drury, over-regulation is no cause for concern: “As a disrupter we have a different perspective… We operate at such speed; regulation is so slow it’s like dog years for nimble tech companies.”
Nor does Drury see the speed of technological change as a cause for concern; for a youthful cloud-based business like Xero it’s built into the fabric of the company. He’s more concerned about number 2 on the list: shortage of key skills.
“That is absolutely a concern and we’re working together as an industry on that,” he says. “In the short term, we’re doing things like job fairs overseas, encouraging people to work here and promoting New Zealand as an employment brand.”
Taking a longer-term approach, Xero works with local schools in an effort to make technology inspiring and exciting for students, as well as demonstrating the value and opportunities it can provide.
Turning concerns in to drivers
For a long-established industry like banking, rapidly evolving technology is both a threat and a driver of innovation, says Westpac NZ CEO David McLean.
Technology and new market entrants are “definitely what’s keeping the established banking sector on our toes right now. Westpac has been in business for almost 200 years and remaining relevant to the market and being positioned for the future is a significant challenge. [We need] to be smart and quick about harnessing technologies that will make banking easier, more convenient and personalised.”
McLean has used strategic partnerships to help ready the company to rise to these challenges: “Rather than simply sticking to our knitting, we’re embracing digital disruption and partnering with experts in their field,” which include New York start-up Moven (software that instantly tracks your spending) and digital behemoth Samsung.
Strength in numbers
That emphasis on partnerships is underscored by CEOs worldwide, with 51% (a record high) saying they planned to enter new strategic alliances or joint ventures this year.
Smart partnerships are part of Fonterra’s guiding principle, says CEO Theo Spiering, who told the survey that the dairy giant is “focusing on our own strengths and growing those hard and fast, and then partnering in areas where we are possibly not that good.”
Drury also sees the potential for partnerships, particularly those between the private sector and the New Zealand Government, in order to make the most of our local IT expertise: “We need to exploit our tech success and apply that at a country level, with public-private partnerships – we’re calling for a New Zealand [Government Chief] technology officer to look at opportunities.”
One key vulnerability
While New Zealand does have plenty of advantages in the technology sector and beyond, we’re still vulnerable to changes in the global economy.
Number 4 on the list of concerns is geopolitical instability, which is definitely a source of worry for Binns. He says recovery from the global financial crisis is of a “fragile nature” in the USA and Europe; and with Greece, Ukraine, and the Middle East all presenting their own uncertainties, it adds up to “a suite of significant risks that could unhinge the global recovery,” he says.
“While we may have ‘rock star’ status at the moment, we would very quickly be affected by a major black swan event, and I would be worried [about] the effect this would have on electricity demand in New Zealand.”
The change face of consumers
Even without a black swan event, it’s difficult to predict how consumer demand will change over the years ahead – that’s why both social instability and changing consumer behaviour are among the biggest concerns for CEOs.
“The biggest impact in my opinion in the next 10 years will be the potential for demographic changes,” Spierings told PWC. “Will there actually be 9 billion people living on the planet at some point? Will we see 400 to 500 million people within a 65-plus age bracket? How are we going to connect with that demand, and do so in a safe way?”
A lesson for everyone
With so many more questions than answers, it’s little wonder that when survey respondents were asked to name one capability that tomorrow’s CEO must have, 2 of their top 3 answers were ‘strategic thinking’ and ‘adaptability’. It’s a lesson not only for CEOs but also for anyone looking to reach the top in business:
“Many of [these] disruptive technologies didn’t even exist 10 years ago, yet today they’re allowing start-ups to dominate entire industries, customers to be important collaborators, and a new generation of employees to bring in new thinking that could change the very DNA of the companies they work for,” according to the PWC report. “And there’s every reason to believe that the pace of change will only accelerate.”