Corporate leaders around the world understandably feel a certain amount of trepidation as they grapple with the implications and effects of new technology in every branch of industry.
In China, though, where individual enterprises and the broader economy have coped successfully with continuous transformation over the past 30-odd years, there is also a discernible sense of anticipation and excitement about what the future now holds.
That much is clear from the results of a large-scale international study overseen by professional services firm KPMG. As part of the worldwide survey, the research team obtained feedback from 125 chief executives of China-headquartered companies. Their responses revealed a broad embrace of technological disruption as a means to innovating, transforming and remaining competitive in their respective markets. And that positive outlook is reflected in concrete ways, with 97 per cent of those interviewed planning to increase headcount over the next year, while two-thirds are predicting top-line growth of 2 per cent or more for their companies each year until 2020 at least. In both cases, the figures are notably more optimistic than in other parts of the world.
All the key findings are presented in a wide-reaching report entitled “2017 China CEO Outlook – Disrupt and Grow”. They also show that the vast majority of mainland respondents remain confident not only about growth prospects for their own organisations, but for the global economy as well.
“The CEOs I speak with recognise they are operating in a rapidly changing and complex business environment,” says Benny Liu, chairman of KPMG China. “Domestically, China’s restructuring process – and increasingly sophisticated consumers – are leading to both challenges and opportunities. CEOs are responding to this by embracing technological disruption to bring innovation to their production and distribution models, as well as to create new products.”
Liu notes too that, compared with last year’s survey, more China-based chief executives – 52 per cent in 2016 versus 65 per cent this year – expect their companies to be transformed into “significantly different entities” in the three years ahead.
Indeed, 64 per cent of respondents said that focusing on innovation was now a high priority. They saw it as a major factor in achieving internal targets for growth. In this, depending on their companies’ core activities, they could be referring to the need for new products or services, or for brand-new ways of doing business.
In looking to adapt and, simultaneously, maintain growth, Chinese CEOs highlighted the importance of increasing penetration in existing markets (62 per cent) and “penetrating new verticals” (47 per cent).
The survey also found that, rather than focusing on mergers and acquisitions, most would now look to other methods to generate higher revenues and expand their customer base.
“Given the importance of ‘innovation’ as a growth initiative, it is not surprising that the majority of China CEOs are also looking to transform their business models through this and a more customer-focused approach,” says Vaughn Barber, chair of KPMG’s Global China Practice. “As we would expect, changes in China’s regulatory and policy environment are also impacting the trajectory of transformation by Chinese firms.”
Barber adds that, according to the survey, 80 per cent of the China CEOs who were questioned expect major disruption in their industries as a result of technological innovation. However, they see this pending disruption as an opportunity rather than a threat (75 per cent). And they are notably proactive in trying to disrupt the markets in which they operate, rather than waiting to be among the businesses which are disrupted (70 per cent).
“Furthermore, increased concerns about reputation or brand risk may reflect a heightened awareness that having a good name and a ‘social licence’ to operate is important for companies to be successful, particularly when they are investing and operating in markets outside China,” Barber says.
On a worldwide basis, the survey received replies from a total of 1,261 chief executives. Many mentioned the continued pressure to deliver on the bottom line, while managing their organisation’s core strengths and transforming the way they create value.
Operating in a more complex and rapidly changing environment is presenting challenges like never before. Besides this, the replies typically noted the need for today’s CEOs to stimulate innovation, and make bold decisions about investments in technology.
“The majority of those we spoke with for this year’s study are still optimistic about their company and its prospects,” says John Veihmeyer, the chairman of KPMG International. “They say they are taking the necessary steps for their business to be a disruptor, rather than the disrupted. They recognise the impact of increased geopolitical and economic uncertainties, and are working hard to be prepared. Moreover, they understand that speed-to-market and innovation are strategic priorities for growth in these uncertain conditions.”