New global c-suite survey reveals need for rewiring corporate strategy development
- 76% of c-suite executives say COVID-19 will impact, or cause them to pivot, their organizations' medium- to long-term strategy.
- 67% of executives believe that the biggest competitive threat in the next three years will come from a company outside their current sector.
- More than 80% of executives who added the new C-suite roles in the last five years say that those positions have had a moderate or significant impact in executing the strategic mandates of the organization.
NEW YORK, Sept. 9, 2020 /PRNewswire/ -- As businesses look beyond the COVID-19 crisis, they will likely need to change how they devise and execute corporate strategy to outpace disruption and their competition. In the new EY Realizing Strategy survey, executives considered the extent to which growing threats have forced companies to revise their approach for planning future business activities.
The survey, which polled 1,000 C-suite executives from companies with more than $1 billion in annual revenues, is among the most comprehensive studies conducted on strategy in the last decade.
The study arrives as many executives struggle to respond to a rapidly changing business environment. Lower barriers to entry across many sectors, coupled with a more connected global economy and increased exposure to macro events, have accelerated disruption and reduced the average company survival rate. The study shows that the current speed of innovation requires different ways of shifting resources across the enterprise.
"The rules of yesterday don't apply to today or tomorrow. Companies have to proactively incorporate disruption into strategy formation or watch their organizations falter," said Jeff Wray, EY Americas EY-Parthenon Strategy Leader. EY-Parthenon provides clients with strategy consulting services and helps organizations build a better working world by fostering long-term value.
Changing the mindset: from shareholder returns to more stakeholders
When thinking through a creative and disruptive strategy, the end audience for companies has fundamentally changed. The former "laser focus" on shareholder returns has widened to prioritize a broader array of stakeholders and values, including customers, employees and suppliers, as well as environmental and social goals.
Sector-specific dynamics often determine degrees of importance among executives.
In financial services, regulatory stakeholder interests carry as much, or more, weight than those of shareholders, according to 78% of executives. Meanwhile, 58% of consumer products and retail executives place customers' interests above those of shareholders. Thus, a company's underlying strategic vision must generally include a focus on sector-specific perspectives.
External threats dominate decision making, spur 'coopetition'
Companies are learning to build a resilient strategy as their universe of potential competitors expands. Consequently, the number and variety of threats stretch beyond similar organizations to include indirect competitors in adjacent industries and nontraditional competitors in unrelated industries.
Of those companies that underperformed their peers, an overwhelming majority (93%) say that unexpected entrants have materially impacted business. At the other end of the spectrum, 64% of organizations that have performed materially better say that they were able to anticipate market newcomers, which greatly limited their effect on business.
Viewed through a different lens, many organizations see competition as an opportunity for collaboration. An astonishing 97% address the ever-growing threat matrix by partnering with competitors, enhancing their ability to assess strategic priorities and combat challengers from outside their competitive space. An exploration of this approach found that 56% of organizations are most likely to partner with a competitor to overcome traditional barriers, while 43% would actively partner with a competitor to enter new markets.
Democratization of strategy empowers more experts to contribute
Strategy formulation now touches more roles than ever as singular top-down management has taken a back seat. Leaders now understand the power of aggregating diverse ideas from experts to solve new challenges. Strategy development, once limited to a small group of thought leaders, now requires input from a larger group of executives empowering expert-led business transformation.
Illustrating this evolution, more than half of those surveyed say that the chief growth officer, the chief transformation officer and the chief sustainability officer now influence the strategy process. It is important to note that a number of those positions were created in only the last five years.
Moving at the 'speed of thought' to drive innovation
Ever-accelerating disruption today requires businesses to rewire their thinking to be more agile and innovative, and to reallocate capital more rapidly. Many outperforming businesses say that they actively plan for the emergence of market entrants that use unconventional, yet potentially challenging, business models, with 99% saying that they conduct exercises that stress-test their strategic processes. Meanwhile, 63% say that they allocate capital for innovative ideas more liberally, as well as adopt more flexible approaches that better adapt to the sheer speed of disruption.
Still, business leaders recognize that too few companies are flexible enough to adapt as rapidly as strategy evolves. About 40% of executives say that they plan to meet this challenge through implementing agile practices and processes over the next three years. These include accelerating digitization, increasing the speed of capital allocation decisions, building a culture of innovation and engaging in more inorganic transactions.
"There's no doubt that, since the 2008 Global Financial Crisis, smart organizations have learned that sitting tight and doing nothing in an economic downturn is not an option, and a creative and evolved strategy is required to be an organization of the future," explained EY Strategy and Transactions Principal Juan Uro. "This study demonstrates not only the resilience which strategy provides in protecting businesses but also providing companies with the backbone needed to thrive in the eventual recovery."
About the survey
The EY Realizing Strategy survey gauges how organizations will need to transform to realize strategy in the new decade. The survey was conducted in collaboration with The Economist Intelligence Unit. The report queried 1,000 executives from Europe, North America and Asia from a broad range of industries at companies with more than $1b in revenue. Of those surveyed, there were 400 CEOs, 200 CFOs and 150 chief strategy officers. The sectors represented in the survey included Consumer Products & Retail; Energy & Natural Resources; Financial Services; Health & Life Sciences; Advance Manufacturing & Mobility; and Technology, Media & Telecommunications.
Notes to editors
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About EY Strategy and Transactions
Strategy and Transactions enables clients to navigate complexity by reimagining their ecosystems, reshaping their portfolios and reinventing themselves for a better future. With global connectivity and scale, we drive corporate, capital, transaction and turnaround strategies through to execution, enabling fast-track value creation. We support the flow of capital across borders and help bring new products and innovation to market. In doing so, we enable our clients to build a better working world by fostering long-term value.
About EY-Parthenon
EY-Parthenon teams work with clients to navigate complexity by helping them to reimagine their ecosystems, reshape their portfolios and reinvent themselves for a better future. With global connectivity and scale, EY-Parthenon teams focus on Strategy Realized — helping CEOs design and deliver strategies to better manage challenges while maximizing opportunities as they look to transform their businesses. From idea to implementation, EY-Parthenon teams help organizations to build a better working world by fostering long-term value. EY-Parthenon is a brand under which a number of EY member firms across the globe provide strategy consulting services. For more information, please visit ey.com/parthenon.
SOURCE EY
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