CEO Perspectives 2018 PDF

Growing
pains
2018 Global CEO Outlook
KPMG International
kpmg.com/CEOoutlook
#CEOoutlook
Foreword
For our fourth annual Global CEO However, that optimism is tempered agenda. And even with the increased
Outlook, we reached out to 1,300 by caution and realism, with a clear reliance on data-driven models and
CEOs of large companies from recognition that, in order to grow their analytics to make decisions, the CEOs
around the world to get their views businesses, they need to respond to an we have spoken with are still relying
of the highest-priority opportunities ever-expanding spectrum of complex on the value of their experience
and most daunting challenges they challenges and ‘growing pains’. While and intuition in making the difficult
and their businesses face. As in prior the CEOs surveyed still predict that strategic calls for the future of their
years, we’ve seen how quickly the their businesses will grow in the organizations.
world is changing for today’s business coming year, forecasts are lower than
Our thanks go to all the CEOs who
leaders, and what this means for how last year and a majority say they need
gave their time and spoke so candidly
they are leading and growing their to hit growth targets before they start
about the issues they face in their
organizations. hiring new people.
roles. Being a CEO in this period
Exploring a broad range of business Reviewing the results and the insights of such profound disruption and
drivers, risks and pain points, this from these senior executives, you opportunity poses immense personal
year’s report offers insights into how can’t help but be struck by the sheer and professional challenges. The CEOs
new and evolving forces are continuing volume and depth of the issues CEOs I speak with around the world are more
to raise the bar for CEOs in all are facing and how they are personally open to new thinking, learning new
countries and all sectors. focusing their efforts as leaders to skills and challenging convention than
face them. ever before.
In 2017, we found CEOs excited about
the future: they saw technology-driven It’s not surprising in the current If you would like to talk to our
change as a significant opportunity environment to see geopolitical issues professionals about the perspectives
to disrupt their sector. That optimism rising up the CEO radar. Technology and issues raised here, we would
continues in 2018, with business continues to command considerable welcome the opportunity to discuss
leaders showing great faith in the attention — as an enabler, a disruptor how your business can gain from
economic environment, both nationally and, with the threat of cyber attacks, these insights.
and globally. a very significant risk. Data privacy is
also understandably high on the CEO
Bill Thomas
Chairman, KPMG International
© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Contents
4 Key findings
6 Growth headwinds
14 Realistic growth
20 Digital gets personal
28 Instinct over data
34 Conclusions
35 Methodology and acknowledgments
Key findings
Growth headwinds Realistic growth
The strategic issues Optimism
CEOs face in the tempered by
pursuit of growth pragmatism
—— Cyber certainty —— Optimistic macroeconomic

49 percent say that becoming the outlook
victim of a cyber attack is a case of
‘when’, not ‘if’ —— 90 percent are confident in their
company’s growth prospects
—— Generational shifts and
Over a third (38 percent) say they
need to reposition their business to —— 67 percent are confident in
meet the needs of Millennials the growth prospects for the
global economy
—— Geopolitics hits the boardroom
‘A return to territorialism’ is the —— A healthy dose of pragmatism
number one threat to growth 55 percent predict cautious
revenue growth of less than
2 percent
—— 52 percent say they will need to

hit growth targets before hiring
new skills
4 2018 Global CEO Outlook

Digital gets personal Instinct over data
CEOs take personal CEOs say agility and
ownership of driving intuition are key to turning
digital transformation digital disruption into
and trust opportunity
—— Owning transformation —— 59 percent believe agility is the new

71 percent are personally ready to lead currency of business
a radical organizational transformation
—— 67 percent have put their own intuition
—— CEO as data protector over data-driven insights in the past 3
59 percent see protecting customer years
data as a critical personal responsibility
—— Robots manufacture jobs

62 percent expect artificial intelligence
(AI) to create more jobs than it
destroys
2018 Global CEO Outlook 5

Growth
Geopolitics now
headwinds
In our 2017 Global CEO Outlook, we of profound political and economic
found chief executives excited about change, business leaders cannot sit
has to be seen the future: they saw technology-
driven change as an opportunity to
on the sidelines and watch,” he says.
“We need to be a force for change,
on par with disrupt their business. That optimism and draw on our missions and our
continues in 2018, with CEOs values to make a difference — and
other strategic showing great faith in the economic we need to partner across the public
challenges and environment, both nationally and
globally, to grow their business.
and private sectors to address the
economic pain points.”
CEOs need to However, CEOs’ optimism is tempered For CEOs, a more nationalistic approach
develop their by greater anxiety about existential
threats. They are having to manage their
to trade is worrying: a ‘return to
territorialism’ is their number one threat
awareness and exposure to three primary headwinds:
geopolitical volatility, cyber security risk
to growth.
skills to manage and demographic shifts.

Interestingly, there are some notable
differences at a country level on the
an increasingly Geopolitics hits risk landscape. In the US, where
organizations are charging ahead with
the boardroom
uncertain their digital agendas, cyber is the
After many years of widespread number one ranked growth risk. And, as
environment. international consensus on China undergoes sweeping changes to
globalization, the potential withdrawal tackle pollution issues, Chinese CEOs
from trade agreements by some are making environmental/climate
Gary Reader developed countries and the UK’s change risk their top concern.
Global Head of Clients decision to exit the EU show that
nationalism is now on the rise. The risk landscape of 2018 shows some
and Markets significant differences from 2017. Last
KPMG International For Dan Schulman, CEO of electronic year, operational risk topped the risk
payments company PayPal, this agenda and cyber security was fifth.
return to nationalist sentiments
has an impact on the way business With a return to territorialism topping
leaders operate. “During these times the risk agenda, Gary Reader,
Chart 1: Threats to growth
1 Return to territorialism
2 Cyber security risk
3 Emerging/disruptive technology risk
4 Environmental/climate change risk
5 Operational risk
Source: 2018 Global CEO Outlook, KPMG International

We need to be a force for
change, and draw on our
missions and our values to
make a difference.
Dan Schulman
CEO
PayPal
KPMG’s Global Head of Clients and

Markets, says leadership teams need
to embed geopolitical intelligence CEOs play a critical role in tax risk
into their strategic thinking and risk A renewed focus on national tax discussion about the formulation
assessments. “Now more than ever, policies is one significant impact of policy with government. At the
CEOs need to develop their geopolitical of the increasingly nationalistic moment, the voice of business is
skills and antennae. Increased political approach. As they manage the not being heard in that discussion.”
uncertainty around the world has to implications of political shifts and
be factored in to board thinking and When we asked CEOs who they
changes, CEOs also need to be
decision-making,” he says. “Geopolitics thought was responsible for
attuned to how public sentiment
now has to be seen on par with other oversight of tax risk, 46 percent
about corporate tax behavior
strategic challenges and CEOs need named the CFO, 29 percent the
is changing. “If you’re a global
to manage in an increasingly uncertain chair of the audit committee and
business, you need to understand
environment.” 25 percent laid responsibility at
how societal expectations are
their own door.
For Ken Allen, CEO of logistics developing in different countries,
company DHL Express, it is about and also try to look forward — While CEOs will of course
being prepared for political events while because tax risk has a long tail,” remain heavily reliant on their
remaining impartial. “We try to be very says Jane McCormick, KPMG’s organization’s specialists to monitor
non-political,” he says. “The people Global Head of Tax. “You have tax risk, the perceived correlation
have decided on Brexit — now, our job to anticipate how society will be between tax and reputational risk
is to understand what the new rules and thinking in the future. You also have means that they will need to take
regulations are. We need to be right on to find a way of engaging in the more responsibility in the future.
top of it and prepared to move as soon
as those new things are put in place.”

The people have decided on
Brexit — now, our job is to
understand what the new
rules and regulations are.
Ken Allen
CEO
DHL Express
While the Chart 2: The inevitability of a cyber attack on their business,

by country
seeming
inevitability US 68%
of a cyber Australia 62%
event crosses Germany 47%

all borders, France 47%
this threat is Japan 46%
perceived to
UK
be highest by 39%
American CEOs, Netherlands 36%
with 68 percent Italy 34%
of CEOs saying India 34%

it’s just a matter China 32%
of time.
Spain 32%

Cyber certainty the entire C-suite — one that we are all
responsible for.”
Only 51 percent
For Dani Michaux, Head of KPMG
Asia Pacific’s Cyber Security practice, And while the seeming inevitability of believe they are
cyber’s rise from last year reflects how
leadership teams are embracing this
a cyber event crosses all borders, this
threat is perceived to be highest by
well-prepared for
issue. “Cyber security has become a American CEOs, with 68 percent of a cyber attack.
mandatory boardroom topic, particularly CEOs saying it’s just a matter of time.
as governments and regulatory bodies “It [cyber risk] is a very big issue because as
increase their scrutiny,” she says. the technology changes, it opens up more
Digital innovation can create significant loopholes,” explains Tim Murray, CEO of
value across business models, customer manufacturing company Aluminium
experience and operations. But greater Bahrain. “We have manufacturing systems
connectivity brings increasing cyber that control things, so if they were hacked or
vulnerability, and about half of all CEOs frozen or locked-up, it could obviously have a
(49 percent) say that a cyber attack is major impact on us.”
now a case of ‘when’, instead of ‘if’. Many CEOs are concerned about the
“The challenge is to constantly be ahead robustness of their defenses. Only about
of the cyber criminals — a task which is half of CEOs (51 percent) believe they
very difficult to achieve,” says Ali Ahmed are well-prepared for a cyber attack.
Al-Kuwari, CEO of Qatar-based QNB It’s perhaps not surprising, given the
Group, the largest bank in the Middle East importance of energy and power to
and North Africa region. “While cyber countries’ economy and society, that
security used to be considered an issue CEOs from the infrastructure sector
primarily for the IT department, these consider themselves to be the most
days it is a permanent agenda item for well-prepared against potential cyber
aggressors compared to their colleagues.
Chart 3: How well-prepared sectors are for a cyber attack, by industry
Infrastructure 67%
Life sciences 58%
Insurance 54%
Asset
management 53%
Energy 53%
Consumer
and retail 52%
Banking 50%
Telecom 49%
Manufacturing 48%
Technology 42%
Automotive 41%

Smart KPMG’s Michaux agrees that cyber
vigilance has moved up the agenda.
of the future. Millennials1 represent
significant spending power, but they are
leaders are “No matter what industry you’re
in, data is the lifeblood of modern
engaging with organizations and brands
in new ways and businesses need to
making cyber business,” she says. “Smart leaders make sure they are in sync.
are making cyber preparedness a board
preparedness priority, stress-testing the resilience of
The survey finds that many CEOs are
concerned that their businesses are
a board priority, their systems and people to withstand
an attack. Businesses are also looking
not keeping up. Asked about the key
challenges of meeting Millennials’
stress testing for a competitive edge from this
investment and the increased insight
needs, 45 percent of CEOs say their
the resilience of they get on their systems and data.”
organization struggles to understand
how the needs of this generation differ
their systems Robust cyber defenses are also
critical to building trust. Over half of
from those of older customers. Over
a third believe they need to reposition
and people to CEOs (55 percent) said that a strong their brand.
cyber strategy is critical to secure key
withstand an stakeholders’ trust.
Dutch companies are the most likely
to be focused on the challenge of
attack. Generational shifts understanding how Millennials’ needs
differ from other cohorts, whereas
To drive long-term growth, organizations Japanese companies see this as less of
need to appeal to consumer markets
Dani Michaux a challenge.
Head of KPMG
Asia Pacific’s
Cyber Security practice 1
This report defines Millennials as those born between 1980 and 2000.
The challenge is to
constantly be ahead of the
cyber criminals — a task
which is very difficult to
achieve.
Ali Ahmed Al-Kuwari

CEO
QNB Group

It [cyber risk] is a very
big issue because as
the technology changes,
it opens up more
loopholes.
Tim Murray
CEO
Aluminium Bahrain
Chart 4: Understanding how Millennials’ needs differ vs To drive long-

older customers, by country
term growth,
Netherlands 56% organizations
China 51% need to appeal
Spain 48% to the consumer
UK 48%
markets of the
future.
US 46%
Germany 44%
Australia 42%
France 40%
India 40%
Italy 40%
Japan 35%

Winning over new “They really want to do something
generations meaningful with their lives. They want
to make an impact, and they see
To form a rounded, nuanced view of sustainability as a key element of this.
the motivations of Millennials and You will only continue to be successful
understand how they make decisions, if you adapt and make your company
CEOs need to listen. future-proof.”
“Organizations that listen to Millennials However, for Enrique Díaz-Rato,
will see that they respond well,” says CEO of global transportation
Carmen Bekker, Partner with KPMG’s infrastructure company Cintra,
Customer Brand and Marketing it is also important not to buy into
practice. “They want to feel that what’s generalized ‘myths’ about new
important to them is also important to generations’ behavior and consumption
the organization they’re dealing with. patterns. “During the Great Recession,
Tomorrow’s successful organizations traffic in the US didn’t grow as it
will listen, think about what their used to,” he says. “However, recent
corporate and brand values are, and ask data show that reduction in driving
if they are aligned with the values of was a temporary effect of the
Millennials and future cohorts.” Great Recession in the employment
Understanding new generations is of Millennials, and that there is a
also about empathy with the values negligible change in travel behavior of
they consider important, such as new generations. Millennials are now
sustainability. “Millennials have the fastest-growing category of US car
often a clear philosophy on this,” buyers.”2
says Feike Sijbesma, CEO of global
science-based company Royal DSM.
2
Millennials drive new cars sales with the US market forecast to reach 18.46 million units sold
“
in 2017”, Mintel, 10 February 2017. (http://www.mintel.com/press-centre/retail-press-centre/
millennials-drive-new-cars-sales-in-the-us)
Millennials have often a

clear philosophy on this.
They really want to do
something meaningful
with their lives.
Feike Sijbesma
CEO
Royal DSM

I think the trick of being
successful in innovation
is being successful in
technology.
Hikmet Ersek
CEO
Western Union
The role technology plays in meeting successful in technology,” he says.

customers’ changing wants and needs “It’s not sitting in the corner office
across generations is also critical. having an idea about technology. It’s
According to Hikmet Ersek, CEO of really about listening to the customer
money transfer services company and adapting that technology to their
Western Union, “I think the trick of needs, you need to listen to the voice of
being successful in innovation is being the customer to be successful.”
Tomorrow’s successful organizations will

listen, think about what their corporate
and brand values are, and ask if they are
aligned with the values of Millennials and
future cohorts.
Carmen Bekker
Partner, KPMG’s Customer Brand
and Marketing practice

Realistic
CEOs are largely
growth
CEOs are confident in the prospects for of the world’s largest economies, there
national, global and industry growth, has been a drop-off in confidence for
confident but but their optimism is not translating into
bullishness about their own company’s
some of the European powerhouses —
notably the UK, Germany, Spain
their optimism topline revenue growth. and Italy (see Chart 5b), all of which
experienced substantial political turmoil
is not translating Optimistic macroeconomic over the past 12 to 18 months. India
outlook
into bullishness Many of the world’s major economies
is an interesting outlier, having seen
major structural reforms around its GST
about their are experiencing positive growth implementation and demonetization
in 2017, which may help explain what
momentum and CEOs are optimistic
own company’s about the next 3 years at the global and appears to be a short-term drop in
confidence reported by Indian CEOs
revenue growth. industry levels. At a country level, while
we see broad confidence across most compared to the previous year.
Chart 5a: Confidence in 3-year growth prospects,

2018 and 2017
67% 78% 74%
65% 69% 77%
Confident in Confident in Confident in

global economy industry country
2018 2017

We have very good
news on global growth.
Fernando A. González
CEO
CEMEX
Chart 5b: Confidence in their own country’s 3-year growth 55 percent

prospects, 2018 and 2017, by country
expect
US
77%
85%
conservative
France
80% topline growth
76%
of less than
80%
Japan
71% 2 percent.
74%
Australia
70%
71%
China
74%
India
69%
88%
65%
UK
76%
64%
Italy
92%
Netherlands 64%
58%
Spain 62%
76%
Germany 61%
78%
2018 2017

Meanwhile, CEOs’ confidence in This greater caution could reflect
the global economy and in their own CEOs’ concerns about the headwinds
industry has increased since last year: they face, particularly the return to
for example, 78 percent say they are territorialism that tops their growth
confident in growth prospects for their risks. It could also reflect the difficulties
sector — a 9 percentage point increase of driving growth from new digital
versus 2017. business models and revenue streams.
As traditional products and services
“We have very good news on global
become obsolete, and CEOs work to
growth,” says Fernando A. González,
make their portfolios relevant to the
CEO of global building materials
digital age, it will take time to replace
company CEMEX. “The last time I
historical revenue streams.
reviewed this, there were only a couple
of countries in the world that are not “The CEOs we’re advising have realized
expected to grow this year. It’s been that topline revenue growth is no
quite a long time since we’ve seen such longer the most important measure of
synchronized global growth.” success in the digital era,” says Mark
A. Goodburn, KPMG’s Global Head of
A healthy dose of Advisory. “They are focused on how
pragmatism they can achieve better profitability:
However, CEOs’ confidence in the investing in technology and their people
macroeconomic environment is not and looking at different business
translating into ambitious growth models. These CEOs recognize that
targets. The majority of CEOs success is achieved with a stronger
(55 percent) expect conservative topline products and services portfolio
growth of less than 2 percent. profitability.”
Chart 6: Outlook for annual topline revenue growth over the

next 3 years
0% growth 1%
Between 0.01% and 1.99% 55%
Between 2% and 4.99% 42%
Between 5% and 9.99% 2%
10% or higher 0%
Only 37 percent predict headcount growth

of more than 6 percent over the next
3 years, which is a 10 percentage point
decrease versus 2017.

Hiring cautiously point decrease versus 2017. In addition,
many are cautious about going ahead
CEOs’ hiring plans are also pragmatic. with wholesale hiring of new skills into
Only 37 percent predict headcount the enterprise. Over half (52 percent) say
growth of more than 6 percent over the they will not hire new skills until growth
next 3 years, which is a 10 percentage targets are met.
Chart 7: Approach to recruiting new skills
52% 48%
We are waiting to achieve certain growth targets before hiring

new skills
We are hiring new skills — regardless of future growth targets
Our customers are having

to reinvent their existing
business models using digital
technology, so they may be
automating and applying AI
[artificial intelligence] to their
traditional solutions.
Duncan Tait
SEVP, Head of Americas and EMEIA
Fujitsu

The rate at which technology is evolving organic growth, through tactics such as
adds complexity to decisions around R&D and recruitment, is their primary
hiring strategy: CEOs need to achieve strategy; the other 72 percent are
the right balance of reskilling the choosing other strategies (see Chart 8).
existing workforce and adding fresh
While only 16 percent cite M&A as their
talent — even as the implications of
most important growth strategy, more
new technologies remain uncertain.
than a quarter (27 percent) of CEOs
“Our customers are having to reinvent indicate a high M&A appetite over the
their existing business models using next 3 years.
digital technology, so they may be
And when asked about the geographic
automating and applying AI [artificial
markets they will prioritize for expansion,
intelligence] to their traditional
70 percent of CEOs cite emerging
solutions,” explains Duncan Tait,
markets — and Central and South
SEVP , Head of Americas and EMEIA
America are targeted by a third of these
at Japanese IT company Fujitsu.
CEOs. “Central and South America
Driving growth: strategic are becoming more attractive as it’s
alliances to the fore a significant market that is getting
wealthier,” says KPMG’s Reader.
In terms of where growth will come
from, CEOs are looking to inorganic “Let’s not forget about Africa either, a
methods. Only 28 percent say that continent rich in natural resources and
Chart 8: The most important strategies to drive growth over

the next 3 years
Strategic alliances with

33%
third parties
Organic growth
(i.e. innovation, R&D, capital 28%
investments and recruitment)
M&A 16%
Joint ventures 13%
Outsourcing 10%
While only 16 percent cite M&A as their

most important growth strategy, more than
a quarter (27 percent) of CEOs indicate a
high M&A appetite over the next 3 years.

with an age demographic that presents
some great growth opportunities.”
“You need to sit at the negotiation table
with a partnership spirit — not as a
You need to sit at
For Christoph Zinke, KPMG’s Asia
buyer or as a target,” he says. “You need
more time to discuss ambition and
the negotiation
Pacific Head of Global Strategy Group,
the emphasis on strategic alliances
not price. This is very different from an table with a
M&A standpoint. It’s much more about
reflects the disruption CEOs face —
collaboration gives them answers to
understanding what each party brings partnership
problems that M&A cannot always
to the table and how you achieve your
joint objective.”
spirit — not as
solve. “Strategic alliances are driven by
the capabilities you need to succeed Miles Roberts, Group Chief Executive a buyer or as
in the future,” he says. “Take a look
at the automotive industry, which
of UK-based international packaging
business DS Smith Plc, agrees that
a target.
is now focused on mobility and not it’s important to strive for growth, but
just producing cars. It’s a totally new growth has to come in the right way.
ecosystem that redefines the value “We have to be a better company, not Christoph Zinke
chain. Alliances also offer flexibility if you just a bigger company, and it’s better KPMG’s Asia Pacific Head
need to add new partners or get rid of through the eyes of the receiver, how of Global Strategy Group
certain partners you aren’t happy with.” they feel we are a more responsible
company and earning the right to be
But Zinke also points out that strategic
a larger company. That’s what we’re
alliances, similar to M&A, often fail to
working on. Those hurdles are only
deliver the hoped-for results — often
going to increase for all of us.”
because leaders lack the right attitude.
We have to be a better company,

not just a bigger company, and
it’s better through the eyes of the
receiver.
Miles Roberts
Group Chief Executive
DS Smith Plc

Digital gets
To win the
personal
CEOs are optimistic about the expectations today. They are embracing
sweeping changes that digital brings. the likes of AI and the Internet of Things
digital race, The vast majority — 95 percent — see
technological disruption as more of an
to reshape their businesses. They are
taking on — as a personal responsibility
CEOs are taking opportunity than a threat. Many are — the obligation to protect data and earn
determined to seize the competitive the public’s trust. And, as automation and
close personal edge it offers and get on the front foot. AI reconfigure the workforce, CEOs are
ownership of Over half of CEOs (54 percent) are
actively disrupting the sector in which
planning how to prepare their people for
the age of the smart machine.
driving digital they operate, rather than waiting to be
disrupted by competitors.
KPMG’s Goodburn welcomes these
transformation. To win the digital race, CEOs are taking
developments: “more and more of the
CEOs I speak with are telling me, ‘I am
close personal ownership of driving personally leading our digital charge’.
digital transformation. They recognize That says to me, ‘I’m creative, adaptive
the power of data to personalize the and agile, and prepared to transform
customer experience, though only 23 my business to be successful in a
percent claim to be exceeding customer digital world’.”
The word
‘disruption’...has an
antagonistic feel
that I’ve never liked.
Instead, we need
to look at it as a
transformation...
Samuel Tsien
Group CEO
OCBC Bank

Chart 9: How prepared CEOs are to personally lead radical 71 percent of
operating model transformation, by country
CEOs say they are
US 91% prepared to lead
France 73% their organization
Germany 69% through a radical
Australia 68%
transformation of its
operating model.
UK 67%
Italy 66%
India 62%
Netherlands 60%
Spain 60%
China 58%
Japan 47%
Samuel Tsien, Group CEO of They are keen to be first-movers, too:

Singapore-headquartered OCBC 86 percent of CEOs in the US feel their
Bank, has a similar view of how CEOs organization is actively disrupting the
should approach transformation. sector in which they operate.
“The word ‘disruption’, often used in
For Susan Story, President and
association with digital technologies,
CEO at American Water, the largest
has an antagonistic feel that I’ve never
publicly traded water and wastewater
liked,” he says. “Instead, we need to
utility company based in the US,
look at it as a transformation that is
CEOs’ focus on transformation reflects
brought about by the change in our
the fact that business and technology
market environment.”
are now intertwined. “In the old days,
Owning transformation you had business and then you laid
technology on top of it,” she explains.
In the digital age, CEOs are prepared to “Today, business is technology and
lead their organization through a radical everything we do has technology
transformation of its operating model. threaded through it. How you most
In fact, 71 percent of CEOs say this. effectively and efficiently do that is
American CEOs are most prepared what distinguishes companies that
to drive this transformative change, are digitally transformed from those
with 91 percent saying that they companies that aren’t.”
are prepared to step up to the plate.

Keeping up with progress on transformation can
expectations seem overwhelming.
As well as acting as champions of Steven Hill, KPMG’s Global Head

change, CEOs are under the spotlight of Innovation, believes that leaders
in terms of delivering results on need to challenge ROI conventions by
technology investments — and fundamentally rethinking how they view
expectations can be challenging. Over digital investments and how returns are
half of CEOs (51 percent) say that their measured. “Business leaders need to
board of directors has an unreasonable rethink their innovation equation,” he
expectation of returns on digital says. “You can’t look at investments and
transformation investments. returns in the way you did in the past.
First, you will only get marginal benefits
Vinod Kumar, Managing Director and if you just digitize an existing process —
Group CEO of Tata Communications, leading organizations rethink analogue
believes that “the largest challenge system workflow at a minimum and the
with getting a return on technology entire business model in many cases.”
investment is the adoption of it.”
He explains, “once you have the Jim Kavanaugh, CEO of World Wide
technology, your people and processes Technology, advises taking a long-
have to evolve to leverage it. There’s term view on technology investing.
usually a lag effect, so adoption tends to “You can no longer evaluate technology
be slower than planned.” investments through only a traditional
lens. When the goal is market disruption
Setting clear expectations will be or to create a new business model or
critical, as CEOs recognize that a level of engagement, understand that
degree of patience is required. We the return is more complex and may
found that 65 percent of CEOs say that materialize over time.”
the lead times to achieve significant
Today, business is
technology and everything
we do has technology
threaded through it.
Susan Story
President and CEO
American Water

When the goal is market
disruption or to create a new
business model or level of
engagement, understand that
the return is more complex and
may materialize over time.
Jim Kavanaugh
CEO
World Wide Technology
Business leaders need to

rethink their innovation
equation.
Steven Hill
Global Head of Innovation
KPMG International

The challenge for both
incumbents and new entrants
is how you transition to new
models in a highly regulated
and political environment.
Paul Massara
CEO
Electron
CEOs recognize Paul Massara, CEO of UK-based

Electron, a company that provides
a direct benefit of putting investment
dollars into AI for your supply chain,
that customer blockchain solutions to the energy
sector, agrees that digital innovation
you’re going to lose competitive
advantage over time if you’re not using
data could is top of mind for today’s business it,” she explains.
leaders. “Nearly every industry is
be their most being disrupted by technology of
“Another measure is around attracting
high-performing talent. The most
valuable asset, some sort and the energy industry is
no exception — battery storage, AI,
attractive talent wants to be part of an
innovative culture where cutting-edge
transforming electric vehicles and blockchain are just
some,” he says. “The challenge for both
approaches and technologies are being
their ability to incumbents and new entrants is how
implemented.”
you transition to new models in a highly CEO as data protector
personalize regulated and political environment.
CEOs recognize that customer data
products and My money would still be on the new
entrants but any new models need could be their most valuable asset,
services. to be grounded in the reality of the

market rules.”
transforming their ability to personalize
products and services.
Traci Gusher of KPMG’s Data & American Water’s Story, for example,
Analytics Center of Excellence says cites the opportunity to rethink the
a combination of quantitative and customer experience. “As a utility,
qualitative measures are needed to we want to deliver an Amazon-type
measure the benefits of AI. “It’s a experience to our customers,” she says.
bit short-sighted to focus solely on “We’re enhancing our customer service
quantitative metrics. Some of the systems to integrate AI and natural
qualitative measures we’ve looked language machine learning to provide
at are things like general competitive even better service to our customers.”
advantage. So, while you may not see

Chart 10: Protection of customer data is a top personal
responsibility for CEOs, by country
US 89%
Australia 68%
France 55%
Italy 50%
China 49%
Germany 48%
India 46%
Japan 42%
UK 40%
Netherlands 34%
Spain 32%
I believe that almost all

blue-collar workers will be
replaced by ‘metal-collar’
workers.
Masayoshi Son
Chairman and CEO
SoftBank Group Corp

59 percent say However, CEOs also know that
customer data comes with significant
Robots manufacture jobs
that protecting responsibilities: 59 percent say that

protecting customers’ data is one of
As well as driving digital transformation
and protecting customer data, CEOs
customers’ data their most important responsibilities. are reconfiguring their workforces for
a future where smart machines and
If customer trust is threatened by
is one of their misuse of data or a breach, the talented people work together.
most important consequences for the company can be

devastating — and very public. CEOs in
“Humans will continue to do jobs in
high-touch segments such as the arts,
responsibilities. the US are particularly conscious of how
difficult it is to earn trust in a digital world,
social enterprises and entertainment,
selling and marketing, where humans
with 89 percent saying that protecting pull on people’s heartstrings,” says
customer data is a personal priority. Masayoshi Son, Chairman and CEO
CEOs who ensure their organization’s of Japanese conglomerate SoftBank
data-handling procedures are robust will Group Corp. “But I believe that almost
be rewarded by consumers. all blue-collar workers will be replaced by
‘metal-collar’ workers. By that, I mean
“Today, there’s a fault line in society robots equipped with intelligence and
between institutions and people, super-intelligence. They are no longer
and that line is trust,” says KPMG’s robots without brains, as they were in the
Bekker. “The trust in big institutions is past — they have become smart-robots.”
waning, while trust in personal, such
as one-to-one recommendations from There is considerable unease about the
friends, is increasing. Corporates that potential negative impact of automation
recognize and enable the personal, and AI, with employees understandably
such as protecting an individual’s data anxious about the impact on jobs. For
and instilling confidence that their data many CEOs, however, the long-term
has not been misrepresented, will win implications are positive: 62 percent
customers’ trust.” say that AI will create more jobs than
it destroys.
New technologies
are going to allow our
people to do a lot more
with less.
Tarek Sultan
CEO and Vice Chairman
Agility

Chart 11: CEOs’ views on the most likely impact of AI and As well as
robotics technologies on their workforce
driving digital
transformation
and protecting
customer
62% 38% data, CEOs are
reconfiguring
their workforces
for a future
where smart
It will create more jobs than it eliminates
machines and
It will eliminate more jobs than it creates
talented people
work together.
“I think the history of the world has says. “They will be able to focus on the
proven that technology doesn’t cost important parts of our business, which
jobs at the end of the day,” says DHL are serving the customer, analyzing the
Express’ Allen. “Uber is creating jobs. data and making good decisions. Much of
Airbnb is creating jobs.” the mundane work will be taken care of
by automation, AI and the use of data and
Refocusing the workforce digitization. That should play a big role in
According to The Dow Chemical making our jobs a lot more interesting.”
Company’s Chairman and CEO, Positive or negative, AI demands
Andrew Liveris, the business world is a communications strategy for the
in the midst of a significant disruption implications of new technologies and
to the workforce. “We’re in the 1918 the need for personal reinvention and
equivalent of industrialization and we development. “Business leaders need
are at the tipping point where we’re to arm the workforce for a new ‘machine
redefining work and what the future job age’ of artificial intelligence (AI) and
will look like.” increasing automation. We have to face
Tarek Sultan, CEO and Vice Chairman up to the fact that AI and automation
of integrated logistics provider Agility, will have a significant impact on the
believes that AI and automation will make way we work — so let’s redevelop our
roles more interesting and will drive workforces,” says Fujitsu’s Tait.
significant efficiency improvements.
“New technologies are going to allow
our people to do a lot more with less,” he

Instinct over
Acting with
data
With customer demands changing CEOs say that acting with agility is the
continually, and the technology new currency of business and that if
agility is not landscape in a constant state of flux,
CEOs now see agility as the dominant
they are too slow they will go bankrupt.
just the new currency of business.

“Acting with agility is not just the
new currency of business; it’s the
currency of But the quest for ever-greater agility
does not mean they simply have
most valuable currency today,” says
KPMG’s Goodburn. “If you succeed,
business; it’s the to embrace data and intelligent you succeed faster, and if you fail, you
technologies wholesale at the expense fail quicker — both of which add to the
most valuable of human qualities. CEOs are also health of a business.”
currency today. bringing their own intelligence to bear,
combining their experience and intuition Build the ecosystem
with data-driven, predictive intelligence To get more agile and put digital
to spot new growth opportunities. innovation on the fast track,
Mark A. Goodburn organizations are aggressively building
Global Head of Advisory Agility their networks (or ‘ecosystems’) of
KPMG International In a digital economy, where new third-party innovation partners. More
technologies are constantly reshaping than half of organizations (53 percent),
industries and business models, the for instance, will set up accelerator or
ability to innovate quickly is a strategic incubator programs for startups.
imperative. In the survey, 59 percent of
Chart 12: Top five barriers to extracting value from third-

party networks
1 Challenges measuring ROI from third-party partnerships
2 Difficulty sharing data securely with third parties
3 Concerns about sharing commercially sensitive data
4 Procurement processes are lengthy and complex
5 Legacy IT systems are incompatible with nimble approaches by startups

But simply having a startup-friendly
ecosystem is no guarantee of success.
60 percent completion — and then co-
create with a customer so we can bring
In the past
CEOs need to focus on driving value
from their networks and ensure that
value to them much faster.” 3 years,
cultural barriers and concerns about
For Tata Communications’ Kumar,
cultural alignment is another significant
67 percent of
data sharing don’t limit the success of
innovative ideas.
issue. “There is a challenge around
aligning cultures and speeds of large
CEOs say they
For Dow’s Liveris, the innovation companies with those of startups,” have overlooked
process is a mix of freedom and he says. “Also, larger companies tend
collaboration with customers. “If you’re to be more inclined to keep the pie to the insights
going to move a consumer on digital
speed, you can’t govern and control
themselves, whereas startups need
to work with multiple players to test
provided by data
every last thing. We’ll build something
to a minimal viable product — maybe
their technology and proofs of concept.
There’s an expectation mismatch.”
and analytics
models because
they contradicted
their intuition.
There is a challenge around

aligning cultures and
speeds of large companies
with those of startups.
Vinod Kumar
Managing Director and Group CEO
Tata Communications

If you’re going to move a
consumer on digital speed, you
can’t govern and control every
last thing.
Andrew Liveris
Chairman and CEO
The Dow Chemical Company
Chart 13: CEOs who have overlooked data-driven insights to

follow intuition instead, by country
US 78%
Japan 68%
UK 67%
Australia 66%
Italy 64%
Spain 64%
China 62%
India 62%
Germany 61%
Netherlands 56%
France 51%

Intuition unique insights when making critical
strategic decisions, with three-quarters
51 percent say
Data and analytics have changed how
CEOs and the rest of the C-suite make
saying they have overlooked computer-
driven models in the past and followed
they are less
business decisions. And they continue
to get more sophisticated: AI that
their intuition instead. confident about
draws on deep learning techniques, CEOs also show some skepticism
about data. Over half (51 percent)
the accuracy
for example, will transform predictive
analytics. say they are less confident about the of predictive
accuracy of predictive analytics than
Yet CEOs have not lost sight of the historic data. They want to understand analytics than
importance of their own intuition,
experience and judgment. In our
where the data that informs predictive
models has come from and whether it
historic data.
survey, in the past 3 years, 67 percent can be trusted.
say they have overlooked the insights
provided by data and analytics models “Understanding where the data comes
or computer-driven models because from is crucial for us,” says Cintra’s
they contradicted their own experience Díaz-Rato. “We have seen exciting
or intuition. insights that would be powerful
provided they were representative of
KPMG’s Hill likens this to the our overall customer base, but they
experience behind the wheel of a race weren’t. You get fascinated by the
car. “There’s a mountain of technical degree of granularity you get from
data — brake pressure, angles of customers’ behavior from a certain
steering input — all coming at once. app, but the question is, are the users
At some point, experience kicks in of this app representative of the whole
and, if necessary, overrides all the population a project is serving? You can
other signals.” be driven to wrong conclusions if you
CEOs in the US are particularly likely just follow the data blindly.”
to draw on their domain expertise and
Understanding where the

data comes from is crucial
for us.
Enrique Díaz-Rato
CEO
Cintra

The social media CEO media emerged as easily the most
trusted source. For example, 42 percent
Perhaps surprisingly, CEOs place a high of CEOs say they have very strong trust
degree of trust in data and information in social media, but only 12 percent
from social media sources. We asked say the same for open data from
CEOs which data sources they trusted government agencies.
to make strategic decisions, and social
Chart 14: Ranking of trusted sources of insight
1 Social media
2 Traditional media
3 Independent secondary information providers
4 Open data from government agencies
5 Government-commissioned research
My decision-making is a
combination of data-driven
information, input from many
and decades of experience.
Patricia Kampling
CEO
Alliant Energy

KPMG’s Gusher is not surprised that What is critical is to be able to control
social is the most trusted source. data, and not get lost in the weeds.
“Social media is direct from the According to Patricia Kampling, CEO
customer,” she says. “A CEO might of Alliant Energy, “there is more
find the opinions of a business reporter data today without a doubt, but it is
interesting and useful, but they may important to focus on the data that
not trust it as much as they would helps decision-making or reveals
the direct word-of-mouth of one of trends, and not get overwhelmed with
their customers.” the quantity. It’s also very important
to go beyond the data and realize
She continues, “if I’m an airline CEO, for
that nothing is more valuable than
example, I’m going to listen closely to
having constant communications with
people posting feedback about customer
employees, customers and technology
service on our Twitter feed. If I get 2,000
partners. My decision-making is a
tweets that are direct quotes from my
combination of data-driven information,
customers that say they’re annoyed
input from many and decades of
about how difficult it is to get an on-time
experience.”
plane, that’s something I can’t deny.”
A CEO might find the opinions of a

business reporter interesting and useful,
but they may not trust it as much as they
would the direct word-of-mouth of one of
their customers.
Traci Gusher
Principal
KPMG Data & Analytics Center of Excellence

Conclusions
Growth headwinds traditional revenue streams. As they Putting instinct over data
look to replace them with new growth
CEOs operate in a connected world engines, they recognize that traditional In an environment where customer
where events can quickly snowball sources will decline and need to be demands are constantly changing,
and the risk agenda is constantly replaced. CEOs play a critical role in new technologies are emerging
changing. A wait-and-see approach to driving business model innovation and new competitive threats are
these issues is not an option. CEOs and growth by challenging the status surfacing, acting with agility is the
will need to play a leading role in quo in their organizations to stimulate dominant currency of business. To
cyber security, particularly in terms new thinking and shift the innovation achieve agility and move at digital
of vulnerabilities in their extended equation. speed, many organizations are
ecosystem of suppliers and partners. investing in innovation networks
While they cannot be political players, and collaborations with startups.
Making digital a personal
they need to put geopolitics on However, many are also failing to
the agenda. This is so that they — crusade see results from those investments.
and their board — understand the As they look to drive growth in a CEOs need to focus on driving
implications of geopolitical risk for digital age, CEOs are leading the value from their networks and play
their finance, business and operating transformation agenda. But to ensure a leadership role in overcoming
models and for the growth of their their long-term digital strategy critical barriers, such as cultural
business. To maximize growth, does not get derailed by pressure challenges. Agility is also about being
they also need to be in tune with to deliver short-term results, they able to spot new opportunities, and
generational shifts. Tomorrow’s critical must manage the expectations of effectively using sophisticated data
consumer cohort, Millennials, will key stakeholders. Working with and analytics — including predictive
expect organizations to understand boards and other stakeholders, they and prescriptive analytics — will be
their priorities and values. CEOs play can map different scenarios for the key. High-performing CEOs will be
an essential role in pivoting their future of the business and set new those who can marry their experience
organizations to the consumers of key performance indicators. Making and intuition with data-driven insight.
tomorrow in order to seize every the most of their customer data will With CEOs still prizing intuition over
opportunity to grow. be a critical element of their growth data-driven fact, leaders need to work
strategies, and with the public’s with their insight teams to ensure that
Driving realistic growth trust in institutions waning, CEOs data and analytics efforts are focused
are taking personal responsibility for on the most valuable opportunities
CEOs feel good about the
safeguarding data. Their employees and that the new forms of data that
macroeconomic environment: they
will also be looking to CEOs for underpin their models can be trusted.
are confident about global and industry
guidance in a world where AI and
growth prospects. However, that does
automation will replace both manual
not mean they are setting aggressive
and more specialized roles. CEOs
revenue targets. In fact, they are
need to lead the workforce transition,
playing a patient game, predicting
and create a compelling and candid
pragmatic rather than bullish growth.
narrative for their employees about
CEOs recognize that in a digital age,
what the future holds.
their organizations still depend on
In summary:
The 2018 Global CEO Outlook finds chief executives optimistic
about the economy and excited by the growth opportunities
offered by disruption. At the same time, CEOs are managing their
exposure to a range of headwinds. Driving growth will require
CEOs to combine equal amounts of resourcefulness and realism.
Methodology and
acknowledgments
The data published in this report is based on a survey —— Jim Kavanaugh, CEO, World Wide Technology, US
of 1,300 chief executive officers (CEOs) in 11 of the
—— Vinod Kumar, Managing Director and Group CEO,
world’s largest economies: Australia, China, France,
Tata Communications, Singapore
Germany, India, Italy, Japan, the Netherlands, Spain,
the UK and the US. The survey was conducted —— Andrew Liveris, Chairman and CEO, The Dow
between 22 January and 27 February 2018. Chemical Company, US
The CEOs operate in 11 key industries: asset —— Paul Massara, CEO, Electron, UK
management, automotive, banking, consumer and —— Tim Murray, CEO, Aluminium Bahrain B.S.C.,
retail, energy, infrastructure, insurance, life sciences, Bahrain
manufacturing, technology and telecom.
—— Miles Roberts, Group Chief Executive,
Of the 1,300 CEOs, 314 came from companies DS Smith Plc, UK
with revenues between US$500 million and
US$999 million; 546 from companies with revenues —— Dan Schulman, CEO, PayPal, US
between US$1 billion and US$9.9 billion; and 440 —— Feike Sijbesma, CEO, Royal DSM, Netherlands
from companies with revenues of US$10 billion
or more. —— Masayoshi Son, Chairman and CEO, SoftBank
Group Corp, Japan
KPMG would like to thank the following for their
contributions: —— Susan Story, President and CEO, American
Water, US
—— Ali Ahmed Al-Kuwari, CEO, QNB Group, Qatar
—— Tarek Sultan, CEO and Vice Chairman, Agility,
—— Ken Allen, CEO, DHL Express, Germany Kuwait
—— Enrique Díaz-Rato, CEO, Cintra, Spain —— Duncan Tait, SEVP, Head of Americas and EMEIA,
—— Hikmet Ersek, CEO, Western Union, US Fujitsu, UK
—— Fernando A. González, CEO, CEMEX, Mexico —— Samuel Tsien, Group CEO, OCBC Bank,
Singapore
—— Patricia Kampling, CEO, Alliant Energy, US

For further information about this report and how KPMG can help
your business, please contact CEOoutlook@kpmg.com.
kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the
particular situation.
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with
KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other
member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Designed by Evalueserve.
Publication name: Growing pains 2018 Global CEO Outlook
Publication number: 135402-G
Publication date: May 2018

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Growing

20 Digital gets personal

28 Instinct over data

35 Methodology and acknowledgments

—— Cyber certainty —— Optimistic macroeconomic

—— 52 percent say they will need to

4 2018 Global CEO Outlook

—— Owning transformation —— 59 percent believe agility is the new

—— Robots manufacture jobs

2018 Global CEO Outlook 5

skills to manage and demographic shifts.

Chart 1: Threats to growth

2 Cyber security risk

3 Emerging/disruptive technology risk

4 Environmental/climate change risk

Source: 2018 Global CEO Outlook, KPMG International

6 2018 Global CEO Outlook

KPMG’s Global Head of Clients and

2018 Global CEO Outlook 7

While the Chart 2: The inevitability of a cyber attack on their business,

of a cyber Australia 62%

event crosses Germany 47%

American CEOs, Netherlands 36%

with 68 percent Italy 34%

of CEOs saying India 34%

Source: 2018 Global CEO Outlook, KPMG International

8 2018 Global CEO Outlook

Chart 3: How well-prepared sectors are for a cyber attack, by industry

Life sciences 58%

Source: 2018 Global CEO Outlook, KPMG International

2018 Global CEO Outlook 9

Ali Ahmed Al-Kuwari

10 2018 Global CEO Outlook

Chart 4: Understanding how Millennials’ needs differ vs To drive long-

Source: 2018 Global CEO Outlook, KPMG International

2018 Global CEO Outlook 11

Millennials have often a

12 2018 Global CEO Outlook

The role technology plays in meeting successful in technology,” he says.

Tomorrow’s successful organizations will

2018 Global CEO Outlook 13

Chart 5a: Confidence in 3-year growth prospects,

67% 78% 74%

65% 69% 77%

Confident in Confident in Confident in

Source: 2018 Global CEO Outlook, KPMG International

14 2018 Global CEO Outlook

Chart 5b: Confidence in their own country’s 3-year growth 55 percent

Source: 2018 Global CEO Outlook, KPMG International

2018 Global CEO Outlook 15

Chart 6: Outlook for annual topline revenue growth over the

Between 0.01% and 1.99% 55%

Between 2% and 4.99% 42%

Between 5% and 9.99% 2%

Source: 2018 Global CEO Outlook, KPMG International

Only 37 percent predict headcount growth

16 2018 Global CEO Outlook

Chart 7: Approach to recruiting new skills

We are waiting to achieve certain growth targets before hiring

Source: 2018 Global CEO Outlook, KPMG International

Our customers are having

2018 Global CEO Outlook 17

Chart 8: The most important strategies to drive growth over