Can Corporate Sustainability & Economic Growth Coexist?
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Submitted by: IBM
Posted: May 06, 2008 – 06:35 AM EST
Plan Significant Investments to Meet Changing Customer Expectations
Plan Significant Investments to Meet Changing Customer Expectations
LONDON and ARMONK, NY -- (MARKET WIRE) -- 05/06/08 -- The IBM (NYSE:
IBM) Global CEO Study, the largest study of chief executives ever conducted, today reveals a dramatic increase in the number of global business leaders who see important change ahead, and also highlights how the ability to absorb and manage change is widening the gap between winners and losers in the global economy.
CEOs reported a surprising level of optimism about change as an opportunity to build new competitive advantage. Overall, 83 percent of surveyed CEOs expect substantial change in the future, an increase of 28 percent in just two years. However, CEOs report their ability to effectively manage change is increasing at a far slower pace.
Collectively, CEOs set their organization's ability to manage change 22 percentage points lower than their expectations for the level of change they will have to manage -- a 'change gap' that is widening.
CEOs point specifically to their own customer base as the source of the most important changes they will have to address, as two new and more demanding classes of customers emerged: the 'information omnivore,' and the 'socially-minded' customer. Of all the trends identified in the study, surveyed CEOs plan their most substantial increases in investment in response to these customer sets.
The IBM Global CEO Study, based on face-to-face interviews with 1,130 CEOs from 40 countries across 32 industries, is designed to capture insights on how the challenges CEOs face today will impact the future of business. The study, titled "The Enterprise of the Future," was conducted by IBM Global Business Services in conjunction with the Economist Intelligence Unit.
"The enterprise of the future accepts change as a permanent state in an organization. Those CEOs who demonstrate the capacity to manage major change know they can beat the competition by reaching new classes of customers, and making bold moves to shift business design around principles of global integration," said Ginni Rometty, senior vice president, IBM Global Business Services. "And it's clear that out- performers are distancing their enterprises from the competition based on their organizational capacity to take advantage of change."
The Rise of the Information Omnivore
The "information omnivore" craves all types of information and often broadcasts its views and expectations worldwide via the Internet. These customers are swapping passive roles for much deeper involvement. "Consumers" are becoming "producers," often creating entertainment and advertising content for their peers, while demanding flexibility and responsiveness from companies with whom they choose to do business. Although these customers are more demanding, the majority of CEOs do not see them as a threat, but as an opportunity for differentiation based on meeting the heightened expectations of this group, and capitalizing on new market opportunities that will emerge.
Overall CEOs are planning a 22 percent increase in investments in the next three years to serve these more sophisticated and demanding customers.
The investment is even more pronounced among financial out-performers. CEOs of firms with higher net profit margin growth indicate that investments targeted at information omnivores will increase 36 percent over the next three years. The majority of these new investments will be dedicated to new operational capabilities that improve collaboration and product innovation, and that are more oriented to transparency and tailored to specific market segments.
The study shows the impact of the information omnivore is driving investment in every major geography. In Europe, CEOs indicated they plan a 23 percent investment targeted at these customers over the next three years, a 20 percent jump from the previous three years. In North America, CEOs plan a 19 percent investment -- jumping 27 percent over the same time period. Asia Pacific CEOs plan a 16 percent investment -- a 20 percent jump -- and Latin America CEOs indicated a 16 percent investment -- jumping 18 percent over the last three years.
The Rise of the Socially-Minded Customer
CEOs agreed that customer expectations around corporate social responsibility ('CSR') are increasing, and that CSR will play an important role in differentiating an enterprise in the future. Customers are coalescing around organizations' CSR profile -- including, but not limited to "green" initiatives -- and are increasingly demanding socially-minded products, services, and even supply chains.
CEOs indicated that while customers have always cared about societal issues, those concerns are now more frequently turning into action as the more socially aware customer evaluates an enterprise's CSR profile
before making purchasing decisions.
To better understand and reach the new socially-minded customer, CEOs plan to increase their investments by 25 percent over the next three years, the largest percentage increase of any trend identified in the study.
The study shows that while increasing CEO concern about environmental issues has doubled over the past four years globally, this concern is not evenly distributed worldwide. Asia Pacific and European CEOs lead the world in focusing on environmental issues, followed by the Americas.
CEOs also revealed that CSR reputations are also an important tool to attract and retain employees. They are also recognizing that their organizations are being held mutually accountable, along with the public sector, for the socioeconomic well-being of the regions in which they operate.
Overall, the CEOs see opportunities in CSR and are using it for their competitive advantage. They indicated that CSR is critical to maintaining current market share.
The study revealed that fundamental shifts in expectations from these more demanding customers and the increased purchasing power in emerging markets are driving major changes in the business models of organizations worldwide. CEOs plan bold moves around business designs that facilitate faster and more extensive collaboration on a worldwide scale, and rapid reconfiguration when new opportunities appear.
Eighty-six percent of the CEOs surveyed plan substantial changes in the capabilities that distinguish leading organizations -- their knowledge and asset mix. CEOs expect to carefully calibrate business model designs based on principles of global integration, which includes global searches for sources of expertise, resources and assets that can help it differentiate. In addition, to take advantage of global integration opportunities, 75 percent of the CEOs intend to actively enter new markets and 85 percent of the CEOs intend to partner to capitalize on global integration opportunities.
About the Global CEO Study
The findings of this report are based upon a series of interviews conducted by IBM in late 2007 and early 2008. A total of 1,130 CEOs, business and public sector leaders from 40 countries participated in structured interviews. IBM consultants conducted more than 1,000 face to face interviews, with the remainder conducted by The Economist Intelligence Unit (EIU).
Participants represent private and public sector organizations across a variety of industries and geographic locations. Nineteen percent are companies employing more than 50,000 employees while 22 percent have less than 1,000 employees. The Global CEO Study is conducted on a biannual basis, and provides a benchmark and a blueprint for global business trends. For more information on additional findings from the study, visit www.ibm.com/enterpriseofthefuture.
For more information about IBM, visit www.ibm.com.
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