Prepress
Midmarket CEOs Increasing Investments in Global Growth, Social Responsibility and Customer Collaboration to Address Rapid Change Ahead
Monday 08. September 2008 - New Findings from IBM Global CEO Study, "The Enterprise of the Future"
IBM (NYSE: IBM) today announced the midmarket (1) findings from the IBM Global CEO Study, the largest study of chief executives ever conducted. The study, titled “The Enterprise of the Future,” which focuses on five core traits that define an enterprise of the future, shows that midsize companies face significant challenges with change and report a sizable gap between their need for change and their past success in managing it. But the study also shows that midsize companies are optimistic about opportunities for growth, especially in developing economies, and are rapidly innovating their business models to become more competitive.
In the face of anticipated changes to external market factors, skill requirements, and regulatory compliance, the gap between the amount of change that CEOs anticipate and their companys past success with managing change is dramatic. More than eight out of ten – or 86 percent – of midsize businesses anticipate substantial change, yet just over half – or 57 percent – have had prior success in managing that change.
Despite the challenges posed by this gap, CEOs of midsize organizations are making a range of strategic investments to evolve their business to succeed in todays rapidly changing environment. The most frequently cited areas of planned new investment include growth through globalization, customer service for the new breed of more demanding and informed customers, and increased corporate social responsibility activities.
Going Global
The first opportunity for investment is the rising purchasing power of emerging economies, an area that midmarket CEOs are targeting for growth through a 20 percent increase in investment over the next three years.
To achieve global expansion, midsize organizations are focusing on new business designs — in fact, three of every four CEOs of midsize organizations plan to change their business models to differentiate themselves over the next three years. They have identified three primary actions they must take to accomplish that goal: make deep changes to their mix of capabilities, knowledge and assets (60 percent), partner extensively (54 percent), and actively enter new markets (51 percent).
“In today’s rapidly changing global marketplace, CEOs of midsize companies recognize that the most effective path to sustained business success is through innovation, skills and active partnering,” said Marc Dupaquier, General Manager, Global Midmarket, IBM General Business. “It’s clear that these firms are aggressively changing their business designs to expand into new markets and forge stronger relationships with a new class of informed and collaborative customer.”
CEOs of midsize companies realize that they have to partner, not just for traditional reasons such as value chain connectivity and operational efficiency, but in order to gain the talent and skills needed to move towards greater global integration. One of the biggest challenges these companies face is how to acquire and manage the skills and talent required to succeed at global integration, since they realize that using a domestic team to drive international business is unlikely to succeed.
The Information Omnivore Opportunity
Second, CEOs will continue to invest in areas that allow them to tap into the increasingly informed and collaborative consumer, the “information omnivore,” a new breed of customer that the overwhelming majority of the participating CEOs of midsize companies see as positive for their business.
Because of their agility and willingness to respond to demanding customers and the highly fragmented needs of “long-tail” niche markets, midsize companies are better positioned than their enterprise counterparts to respond to and invest in the information omnivore. Twenty-two percent of CEOs at midsize organizations are planning to invest in this trend in the next three years, viewing it as an opportunity for differentiation and a way to justify premium positioning and brand value. This represents a double-digit increase from IBMs 2006 Global CEO Study.
The information omnivore craves all types of information and often broadcasts its views and expectations worldwide via the Internet. In a 2007 IBM survey of 1,000 retail consumers, 53 percent said they used the Internet to compare product features and prices and one in ten sent text messages to friends and family while shopping to get input or share information on products. 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.
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. In particular, midsize companies recognize the importance of corporate reputation among informed customers, a group that often makes purchasing decisions based on corporate policies and record. According to the survey, they plan to increase their CSR investments by a sizeable 34 percent over the next three years.
About the Global CEO Study
The findings of this report are based upon a series of interviews and analysis conducted by IBM in late 2007 and early 2008. A total of 1,130 CEOs, business and public sector leaders from 40 countries representing organizations across a variety of industries and sizes 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).
The Global CEO Study is conducted on a biannual basis, and provides a benchmark and a blueprint for global business trends.