Long-term vision, short-term action:

How private businesses can deliver on five key priorities in 2024

Blog
4 minute read
February 12, 2024

Dr. Peter Bartels

Partner, Global Entrepreneurial & Private Business Leader, PwC Germany

Since 2021, we’ve marked the start of each year by exploring the top five issues for private and family businesses to address in the coming year. While the focus areas change and evolve each time, several themes remain consistent namely technology, people and sustainability.

In our 2023 article, one of our key recommendations was for private businesses to “act short term, think long term.” It’s a theme that continues and is strongly underlined by PwC’s 27th Global CEO Survey, published at the World Economic Forum in DavosOpens in a new window.

Of PwC’s 27th annual CEO survey of 4,702 CEO respondents in 105 countries, 68% lead privately owned companies as opposed to publicly-listed companies. This is important as it both demonstrates that private businesses are drivers of economic activity, employment and growth and also offers a great opportunity to compare how private and listed companies respond to the same questions.

What do private company CEOs think about today’s challenges?

Firstly, private company CEOs are consistently more optimistic than their listed counterparts about their ability to ride out the enduring risks of macroeconomic volatility, inflation and political turbulence. In fact 50% think their business will still be viable in ten years’ time, against 35% of listed companies. This optimism mirrors the long-term perspective and positive outlook of private business leaders as they build their legacy.

When we turn to more immediate, shorter-term disruptions like cybersecurity and Generative AI (GenAI), we find private companies are more optimistic on these as well. For example only 60% of CEOs of privately owned businesses think GenAI will increase their cybersecurity risks in the coming year, compared to 78% of listed corporations. Yet when it comes to concrete actions like adopting GenAI, private businesses are lagging way behind with only 27% saying they’ve done this in the past year, compared to 43% of listed companies.

Well-founded confidence or blind spot?

Taken together, these findings raise some searching questions. Is private businesses’ optimism over short-term (as well as long-term) challenges justified? Or does it reflect a blind spot they lack the resources and skills to tackle?

There’s also a wider concern here. As our latest Global Family Business Survey points out, private companies have been losing their traditional “trust premium” because they’re being slow to act on ESG in general, and climate change in particular. Our CEO Survey confirms this gap still exists: only 70% of private businesses report progress on improving energy efficiency, against 87% of listed corporations. Also, in the years before the current gap on climate action opened up, private businesses were lagging behind on digital transformation, until the COVID-19 pandemic increased the speed of adoption.

The five focus areas for 2024

Against this background, we’ve mapped out our five priorities for private business in 2024.

With usage of GenAI tools rising dramatically, now is the time for private companies to get to grips with GenAIOpens in a new window, work out what it can deliver for them and progress to adoption. The first step is to allocate leadership responsibility for developing an “early days” GenAI strategy as part of the overall tech strategy. In many family businesses, the natural choice for this role may be a NextGen member. Our forthcoming PwC NextGen Survey finds that many NextGens see GenAI as a career opportunity in their family business, and that 74% agree it’s a powerful source of transformation.

Across the board, private businesses are behind listed corporations both in progressing climate initiatives and appreciating the business benefits they offer.This came across very clearly in the 27th Global CEO Survey with private businesses lagging behind listed companies on all of the questions about progress on climate initiatives. It’s vital to start seeing climate initiatives as an opportunity to build trust and value, and as a business enabler rather than a cost – for example by improving energy efficiency and investing the savings in innovation to create “clean”, climate-friendly products and services.

It’s predicted GenAI will affect 40% of jobs worldwideOpens in a new window. And PwC research shows employees – especially younger ones – are eager to learn new skills. So, to realise GenAI’s potential, private businesses must put the right skills and capabilities in place while safeguarding their people. This means reviewing the current workforce against future skills needs to identify gaps and opportunities to redeploy and/or retrain staff. Through good workforce planning and interventions, companies will achieve advances like harnessing GenAI to boost efficiency, and upskilling workers to support climate-driven business model changes.

With tough economic conditions forecast to continue in 2024, capital constraints for private businesses are unlikely to ease off. This is especially since PwC’s CEO Survey shows that 38% of them have made a major acquisition within the past three years, against just 27% of listed companies. As the need for capital increases, one increasingly attractive external source can be private equity (PE): our recent research by PwC GermanyOpens in a new window shows 90% of private businesses are willing to consider PE funding, up from 18% in 2011. Historically family businesses have been hesitant to even consider PE funding. However this is changing with PE investors’ showing much greater flexibility over the timing of exits and higher readiness to take minority stakes.

Private businesses’ more optimistic view of the long-term threats facing them can be a strategic asset, since it makes them more willing to take risks to diversify, adapt and try new things. But they must also be realistic around short-term risks in areas like cybersecurity and GenAI, where listed companies voice much greater concern. In previous years we’ve discussed the six paradoxes of leadership. In today’s world a new paradox has emerged for private business leaders: the ability to simultaneously have a ‘corporate’ short term focus and an entrepreneurial long term mindset.

Private businesses have many inherent strengths that – if applied well – can position them in the forefront of their industries while also benefiting the societies where they operate. As 2024 unfolds, there’s a great opportunity to leverage those strengths to maximum effect. We think the five priorities we’ve highlighted can help. Get in touch if you’d like to discuss any of these issues further.