Thriving in an age of continuous reinvention

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Twelve months ago, we reported that 46% CEOs in Slovakia and 39% of CEOs believed their companies would no longer be viable in ten years’ time if they continued on their current path. The reinvention imperative this implied caught the attention of our clients, prompting thousands of conversations between PwC partners and CEOs around the world. ‘Are we in the 40% or the 60%?’ was a question many CEOs posed to themselves and their top teams during or following these discussions. Almost invariably, as they anticipated the magnitude of changes barrelling towards them, those leaders concluded that they needed to be more transformative in their approach if their organisation was to thrive in the decades ahead.

This year’s Slovak and Global CEO Survey compries the opinions of 194 CEOs in Slovakia and 4702 globally. Nearly all companies are already taking steps towards reinvention. Even as CEOs seek to radically change their companies’ business models, they remain concerned about their companies’ long-term viability. The impetus to reinvent is intensifying. CEOs expect more pressure over the next three years than they experienced over the previous five from technology, climate change and nearly every other megatrend affecting global business.

Key findings:

• CEOs who responded to this year’s survey were more optimistic about global economic growth than last year.
• 51% of CEOs in Slovakia (45% globally) are still not confident that their companies would survive more than a decade on their current path.
• Survival-conscious CEOs among the 51% CEOs in Slovakia (45% globally) who are less confident of their company’s viability are slightly more likely than other CEOs to have taken action aimed at reinventing their business models. 
  
• Small company chief executives are more likely than their larger company counterparts to feel their company’s viability threatened.
  
• CEOs perceive enormous inefficiencies across a range of their companies’ routine activities – everything from decision-making meetings to emails – viewing roughly 40% of the time spent on these tasks as inefficient. A conservative estimate of the cost of that inefficiency would be tantamount to a self-imposed US$10 trillion tax on productivity. Generative AI, which about 60% of CEOs expect to create efficiency benefits, could help relieve some routine burdens.
  
• Four in ten CEOs report that they have accepted lower hurdle rates for climate-friendly investments than for other investments—in the majority of cases between one and four percentage points lower. This is clear evidence that some CEOs are willing to make complex trade-offs as they strive to boost the sustainability of their businesses.
  
• Meanwhile, two-thirds of CEOs report reallocation of resources (financial and human) of 20% or less year to year. The connections among reallocation, reinvention and financial performance suggest that more aggressive reallocation – up to a point – is required to succeed.
  

The stakes are high, but so is CEO awareness of both the urgency to change and the need to deliver sustained outcomes for stakeholders and society. To clarify the nature of the challenge and the opportunities associated with meaningful business reimagination, we’ve organised this year’s report in nine sections under three themes:

1. An enduring imperative to reinvent

Technological disruption, climate change and other accelerating global megatrends continue to compel CEOs to adapt, as a whopping 97% of respondents to PwC’s 27th Annual Global CEO Survey report having taken some steps to change how they create, deliver and capture value over the past five years. During that span, 76% of CEOs took at least one action that had a large or very large impact on their company’s business model. That finding reflects a growing unease, as 51% of respondents in Slovakia and 45% in the world doubted their company’s current trajectory would keep them viable beyond the next decade—up from 39% just 12 months earlier.

The intensification of CEO worries about corporate viability does not appear to reflect nearterm economic concerns. For example, CEOs are less likely than they were a year ago to anticipate a decline in global economic growth, and much more likely to expect growth will improve in 2024 (38% compared to 18% last year). The optimism of CEOs in Slovakia regarding global economic growth has increased significantly, 54% expect an acceleration, compared to 18% last year. The expectations of CEOs in Slovakia regarding the growth of the Slovak economy have also changed significantly year-on-year, 31% of CEOs expect economic growth in Slovakia to accelerate, compared to 16% last year. Still, that doesn’t mean CEOs globally are unalloyed optimists: slightly more CEOs expect the global economy to contract in the coming year than expect it to improve. CEOs are also slightly less confident than last year in their own company’s prospects for revenue growth, over both the next 12 months and the next three years.

2. Pressures and threats

Another sign that the need to reinvent is rising is a notable increase in the pressure CEOs expect over the next three years from factors that influence business model change. In the next three years, CEOs in Slovakia and globally expect significantly higher pressure on business from all factors, i.e. technological changes, changes in customer preferences, stronger competition, state regulations, and demographic and climate changes, compared to the last five years. While CEOs in Slovakia consider technological changes and customer preferences (65% versus 49%) to be significantly more important issues (78% versus 56%) compared to CEOs globally.

The growing importance of trends like these stands in contrast to CEO perceptions of exposure to several near-term threats, which have declined overall since last year. Geographically, however, CEOs still see pockets of concern. Inflation remains the top concern for CEOs in the United States, for example, despite receding in terms of expected exposure for global CEOs overall. Similarly, geopolitical threats are still among the top concerns for CEOs in Central and Eastern Europe, as well as the Middle East, despite receding for global CEOs overall. This may be because companies have already been taking measures to insulate themselves from the effects of some conflicts—and the full impact of others is still unclear. In Western Europe, CEOs are most concerned about cyber risk over the next 12 months—that’s especially true in France and Germany, where it’s perceived as the top threat. US CEOs also rank exposure to cyber risk high on their list of concerns.

4. The AI opportunity

In addition to climate change, a second megatrend with systemic, existential implications is technological disruption. Specifically, our survey looked at generative AI, which has all the hallmarks of a technology that could significantly change how companies operate. It’s also approaching a critical juncture, seemingly poised to transform business models, redefine work processes and overhaul entire industries. CEOs in this year’s survey appear to believe in both the fast pace of generative AI adoption and its outsized potential for disruption. For example, over the next year, about half of CEOs globally and 35% in Slovakia expect generative AI to enhance their ability to build trust with stakeholders.

 About 60% CEOs globally and 43% CEOs in Slovakia expect it to improve product or service quality. Within the next three years, nearly seven in ten respondents also anticipate generative AI will increase competition, drive changes to their business models and require new skills from their workforce. But CEOs in Slovakia believe less (55%) compared to CEOs globally (68%) that generative AI will change the way their company creates value, how it brings it to its customers and how it transforms it into profit. 

So far, experience apparently buoys expectations. CEOs who say they have adopted generative AI across their company (about one-third of our sample) are significantly more likely than others to anticipate its transformative potential over the next 12 months, as well as over the next three years.

Overall, CEOs anticipate many positive near-term business impacts from generative AI. These include applications that increase revenues, such as through improved product quality and customer trust, as well as those that boost efficiency. This trend is consistent with PwC’s Global Risk Survey 2023, which found that 60% of respondents see generative AI as mostly or fully an opportunity rather than a risk. 

At a societal level, the effects of generative AI are still uncertain. Some of those efficiency benefits appear likely to come via employee headcount reduction – at least in the short Term – with one-quarter of CEOs globally and one fifth of CEOs in Slovakia expecting to reduce headcount by at least 5% in 2024 due to generative AI. Companies making early reductions to capture efficiencies in some areas may already be offsetting them with hiring in others, as growth and revenue opportunities become clearer. For example, although 14% of technology CEOs anticipate reducing headcount in the next year due to generative AI, 56% of them also anticipate hiring in 2024 – at a rate almost 20 percentage points higher than the global average in our survey. (Overall, 39% of CEOs globally and 33% CEOs in Slovakia expect their company’s headcount to increase by 5% or more in the coming 12 months.)

These findings drive home the need for CEOs to bring their people along when it comes to generative AI. Being transparent, purpose-driven, and trusted regarding AI-related plans and decisions can help employees who are wary of AI (and what it may mean for their jobs) feel more comfortable experimenting – and innovating – with it. Ultimately, CEOs must embrace this as a new facet of their role: understanding, explaining and managing the inevitable tensions between short-term job losses and long-term job creation potential from AI.

5. The AI challenge

Even as the momentum of generative AI surges, a range of experts in the field are voicing concerns over the potentially significant, unintended consequences that could emerge as its reach grows. CEOs reflected similar sentiments in their responses to the survey. Consider, for example, that when it comes to generative AI, CEOs are most concerned about cybersecurity risk—and over half agree that it is likely to increase the spread of misinformation in their company. One-third of CEOs also expect generative AI to increase bias towards specific groups of employees or customers in the next 12 months. Almost as many disagree, suggesting bias is likely to be an area of growing attention as the scope and complexity of generative AI’s role in business expands. Interestingly, familiarity with generative AI does not seem to mitigate concerns about the risks among CEOs whose companies have already broadly adopted it.

Taken together, these findings underscore the societal obligation that CEOs have for ensuring their organisations use AI responsibly. Indeed, given the pace of innovation and the inevitable delay in establishing new norms and regulations, much of the onus for managing this advancing technology falls, for now, to businesses. As Robert Playter, CEO of Boston Dynamics (a robotics manufacturer), told us in a recent interview, ‘While there are potential risks with [AI and large language models], we believe more in its potential and creating boundaries to mitigate any risk. This integration, like all applications of our robots, must adhere to ethical principles, which strictly prohibit weaponizing the robots or using them for purposes of harm or intimidation.’

6. Turn barriers into opportunities

Armed with a better understanding of the challenges and the opportunities associated with meaningful business reimagination, CEOs can begin turning the former into the latter. We asked CEOs about a range of obstacles they often confront when undertaking large scale corporate change efforts.

Their responses underscore that many constraints are sector-specific. Infrastructure challenges, for example, inhibit reinvention (to a moderate extent or more) in energy, power and utilities, and transportation and logistics (61%, 58% and 56%, respectively, compared to the global average of 37%). We also saw that CEOs who are more concerned about the viability of their companies were more likely to flag the existence of reinvention obstacles. Additionally, though, we were surprised to learn how few CEOs perceived some obstacles to have much of an impact. For example, only 25% of CEOs described lack of support from the board as even a moderate constraint on their reinvention efforts, and only 30% of CEOs said the same of internal stakeholders.

Similarly, only 26% of CEOs described a lack of support from the board or the management team as a moderate or greater constraint on decarbonising the company’s business model.

On the other hand, many perceived constraints on reinvention fall squarely in a CEO’s realm of influence. Bureaucratic processes, competing operational priorities, limited financial resources, workforce skills and technological capabilities are subject to some degree of CEO influence – as is efficiency, which was an area of concern for many CEOs. On average, CEOs globally said that 40% of time spent on meetings, administrative processes and emails is inefficient and CEOs in Slovakia 31%. Moreover, respondents said that 35% of time spent in decision-making meetings, an activity over which CEOs often have direct personal control, is inefficient (CEOs in Slovakia said 31%). Our conservative estimate of the cost of that inefficiency would be tantamount to a self-imposed US$10 million tax on productivity. That’s about 7% of global GDP at purchasing-power parity – what Harvard Law School professor Cass Sunstein might call a ‘sludge’ tax, borne of high transaction costs.

7. Pinpoint your most important moves

Actual progress will come when leaders and companies undertake meaningful initiatives to evolve the way they create, deliver and capture value. Analysis of this year’s survey data showed a positive association between self-reported profit margins and business moves that had a large or very large effect on respondents’ business models—such as technology development and deployment, novel pricing models, and strategic partnerships. This was true both of individual reinvention actions and of a composite reinvention index that we created. The data suggests that returns are three to five percentage points higher for actions with a very large impact on business models than those with limited impact.

The right moves for each company will differ, of course, depending on its strategy, operating model, industry context and competitive landscape. Two things stand out. First is that nimble resource reallocation—an acknowledged attribute of high-performing companies—remains a critical area for CEO attention.

• Nearly two-thirds of CEOs reported reallocating 20% or less of resources from year to year, and almost 30% of CEOs cited resource reallocation of 10% or less. Higher levels of annual reallocation in the survey were associated with both greater levels of reinvention and higher profit margins.
• Second is the value of looking beyond a company’s walls and embracing business ecosystems. Separate PwC research finds it’s often possible to create more value than any firm could achieve alone by working across industry boundaries—through joint ventures or alliances, for example—to provide what customers need.

Companies in ecosystems are 1.7 times as likely to be faster to market than peers, 1.2 times as likely to be flexible and agile, and 2.3 times as likely to be highly innovative.

8. Recalibrate expectations for climate priorities

As CEOs establish priorities, many are seeing climate change as an industry disruptor containing distinct opportunities in addition to risks. Nearly one-third expect climate change to alter the way they create, deliver and capture value over the next three years – compared to less than one-quarter, who said as much regarding the past five years. This may partly explain why 41% of CEOs, including over half of those at chemical companies, say their companies have set lower hurdle rates for climate-friendly investments than for other investments. Geographically, CEOs in Asia-Pacific are more likely than those elsewhere to have accepted lower hurdle rates, even though they were no more likely than CEOs elsewhere to report feeling highly or extremely exposed to climate change. 65% of CEOs in Slovakia are willing to accept a significantly lower rate of return on climate-friendly investments. 28% of CEOs in Slovakia, compared to 18% of CEOs globally, consider an acceptable lower rate of return on climate-friendly investments compared to other investments to be more than 6%.

That’s consistent with the sentiment of investors in PwC’s Global Investor Survey 2023, two thirds of whom say that companies should make expenditures that address environmental, social and governance (ESG) issues even if doing so reduces short-term profitability.

 Return requirements are critical inputs to corporate resource allocation decisions, so evidence that CEOs are flexing their expectations as they face up to the climate challenge is a hopeful sign of potential for progress. Related PwC research finds evidence, too, of a shift in private investor interest in green tech towards more emissions-intensive sectors.

9. Keep your antennae up

‘Sooner or later,’ wrote the late Andy Grove, former CEO of Intel, in his 1996 memoir, Only the Paranoid Survive, ‘something fundamental in your business will change.’ Whether that change is in technology, intense competition or regulation, companies face forces that ‘build up so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has.’

Facing inflection points that precipitate, in Grove’s words, ‘full-scale changes in the way business is conducted,’ managers must be ‘paranoid’ guardians of their businesses against competitors ‘who will eat away at it chunk by chunk until there is nothing left.’ Grove’s emphasis on sensing inflections made an appearance in a telling data point from this year’s survey. Those CEOs who are less confident in their company’s viability are more conscious of the threats they face. Whether that’s because they are at greater risk from those threats or because they’re seeing something other companies don’t probably varies by company, industry and geography. PwC’s Global Internal Audit Study 2023 highlights how effective a company’s risk, compliance and internal audit teams can be at putting in place the early warning and risk-sensing systems to help spot these hazards.

We also see CEOs who are more concerned about the viability of their businesses doing somewhat more to adapt than others. This was particularly true among CEOs who say their company formed new strategic partnerships, shifted from global supply chain models to regional ones, or implemented novel pricing models.

The totality of this year’s survey results reflects an awareness among CEOs that they are navigating critical strategic inflection points, and feel a sense of urgency and a bias towards action. The data also suggest there’s a growing premium on leadership effectiveness to maintain energy, challenge the status quo and increase momentum. In a recent strategy+business article, PwC’s Ryan Hawk, Nadia Kubis and Blair Sheppard described a number of critical leadership priorities for reinvention-minded leaders.

For example, CEOs may need to expand their executive teams to include experts in emerging areas that are critical for their company’s future success, such as climate regulation or AI. Also crucial: having the whole top team own the change – as well as their systems of governance and control – rather than putting functional or business unit leaders in charge of discrete initiatives.

In addition, many organisations will need to take account of the fact that the answers to a great many questions don’t exist, and new mechanisms will be necessary for solving problems together – rather than presenting solutions and seeking approval – as well as for new ways of tracking progress and rewarding people. What’s more, CEOs need a plan to communicate the urgency they are feeling, so that everyone understands and can potentially own part of the solution. People who are proficient at their current jobs may resist change because they’re concerned they may not be good at what they’ll be required to do in the future. So CEOs who are serious about reinvention must find approaches for acknowledging concerns, prizing curiosity and openness to learning, and encouraging managers to help people adapt. Some of these leadership imperatives may sound familiar, but all of them raise expectations of CEOs to lead the voyage of strategic discovery necessary to evolve long-standing approaches to value creation. As we enter an age of continuous reinvention, CEOs have unparalleled opportunities to reshape their organisations, and themselves, to thrive on disruption, and transform aspirations into realities.

Slovak CEO survey 2024 – 14th year

The survey was carried out by the consulting company, PwC Slovakia, in cooperation with the Slovak edition of Forbes magazine for the 14th time. CEOs responded via an online questionnaire from 15 December 2023 to 31 January 2024. 194 CEOs of companies from a number of industries operating in Slovakia took part in the survey.

• 80% of respondents are CEOs of privately-owned companies
• 51% of respondents are CEOs of owner-managed companies
• 37% of respondents are CEOs of a parent company with multiple subsidiaries
• 40% of respondents are CEOs of a local subsidiary where the parent company controls multiple entities
• 27% of respondents are CEOs of family businesses
• 32% of respondents are CEOs of companies with sales of more than EUR 30 million
• 38% of respondents are CEOs of companies with sales of EUR 5 - 30 million
• 82% of respondents are CEOs of companies with less than 500 employees
• 18% of respondents are CEOs of companies with more than 500 employees

PwC’s 27th Annual Global CEO Survey

Methodology, demographics and defi nitions

PwC surveyed 4,702 CEOs in 105 countries and territories from 2 October through 10 November 2023. The global and regional figures in this report are weighted proportionally to country nominal GDP to ensure that CEOs’ views are representative across all major regions. The industry- and country-level figures are based on unweighted data from the full sample of 4,702 CEOs, including 4,088 men, 521 women, and 93 who identified with another gender or preferred not to say. Further details by region, country and industry are available on request. All quantitative interviews were conducted on a confidential basis.

Among the CEOs who participated in the survey:

• 3% lead organisations with revenues of US$25 billion or more 
• 4% lead organisations with revenues between US$10 billion and US$25 billion
• 20% lead organisations with revenues between US$1 billion and US$10 billion
• 31% lead organisations with revenues of up to US$100 million
  
• 68% lead organisations that are privately owned.

Notes:
Not all percentages in charts add up to 100% – a result of rounding percentages; multiselection answer options; and the decision in certain cases to exclude the display of certain responses, including other, none of the above and don’t know.

We also conducted in-depth interviews with CEOs from North America and Asia-Pacific. Two of these interviews are quoted in this report; the full interviews can be found at https://www.strategy-business.com/inside-the-mind-of-the-ceo.

The research was undertaken by PwC Research, our global centre of excellence for primary research and evidence-based consulting services. https://www.pwc.co.uk/pwcresearch

About the inefficiency tax

By combining data from this year’s CEO Survey with selected data from other sources, we calculated an overall cost of inefficiency that ranged from US$10 trillion to US$20 trillion. This translates to 7% to 13% of global GDP based on purchasing-power parity.

Our assumptions were as follows:

• The percent of total time considered inefficient was a sum of the estimates for the average time considered inefficient in meetings and administrative work.
  • To derive the estimate for meetings, we multiplied our estimate of the percentage of scheduled meeting time considered inefficient (average: 40%) by an estimate of the average percent of time spent on meetings in a week (15%; based on research suggesting an average of six hours of scheduled meetings per week; Rogelberg, Scott, & Kello, 2007). 
  • To derive the estimate for administrative work, we multiplied our estimate of the percentage of administrative time considered inefficient (average: 38%) by an estimate of the average percent of time spent on administrative tasks in a week (15.5 to 38%; based on research suggesting a minimum of five hours and an average of 15 hours of administrative work per week; West Monroe, 2018).
• Payroll expenses per employee were estimated by dividing the assumed payroll revenue for each company (self-reported revenue times 0.15) by the self-reported number of employees in the company.
  
• Statista estimates the number of total employees globally at 3.39 billion