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PwC Pulse Survey: Finding opportunity in reinvention
Read time: 14 minutes
Executive summary
In the current business environment, US companies need to transform — repeatedly and holistically — or risk falling behind. In PwC’s latest Pulse Survey, business executives understand what’s at stake, and they believe they have what they need to reinvent.
But the data also signal some red flags. Business executives broadly agree on their company’s future vision, but they also believe there’s significant misalignment about how to get there and even how long it will take. This gap in alignment can be a critical factor in your company’s survival or failure.
Meanwhile, almost all companies must deal with a riskier business environment and roadblocks to reinvention. Still, many recognize the need to change how they create, deliver and capture value, and their leaders are looking ahead to fully reinventing their business models.
Here are some of our key findings.
- CEOs emphasize the need to reinvent. More than a third (34%) of CEOs say that the average competitor in their industry will be out of business within three years if it doesn’t change its business model.
- Confidence is high in talent and capabilities. Most of the executives (76%) tell us that they have the right talent mix to support the company’s future vision, and the same percentage say they have the capabilities to execute business model changes at scale. But 84% also say that executing at the pace needed to win in the market is a challenge.
- And there’s a gap in executive alignment. Nearly six in 10 (59%) of executives say there’s strong consensus about the company’s future vision, but only 41% say the same about how to get there.
- Many companies have initiated the reinvention process. Roughly 75% of companies have started or completed measures to reach new customers directly, to make their products “smart” and to build collaborative networks to share value, among other reinvention efforts.
- Executives are prioritizing investment over cost cutting. To enhance performance, they’re investing in new technologies (51%) — and generative AI (GenAI) specifically (51%) — as opposed to cutting costs (30%).
- The overall business risk landscape appears to be intensifying. The most serious risks to executives are familiar — cyber attacks, an uncertain macroeconomic environment and the US regulatory environment – and they’re all up from August 2023. Executives cite the cost of adopting new technology as the top challenge, with 42% saying it’s a significant challenge.
Sounding the alarm about business viability
34%
of CEOs say that an average competitor will be out of business within three years if it doesn’t change its current business model
What’s at stake for companies that don’t transform? Their very survival. Among business executives, 76% say that the average company in their industry will be out of business within 10 years unless it changes its current business model. US CEOs are even more likely to see businesses failing, with 82% saying the average company in the US will not survive the coming decade if they fail to change. They have an even more urgent near-term outlook. Thirty-four percent say that an average competitor will go under within three years without change.
The urgency among US CEOs about their competitors’ viability may spring from the CEO mindset of needing to consistently outperform them. CEOs also have a good view of their industry, and they’re starting to understand the impact of disruptors like artificial intelligence and cloud on their businesses. They recognize that reinvention is critical if they’re to survive.
What you can do
- Be bold and proactive about change. Proactive transformations from a position of strength can be more successful — they give companies a wider set of options and remove the short-term pressure to restructure or shore up the balance sheet. A company with strong financial performance, for example, could proactively explore new technologies or markets rather than wait for a crisis to force change.
- Develop enterprise change management capabilities. Your company might, for instance, establish a dedicated change management team, implement robust governance structures to oversee the change process, and develop a risk management strategy to identify and mitigate potential risks associated with the change.
Having what it takes to survive but overlooking alignment
76%
of executives agree that they have the capabilities to execute business model changes at scale
Despite the seemingly overwhelming landscape, business leaders say they’re ready for what’s coming. They’ve weathered four years of uncertainty and see the need to adapt their business models to the changing world. Just over three-quarters agree they have the right talent mix to support their company’s future vision (76% agree or strongly agree, 31% strongly agree), as well as the capabilities to execute business model changes at scale (76%, 27% strongly) and at speed (71%, 27% strongly). CEOs are even more optimistic — about nine in ten agree they have the right talent mix to support their company’s future vision (96%) and the capabilities to execute business model changes at scale (88%) and at speed (86%).
Business executives are also relatively aligned in terms of their company’s future direction. Nearly six in ten respondents (59%) say there’s strong consensus on the future vision for the company. So far, so good.
But when it comes to how a company can implement its future vision, the data shows a different story. Only 42% say there’s strong consensus on how long it will take to execute the company’s vision, and 41% say there’s strong consensus on how companies will change their business model. To get to that future vision, CEOs need effective and strategic business partners, but CEOs in our survey aren’t finding them consistently across the C-suite. While 76% of CEOs say their COOs are highly effective business partners in driving the company’s strategy, only 64% say the same for their CFOs, and a mere 54% say the same for both board members and risk leaders.
The ability to implement change is now a critical competency for every organization. That won’t happen unless CEOs have alignment across the entire leadership team — and board — including complete clarity on what’s required and how the organization will get there. In particular, the C-suite and board need to create a culture that supports change, including an environment built on transparency, trust and healthy debate.
In particular, the lack of alignment between CEOs and the board should give leaders pause. Alignment across the full C-suite is important, but the board and CEO have a unique relationship. Together they are directly responsible for developing strategy and overseeing its implementation. CEOs who don’t feel they have a strong and strategic relationship with the board — and its full support in making changes — are at a serious disadvantage.
What you can do
- Within the C-suite, build a culture based on healthy debate and disagreement. Leaders may not always agree with each other, but they should be able to hear and share different views respectfully, grow aligned around a particular decision and move forward with a united front. This might involve creating a space for open discussion during leadership meetings, encouraging feedback and different perspectives, and making sure that all decisions are made collectively and with full understanding of their implications.
- When communicating outside the C-suite, eliminate confusion and misperceptions. Communicate consistently and repeatedly, including within the C-suite and with your employees, about what’s required for business model reinvention. For example, this could involve clear and regular communication about the company's strategic goals, the steps needed to achieve them, and the roles and responsibilities of different team members. These steps may involve company-wide meetings, newsletters or dedicated strategy sessions.
- Assess the communication between the CEO and board. Make sure the discussions and debates between the CEO and board are strategic and constructive – and that they’re the right ones to have. It’s important to have healthy debate, and it’s critical to get alignment on the company's strategic direction and progress.
Making the move to business reinvention
More than two-thirds
of business executives have started — or already completed — a broad set of reinvention initiatives
Operating model transformation and business model reinvention are both strategic initiatives aimed at driving organizational change and improving performance, but they focus on different aspects of a business and have distinct objectives.
Operating model transformation involves making changes to how a company operates internally to improve efficiency, effectiveness and agility. Steps may include the redesign and optimization of your organization’s operational processes, structures, capabilities and technologies. Business model reinvention, on the other hand, focuses on reimagining and transforming the fundamental way a company creates, delivers and captures value. It involves making significant changes to the core elements of your business model, such as target customers, value propositions, revenue streams and strategic relationships.
Combining respondents that have started or completed the following types of business model reinvention:
- 75% are creating new ways to reach customers directly
- 74% are making their products “smart”
- 72% are building collaborative networks to share value
- 72% are creating digital products
- 69% are expanding into adjacent or new market segments
- 66% are developing subscription-based anything-as-a-service offerings
Most executives report taking a diversified approach, and 26% say their company has either started or done all six types of business model reinvention.
6 types of business model reinvention
Perhaps not surprisingly, the share of telecom, media and technology executives who report having already started these initiatives is higher across the board (it has the highest percentage of respondents who report having started or having already done each of the six types). For example, the TMT industry has 83% of respondents who report having started or already moved to anything as a service, 79% who report having started or already created digital products, and 82% who report having already started or already made their products “smart.”
What you can do
- Gather the insights you need to have real-time visibility into your market position. Look at objective data about your company’s performance relative to your competition. Synthesize them down to a dashboard with a manageable set of metrics that you can track in real time and examine trends. Your company might, for instance, use data analytics to track key performance indicators like market share, customer satisfaction and operational efficiency. Compare these metrics with industry benchmarks to better understand your position relative to your competition and identify areas for improvement.
- Monitor competitors and adapt swiftly. Keep a close eye on what your competitors are doing and adapt your strategies accordingly. This could involve tracking technological advancements, market trends and consumer behavior to identify opportunities for innovation and disruption in your own industry.
- Expand your industry horizon. Don’t limit your focus to your own industry but monitor developments in other sectors. This can provide valuable insights into potential disruptions and opportunities for innovation. A retail company, for example, could learn from advancements in the tech industry, such as the use of AI for personalized customer experiences, and apply that information to enhance its own customer service strategies.
- Challenge yourself on whether your agenda is bold enough. Reinvention requires work. Regularly evaluate your company’s strategy objectively, and assess what is and isn’t working. Make sure your goals are ambitious enough to drive change for the future. Give your strategy a hard, earnest look, take calculated risks and push your company and your people out of their comfort zones.
Executives tap their strategic toolboxes
51%
of business executives plan to invest in new technologies over the next 12 to 18 months
Executives have many tools they can use to reinvent their businesses, and they’re making a variety of strategic changes in the next 12 to 18 months. They’re investing in new technologies (51%) and they’re leveraging data analytics to develop new offerings (40%). In comparison, traditional measures such as cost cuts and M&A were lower on the list (30% and 28%, respectively). About the same (29%) say they’re using tax credits to fund investments such as renewable energy and research and development.
Just over half (51%) say they’re investing in GenAI specifically. While this may seem low, it may be driven by past investments. In our August 2023 Pulse Survey, 46% of business executives said they were investing in GenAI. Companies are also likely ready to optimize their adoption of GenAI, with 73% of executives saying they’ll use it to make changes to their company’s business model. GenAI can provide valuable insights, data analysis and strategic guidance, setting it apart from other technologies when it comes to supporting business model changes.
The emphasis on investment is another positive aspect of the findings. In the past, when companies faced challenging market conditions, their initial instinct was to cut costs, hunker down and wait for a return to the status quo. Today, companies are less likely to try cutting their way to better performance. Instead, they know they need to continue investing, changing and growing. They’re also concentrating on getting the return on their investment in tech and capitalizing on what they’ve adopted.
As companies consider full-scale reinvention plans, 40% of executives are looking at doing a major reorganization of their operating model in the near term. This is the highest percentage in the four years we’ve asked the question. The combination of tech investment and operating model reorganization may signal that companies are moving beyond headcount cuts of the past and looking for ways to improve worker productivity. This basically equates to doing more with less, but it will likely require continued tech investment to make it possible.
What you can do
- Don’t conflate transformation with true reinvention. Many executives implement short-term organization tweaks at the expense of longer-term foundational shifts that may be necessary to stay in business. If your business is heavily reliant on workflows that can be automated using tools such as GenAI, you should analyze how much of your current revenue stream is at risk. For some companies, the potential revenue shortfall may result in bankruptcy unless you shift how your company makes money.
- Examine everything in your toolbox. Many executives focus too much on the company’s operating model as the key to reinvention. Success depends on your ability to execute on the entire set of strategic changes, not just your ability to use one tool effectively. Look at your entire toolbox rather than relying on just one. And keep in mind that you may need to use a different tool in the future to move forward with reinvention.
- Focus on growth. While the business model should be fit for purpose, it should also be designed with growth in mind. This means considering not just the current needs of the business but how it can adapt and evolve in the future.
Overcoming roadblocks to reinventing business
79%
of executives say broader and/or more frequent cyber attacks are a moderate or serious risk
The overall business risk landscape appears to be intensifying. And while the world continues to rapidly change, the most serious risks are not unfamiliar: cyber attacks, an uncertain macroeconomic environment and the US regulatory environment. Business leaders also say climate change is a bigger risk to their business than in the past.
While some businesses may not be feeling specific pressure from geopolitical uncertainty as much as other risks, the bigger risk picture is one that is far more interconnected. Cyber criminals become more sophisticated as technology advances. Regulations then require additional disclosures related to escalating risks. Consider cyber preparedness. The new SEC cyber disclosure rule requires companies to give investors current, consistent and “decision-useful” information about how they manage their cyber risks. While these disclosures are meant to increase transparency and awareness, they could inadvertently expose vulnerabilities or gaps in your company’s security. Cybercriminals could exploit this information to design more targeted and effective attacks, bypassing the company’s defenses. This vicious cycle creates a complex business landscape that executives should navigate with caution.
Increased concerns related to climate change may be driven in part by the environmental implications of AI models. These models require massive computing power and contribute to significant energy demand, and concerns are developing that there isn’t enough clean energy to power the huge wave of demand heading our way. At the same time, GenAI could help offset emissions through more efficient ways of doing things and improved design.
Executives also note internal challenges — especially around adopting new technologies — with the majority citing the cost of adopting new technology, changing their operating models to support their vision and achieving measurable value from adopting new technologies. They also cite thinking beyond current profit pools, monetizing data and executing at the pace needed to win in the market as roadblocks to reinventing their businesses.
The accelerating pace of innovation — and the range of new solutions continually hitting the market — are like an accelerating treadmill. Leaders feel (often correctly) that not embracing new technologies could put them at a disadvantage, and that they can fall behind quickly if they don’t. More than half (55%) of executives agree or strongly agree that they’re behind the competition in adopting new technologies — up from 48% in August 2023. This sentiment is more pronounced for marketing leaders, with 70% agreeing or strongly agreeing that they’re behind.
Tech transformations can be costly, complex initiatives, and the data shows that companies continue to struggle with unlocking real value from them.
What you can do
- Get out of your own way. Despite the best intentions, many companies can get bogged down by trying to address every internal challenge at once. Some also end up overlooking other challenges because they may not present an immediate barrier to successful business transformation. Focus on what you can control. For example, establish processes that can help you streamline operations, and take steps to address succession planning.
- Think longer-term when planning tech investments. Instead of implementing isolated new technologies, build a pipeline of tech solutions that can reinforce each other. Take, for example, a manufacturing company that decides to invest in cloud computing, data analytics and AI technologies. Rather than invest in them in silos, executives might instead create a cohesive tech strategy that combines all three. The cloud computing infrastructure enables seamless data storage and access, while data analytics tools provide valuable insights. AI technologies take it a step further by leveraging the data to make predictions and optimize processes.
- Invest in leadership training and executive coaching for managers. Strong leadership is crucial for driving successful change. Equipping managers with the right information and skills can significantly enhance the effectiveness of transformation efforts. Concentrate on helping your managers better understand the future vision and the change process. This empowers them to lead their teams effectively through periods of transition.
- Don’t exhaust your organization. Gauge employee sentiment and willingness to change. Even if a solution is promising, employees can undermine it by refusing to embrace the change. Before implementing a new technology, understand employee attitudes and provide necessary training to enable a smooth transition.
- Consumer markets
- Energy and utilities
- Financial services
- Industrial products
- Tech, media, telecom
Consumer markets
Tech investments and operating model changes are on the horizon
70%
of consumer markets leaders agree that their current business model needs to change fundamentally to support the future company vision
Energy and utilities
Today’s obligations vs. tomorrow’s transformation
71%
of energy and utilities leaders say day-to-day operations prevent them from focusing on the future vision, compared to 56% of their peers
Financial services
Rethinking how to make money
53%
of financial services executives agree that their company’s business model needs to fundamentally change to support the company’s vision
Industrial products
Looking to embrace business model changes
73%
of industrial products executives cite margin pressures affecting earnings as a risk to their companies
Tech, media, telecom
Headwinds aren’t cooling TMT leaders’ reinvention optimism
85%
of tech, media and telecom leaders agree they’re ready to execute business model changes at scale
Finding opportunity in reinvention
About the survey
Between May 15 and May 22, 2024, PwC surveyed 673 US executives, including CFOs and finance leaders (13%), tax leaders (12%), risk management leaders, including CROs, CAEs and CISOs (12%), CIOs, CTOs and technology leaders (12%), CHROs and human capital leaders (12%), COOs and operations leaders (12%), corporate board directors (8%), CMOs and marketing leaders (12%) and CEOs (7%). This is the first time we included CEOs. Respondents were from public and private companies in six sectors: industrial products (28%), consumer markets (21%), financial services (15%), technology, media and telecom (20%), health industries (4%), energy and utilities (8%), and other (4%). The Pulse Survey is conducted on a periodic basis to track the changing sentiment and priorities of business executives.
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