Now or
never2016 Global CEO Outlook

KPMG International

kpmg.com/CEOoutlook

Foreword
The amount of change we encounteron a daily basis, whether in the latest
news headlines or a new technologythat suddenly unleashes an unfamiliar
business challenge, is remarkable.
The key to managing the increasing
pace, scale and scope of change is in
how we react and whether we view
these events with caution or with the
optimism that they present us withnew opportunities.
We have spoken to nearly 1,300
CEOs from many of the world’s
leading companies, located in 10 of
the world’s largest economies, tobetter understand their views of theforces and opportunities shaping
the businesses they lead. This
year we also surveyed CEOs in an
additional 18 countries to assess theircomparative views, the highlights ofwhich are included in the Appendix tothis report.
We set ourselves the challenge ofunderstanding more about which
strategic dilemmas CEOs are grappling
with, and how they plan to respond.
I am grateful to all of these CEOs fortheir candid and insightful responses toa very challenging set of questions.
In this year’s survey, we found thatwhile CEOs are confident in theirability to successfully transform theirbusiness, and to outperform thegeneral economic backdrop, they alsofeel that the next 3 years will be criticalJohn Veihmeyer
Chairman, KPMG Internationalin shaping their industry. Put simply,
CEOs are telling us the time for change
is “now or never”.
Despite the change enveloping theirorganizations, and predicted global
economic challenges in the coming
12 months, these corporate leaders
are largely confident in their near-term
prospects. In fact, they expressed
greater confidence in the growth oftheir own company and the global
economy over the next 3 years, ascompared to last year.
These CEOs are also alert to many
unfolding challenges and they
acknowledge a growing list of top
concerns, from shifting customer
loyalty to technologies that are
overturning traditional businessmodels. There are also a number of
additional critical issues that haveemerged recently, ranging from cybersecurity risks to the need to masteradvanced data analytics.
When you add up these diverse
challenges, as well as the geopoliticalevents impacting every continent, it’seasy to label the current environmentas ‘uncertain’. However, the CEOs wesurveyed remain optimistic.
While it’s natural for seasoned, longtenured executives to remain unruffledin the midst of uncertainty, there
is another factor at play. We foundthat nearly half of CEOs expect theircompanies to be transformed into
a significantly different entity within
the next 3 years. To do so, they areembarking on a transformation journey,
reviewing strategies, implementing
their own disruptive technologies andincreasing their headcounts to recruit
new skill-sets.
These sentiments mirror the views
I hear during my own conversations
with CEOs around the world. They
tell me that “The game is changing
dramatically, but we know what weneed to do, and we’re confident that
we can emerge as winners.”
This attitude, and their enthusiasm tointroduce innovation, is inspiring. It
reminds us all at KPMG that we needto continue to match this pace ofchange and constantly apply innovative
approaches to meet our clients’evolving needs, whether they seek
advice for targeted change programs
or end-to-end support for enterprisewide transformation. I’m proud that weshare our clients’ spirit of confidence
in the face of change, and we embraceinnovation as a means to overcome
uncertainty and grow in new ways.
I hope you find our 2016 Global CEO
Outlook to be insightful, and I invite
you to reach out to KPMG’s partners
and professionals to discuss your own
challenges and opportunities in today’s
dynamic, ever-changing landscape.

Table ofcontents

4

Executive summary5

The next 3 years

8

Convergence and diffusion

9Innovation

13

Transforming for the future

16

Technology and speed

22

The innovation engine

25

Is the customer always right?

26

Cyber security for the fourth industrial revolution 

28

Confidence and future growth

31

Top growth geographies

34

Conclusions

38

Methodology and acknowledgements

39

Appendix

40

Executive
summary
The force and speed with which technological innovation
is moving through the economy is creating an inflection
point for the business sector, say the vast majority of CEOssurveyed. So great will be the impact, that 41 percent of CEOs
expect to be running significantly transformed companies in
3 years’ time. That response rate is up from 29 percent of
the CEOs who felt that way in last year’s survey. In addition,
82 percent of those surveyed are concerned about whether
their company’s current products or services will be relevant tocustomers 3 years from now.
A significant majority of CEOs recognize the important need tofoster a culture of innovation, respond quickly to technologicalopportunities and invest in new processes. But most CEOs
recognize that they are now handling issues that they have nevergrappled with before.
Global CEOs of the largest corporations have indicated they areprepared to handle this period of unprecedented change withrealistic expectations and a healthy dose of confidence. They are
increasingly optimistic that they can transform their organization
to enable it to capture the opportunity that the future holds. Thisconfidence is apparent in their hiring plans and projected top-line
growth over the next 3 years.
The key findings of this year’s survey are summarized in thegraphic on pages 6–7.

Now or never: 2016 Global Now
CEO orOutlooknever

5Key findings
Critical changeForty-one percent of CEOs anticipate that their company will besignificantly transformed over the next 3 years. That number has
risen significantly from the 2015 survey, in which 29 percent ofCEOs held that opinion. According to 72 percent of CEOs, the next
3 years will be more critical for their industry than the last 50 years.

Confidence

The vast majority of CEOs feel they can succeed intransforming their company and thus are confident in future
growth, with 89 percent feeling confident. This sentiment isechoed in their confidence level in the growth over the next
3 years in their home country (86 percent), their industry(85 percent) and in the global economy (80 percent).



Cyber risk

Cyber security climbed the list to become the top risk over the next
3 years (30 percent). CEOs recognize there is work to be done toprotect their organization, with 72 percent of CEOs not feeling fully
prepared for a cyber event.

Innovation

Fostering innovation is one of the top (21 percent) strategicalpriorities for CEOs over the next 3 years, and a significant
majority (77 percent) say it was important to specifically
include innovation in their business strategy with clear targets
and objectives.

Disruption6

Now or never: 2016 Global CEO Outlook

CEOs recognize that the lines between industries are blurring.
Sixty-five percent are concerned that new entrants are disrupting
their business models and more than half (53 percent) of CEOs
believe that their company is not disrupting their industry’s businessmodels enough.

TechnologyThe speed of change will be exponential and fueled bytechnology. Seventy-seven percent of CEOs areconcerned about whether their organization is keeping up
with new technologies. Data and analytics will be a top
area of investment over the next 3 years (25 percent).

Collaboration

Collaborative growth is how 58 percent of CEOs intend to drive
shareholder value for the next 3 years. Creating partnerships orcollaborative arrangements with other firms is the primary typeof transaction that CEOs expect to undertake (50 percent).

Customer focusEighty-eight percent of CEOs are concerned about theloyalty of their customers and 82 percent about therelevance of their products or services. Almost half
(45 percent) feel they could better leverage digitalmeans to connect with customers.

Annual top-line growth

Almost half (48 percent) believe their annual
revenues will grow between 2 percent and5 percent over the next 3 years.



Developing talentFaced with significant transformation plans and rapidly advancing
technology, 99 percent of CEOs report taking action to develop
existing or future talent. In line with these findings, most CEOs
report some level of skills gap emerging. Over 50 percent reportskills gaps in key business functions. This will likely create
challenges for the 96 percent of CEOs who plan to increase theirheadcount over the next 3 years. This is up from 78 percent inlast year’s survey.
Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

7

The next
3 years“This period will
be even morechallenging, as it
will take place in anenvironment that isstill characterized bysignificant economic,
geopoliticaland regulatory
uncertainty.”
John Scott
Deputy Chairman
KPMG International

Stephen G Hasty, Jr
Global Transformation Leader
KPMG International8

Now or never: 2016 Global CEO Outlook

CEOs believe it’s now or never.
Globally, 72 percent of CEOs believethat the next 3 years will be morecritical for their industry than thelast 50 years. Change will be led bytechnology, connected consumers
and sector convergence. These three
forces will upend business models,
blur lines between industries andcompanies, and demand a new wayof thinking about business. Muchof what will happen is unknowable.
What is impossible today will become
mainstream tomorrow.
“Only those companies and industries
accepting the challenge to transformthemselves will be more competitive,

gain efficiency and ensure the loyalty
of new digital consumers,” says
John Scott, Deputy Chairman, KPMGInternational. “This period will beeven more challenging, as it will takeplace in an environment that is stillcharacterized by significant economic,
geopolitical and regulatory uncertainty.”
With the accelerated speed of change,
it is increasingly difficult to have areliable long-term, or even mediumterm, view. But waiting is not an
option. “You can’t wait until you have asatisfying level of clarity, because you
might never get it,” says Stephen G
Hasty, Jr, Global Transformation Leader
at KPMG International.

Convergenceand diffusion
The lines separating industries,
companies, technologies andcustomers are disappearing. “We aregoing to see far more collaboration
between organizations taking placebecause of the need for speed
and the realization that ‘rent’ or‘collaborate’ is a viable and often
preferable alternative to ‘build’ or‘buy,’” says Nicholas Griffin, Headof the Global Strategy Group,
KPMG International. “Companies

will embrace the sharing economy
in the next 3 to 5 years in the waythat consumers have in the past
few years.”
Every business must become
software and digitally enabled to
sharpen its competitive edge. While
today’s technology giants typicallystarted off on unique technology
platforms, more traditional industries
now understand digital is integral tosurvive, let alone grow.

Nicholas Griffin
Head of the Global Strategy Group
KPMG International

Now or never: 2016 Global CEO Outlook

9Top CEO concerns*
Customer loyalty

88%
Impact of the global economy on their company

88%

Lack of time to think strategically about the forces of disruption and innovation shaping theircompany’s future86%

How Millennials and their differing wants/needs will change our business86%

Our competitors’ ability to take business away from our organization

85%

Whether our organization is staying on top of what’s next in services/products

85%

Having to consider the integration of basic automated business processes with artificial intelligenceand cognitive processes

85%

That regulations will inhibit our growth85%
The quality of the data I’m basing my decisions on

84%

The value and quality of external audit

84%

The relevance of our products/services 3 years from now

82%

Whether our organization is keeping up with new technologies

77%

That the next 3 years will be more critical for my industry than the previous 50 years
The number of additional mission-critical issues that I have not grown up with/experienced previously in my career that I need to take a leadership position on

That new entrants are disrupting our business model*Bolded items in this list are primary concerns this report focuses on.
Source: 2016 Global CEO Outlook, KPMG International10

Now or never: 2016 Global CEO Outlook

69%
65%

That we don’t have an effective strategy to counter convergence in the market
That our organization is not disrupting business models in
the industry

72%

53%

59%

CEOs believe that technologicalchange will be one of the biggest
factors impacting growth overthe next 3 years, second only toeconomic factors. “There is thiselusive pursuit of growth and it isvery difficult,” says Gary Burnison,
CEO of Korn Ferry, the executive
placement firm. “I think that CEOs
have only a few levers: You caninnovate or you can consolidate but
you have to do anything you can
to tap this borderless consumer,”he says. As with many otherorganizations, Korn Ferry’s revenue
sources are shifting dramatically.
“We’re trying to define an entire newindustry,” says Burnison. “We haveto re-imagine the future and maintaina mindset of ‘how could we put
ourselves out of business?’”
Companies are increasingly
forming partnerships, alliancesand joint ventures with startups
and universities. Competitors may
be suppliers as well as customers
and all are becoming part of theinnovation process. This results
in a redefinition of power andresponsibilities and the need for adifferent type of leadership. “We
are evolving towards a world where
what’s inside the company andwhat’s outside is not binary. Thismeans that, as a CEO, you can’t havea proprietary or protective mindset.
You need to be very comfortable with
ambiguity and undefined spaces,”says KPMG’s Isabelle Allen, Global
Head of Clients and Markets.

“We are evolving
towards a world
where what’s inside
the company andwhat’s outside
is not binary.
CEOs can’t havea proprietary orprotective mindset.”
Isabelle Allen
Global Head ofClients and Markets
KPMG International

Now or never: 2016 Global CEO Outlook

11

Pedro Melo
Chairman
KPMG in Brazil

It is amid such shifting realities that
CEOs are setting their short- andlong-term strategies and executing
them. The global and national
economies add headwinds, with avery low interest rate environment,high volatility and politicaluncertainties. No wonder then that
CEOs’ concerns about meeting thedemands of the future continue toincrease. They are anxious about
all angles of disruption coming attheir company and ways to pre-empt
them. They are also concerned about
whether they are taking the lead in
disruption themselves.
“Many of the CEOs I speak withhave come to the realization thatthe critical issues their organization

faces today are in areas where they
have little or no prior experience,”says Pedro Melo, Chairman, KPMG in
Brazil. “They are looking at alternative
arrangements such as joint ventures,
alliances and partnerships with othercompanies to respond to market
changes in a timely manner.”“In the digital age the consumer
has never been more interested ormore informed with information on
healthcare available anytime, anyplace,”
said GSK’s Walmsley. “Our leadershipapproach centers on sharpening
our listening skills internally andexternally to ensure that we hone inon early signals and can be agile andentrepreneurial enough to shift course
if necessary.”“Collaboration and partnership are integral to how we do business.
We know that by working with leading scientists, academic institutions,
technology specialists and in many cases, specialist NGOs, we caninnovate more effectively and get drugs and products to the patientsand consumers who need them faster.”Emma Walmsley
CEO, Consumer Healthcare, GSK

Regulatory concerns
Regulatory compliance, if not approached properly, can hamper transformation andgrowth. CEOs are fully aware of its importance. Eighty-five percent of CEOs areconcerned that regulations will inhibit growth. CEOs also see regulatory risk as thesecond most important risk (28 percent), after cyber risk.
One such regulatory project, base erosion and profit sharing (BEPS), has done agreat deal to shine a light on the risks associated with tax loopholes. The results
are nothing short of transformational.
To thrive in this new environment, businesses will need a much more holistic,
global view of their overall tax management over the 3-year horizon. They will needto think through their strategy in relation to tax and communicate it throughout theentire organization, to make sure that it is consistent with the overall values. Thenthey will have to figure out a good way to communicate that to their stakeholders.

Jane McCormick
Global Head of Tax
KPMG International12

Now or never: 2016 Global CEO Outlook

Innovation
CEOs recognize that they are operating
in a new world. Sixty-nine percent
are concerned about dealing withissues that they have never had toconfront before in leadership positions.
Interestingly, experienced CEOs are
more concerned about new entrants
disrupting their business models thanare less experienced CEOs.
“The complexity of the issues CEOs
face today and the speed with which
the market requires them to respond,
is putting a significant amount ofpressure on the front office,” says
Simon Collins, Chairman, KPMG
in the UK. “However, the CEOs I
speak with have a real sense of
optimism about the future of theirorganizations. They see change in themarketplace and disruptions causedby new technologies as opportunities
to take market share. That said, theiroptimism is usually guarded by ahealthy dose of realism regarding thesignificant amount of work required
within their organizations to adapt
to these changes and seize on theopportunities.”
These concerns reflect CEOs’ focus
on the essence of the fourth industrial
revolution: integration of cognitive
computing and artificial intelligence.
CEOs have recognized that theircurrent skills and experience may
not be enough to fully succeed in
the digital world. But this is theknow-how they need. “Digital
Darwinism is unkind to those who
wait,” says Karl-Heinz Streibich, CEOof Software AG. To succeed will
require taking advantage of the wholeecosystem of partners — clients,
suppliers, startups or universities.

Navigating the next industrial revolution
Revolution

Year

Information

1

1784

Steam, water, mechanical production equipment

2

1870

Division of labour, electricity, mass production

3

1969

Electronics, IT, automated production

4?

Cyber-physical systems

Market Realist

Simon Collins
Chairman
KPMG in the UK“Digital
Darwinism
is unkind to
those who
wait.”
Karl-Heinz Streibich
CEO
Software AG

Source: World Economic Forum 2015

Now or never: 2016 Global CEO Outlook

13

“Because
they have noexperience inagribusiness,they can use
totally new
businessmodels. Thechanges
they could
bring to theagricultural
sector are
unimaginable.”
Chunhua Chen
Former CEO
New Hope Liuhe14

Now or never: 2016 Global CEO Outlook

A watchful disruptor
Chunhua Chen, former CEO of
New Hope Liuhe, an agribusinessenterprise in China, is keeping awatchful eye out for disruptors. New
Hope Liuhe has been an industry
disruptor itself, and has been apioneer in the industry in many
ways. For example, it is the firstagribusiness in China to digitize,and its ‘Farm Development Plan’,
which launched in 2013, is a service
platform to help farmers. It also holds
the biggest cache of agribusinessdata among Chinese companies,
including cultivation data from
460,000 farming units and data on
100 million pigs. This data provides
valuable insight. For example, thecompany can immediately detect an
epidemic and implement prevention
mechanisms.
New Hope Liuhe is also the first
agricultural conglomerate to provide
financial services. It plans to expand

into new business areas around its
two core areas of cultivation and foodproduction. Such new extensions
might include raw materials trading or
training and management schools.
Chen recognizes that, to stay ahead of
the competition, the company needs
to be vigilant. She believes that newtechnology and new competition
will have the biggest impact on thecompany’s growth in the next 3 years.
Fundamental changes in biotech or
gene technology could disrupt theagribusiness industry. At the sametime, as demand for agricultural
products remains high, companies
from other industries will want toenter the sector.“Because they haveno experience in agribusiness, they
can use totally new business models.
The changes they could bring to theagricultural sector are unimaginable,”says Chen.

CEO experience matters
CEOs surveyed who have been in their roles more than 5 years, expressed slightly lower confidence inthe economy than the CEOs with less than 5 years’ experience. Despite this, or maybe because of it,they tend to adopt a more strategic approach to innovation.

More experienced CEOs* versus less experienced CEOs
Confidence
About their countries’ 3-year growth84%
88%
About the global economy

77%
83%
Innovation

Strategic approach to innovation

30%
25%
Important to foster a culture of innovation

78%
63%
More experienced CEOs

Less experienced CEOs

* More experienced CEOs have been CEOs for more than 5 years.

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

15

Transforming
for the future
The pace of change continues toaccelerate. Forty-one percent of CEOs
anticipate that their company will be
substantially transformed over the next
3 years. This is a significant increaseover 2015 when just 29 percent ofCEOs expressed this belief.
“Change has become the new normal,”says KPMG’s Hasty. “The world ismoving so quickly today that there
really is no steady state. CEOs haveto be prepared to be in a continualtransformation.” Ability to change affects
results. For 27 percent of companies
that had average revenue growthof 10 percent or more over the last

“CEOs are taking
change by the reins
and transforming
their companies,
rather than being
buffeted by the ride.”
Margaret Cowle
Transformation Leader
KPMG Asia Pacific Region

16

Now or never: Global CEO Outlook 2016

3 years, fostering innovation is one of
the top strategies over the next 3 years.
In contrast, at companies with revenue
growth under 10 percent, only
19 percent of CEOs named fostering
innovation as a top strategy.
“We have seen a return to growthin Europe and continue to perform
well in our emerging markets and are
confident of sustaining this positive
momentum into the coming year,”says Vittorio Colao, CEO, Vodafone.
“The recent conclusion of ourtransformative £19 billion investment
program underpins this confidence
and positions Vodafone well tocapture the exciting organic growth
opportunities within both fixed andmobile markets.”“CEOs are taking change by the reins
and transforming their companies,
rather than being buffeted by
the ride,” says Margaret Cowle,
Transformation Leader, KPMG’s Asia
Pacific region.
Asia Pacific is a hotbed of change
and has an interesting combinationof new entrants and technology
companies constantly making newmarkets with new business models
leveraging disruptive technologies

and leading customer behavior.
Cowle continues, “At the same time,it has some of the most traditional
conglomerate models that areentrenched in old ways, and anychange is like a transplant and canbe rejected if the conditions are notproperly managed.”
Of those CEOs who said they
expected revenue growth of
10 percent or higher, a majority(51 percent) believe that theircompany will have transformed into asignificantly different entity in the next
3 years. In contrast, only 38 percentof CEOs who expect lower revenue
growth believe that their company
will be transformed into a significantly
different entity in the next 3 years.

“Not innovating would be our biggest
risk,” says Debby Blakey, CEO of
Health Employees Superannuation
Trust Australia (HESTA), an industry
super fund for health and community
services. In fact, fostering innovationis the top strategic priority for CEOs
globally over the next 3 years.
Technology, which can be a trigger
as well as an enabler of innovation,
features among the top investments
CEOs are expecting to make over the
next 3 years.
Nobody is safe. Gonvarri Steel Services
is a 60-year-old industrial company inSpain. “The prevailing thinking wasthat there is no need to innovate for
a company positioned between theautomotive world, which innovates a

But what accounted for the company’s
success and longevity in the past
no longer applies. “Now we intend
to make a 180-degree turn,” says
Gonvarri’s Calvo. The strategic planfor 2016–18 identifies four areasof strategic priorities, including
innovation. The company intends toinnovate its processes, materials
and the services it provides to its
customers. There are also plans toinvest in venture capital to develop
new ideas, internally or with anothercompany.

Top five areas of investment over the
next 3 years

Top five strategic priorities over the
next 3 years

21%

Fostering innovation

lot, and steelmakers, who are the ones
developing new materials,” says Josu
Calvo, CEO of Gonvarri Steel Services.

Increasing data
analysis capabilities

25%
24%

Stronger client focus

19%

New productdevelopment

Implementing disruptive
technology

18%

Cyber security
solutions22%

Talent development/
management

18%

Measurement and analysis ofcustomer experience/needs

21%

Stronger marketing, branding
and communications

17%

Geographic expansion
within home country

20%

Source: 2016 Global CEO Outlook, KPMG International

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

17

“The corporate playbook
is being rewritten andreplaced by one thattakes business agility
to a level we have neverseen before.”
Lynne Doughtie
Chairman and CEO
KPMG in the US“Today’s top business leaders
understand that long-term successin this era of fast-paced technologicalchange requires a new way of thinking
and operating,” said Lynne Doughtie,
Chairman and CEO, KPMG in the US.
“In fact, the corporate playbook is
being rewritten and replaced by one
that takes business agility to a level wehave never seen before.”
What does it take to execute change ina fast-changing environment?

Become agile. “The key elementof a successful strategy for the
unknown is focusing on selling ameasurable return to customers inthe short to medium term. The digitaltransformation is not an overnight
event but a series of incremental
steps, each delivering a concretebusiness advantage,” says Software
AG’s Streibich. Agility is key, and yet
today just 40 percent of organizations
are highly capable of responding
quickly to developments.

What is your organization doing to accelerate theexecution of your strategy?
Streamline internal
processes

43%

Form new partnerships/
alliances

43%
41%

Hire talent
Source: 2016 Global CEO Outlook, KPMG International

The best way to deliver faster,
according to 43 percent of CEOs, isby streamlining internal processes.
Software AG did just that whenit adopted its own software to
streamline operations and support
new digital market businessprocesses. The company introduced18

Now or never: 2016 Global CEO Outlook

a 6-month product-release cycle,
bringing the app economy to theenterprise. Big-bang product releases
have been replaced by quick,incremental releases that reflect whatcustomers are experiencing in thepresent or what they want to do tostay ahead.

BNP Paribas Wealth Management
has also sped up product delivery.
To be able to complete projects in
12 weeks, teams of colleagues fromdifferent departments work on projects
simultaneously, and not in a linear way,with departments handing off tasks
to each other. Team members are

assigned to projects for two full daysa week, during which they work on
the project at hand only, free from thedaily duties of their regular jobs. Suchcross-functional development is also
among the top methods of CEOs wesurveyed.

Which of the following describes your development plansto drive shareholder value for the next 3 years?
Collaborative growth (external
partnerships or collaboration
with other firms)“Not innovating
would be ourbiggest risk.”Debby Blakey
CEO
Health Employees
Superannuation
Trust Australia

58%

Organic growth (new lines ofbusiness, geographic expansion)

55%

Inorganic growth(M&A or joint ventures)

55%

Source: 2016 Global CEO Outlook, KPMG International

What forms of M&A or other significant deals do you
expect to undertake in the next 3 years?
Creating partnerships or collaborative
arrangements with other firms

50%

Changing the capital structure
through equity

47%

Changing the capital structurewith debt/financing

45%

Buying business(es), assets
or capabilities

41%

Selling business(es), assets
or capabilities

40%

Source: 2016 Global CEO Outlook, KPMG International“In thisincreasingly
volatile andfast-changing
world,
businesses
need toconsideralternativemodelsbeyondreliance only
on organic
growth.”Paul Polman
CEO
UnileverNow or never: Global CEO Outlook 201619

that her company’s product pipeline
illustrates her appetite for disruptive
innovation. She has brought inrenewed focus on new drug programs
through a dedicated research team,unlike in the past, where some ofthese programs were being developedby the company’s scientists in their‘spare time’.

“This is a change of our culture.
Working with partners on projects
is new, and it gives us a new wayof understanding how to bring new
solutions,” says Sofia Merlo, Co-CEOof BNP Paribas Wealth Management.
Kiran Mazumdar-Shaw, Chairmanof Biocon Limited, India’s leading
biopharmaceutical company, says

Strategic priorities of top-performing organizations
Top performers

OthersCollaborative deals

Top performers had an average revenue growth of 10 percent or more over thelast 3 years, while Others had revenue growth under 10 percent.

While the regulatory
hurdles of mega deals
make headlines, CEOs
are facing ever-increasingpressures to create real
deal value. In today’s‘new normal’ of rapid
disruption, big data and a
low growth environment,
the public struggles ofsome deals have led
CEOs in our survey toshift their strategies tofavor Alliances and JVs.
This is particularly true
among high performing
firms. Collaborative
deals should be partof any M&A playbook.
The best playbook takes
into account complexity
at every turn, holistic
advisors enabled with theright technology, and theability to deliver value atdeal speed. Business as
usual is simply not viable.

Expect technology to have a bigger impact on growth

Leif Zeirz
Global Head of Deal Advisory
KPMG International

20%
10%Focus more on fostering innovation

27%
19%
Innovation embedded in business

44%
24%
Company will be significantly transformed in 3 years

51%
39%
Innovation at top of personal agenda

39%
18%
Considered a leader in data and analytics (D&A)

41%
27%
Fully prepared for a cyber event

44%
22%
Source: 2016 Global CEO Outlook, KPMG International20

Now or never: Global CEO Outlook 2016

Join forces. The speed, breadthand depth of change require unique
skills, cutting-edge technologies andforward-thinking minds. No one CEOor company can have all of these
attributes at the same time acrossthe whole innovation spectrum.
That is why many CEOs turn tocollaboration to ensure the company
stays ahead in all areas. Collaborationis the top way CEOs plan to drive
shareholder value over the next
3 years. Collaborative arrangements
are also the top type of deal that
CEOs are planning to undertake overthe next 3 years.
Interestingly, the top three significant
investments for CEOs who are mostconfident about their growth are all
rooted in technology. They are increasingdata analysis capability (26 percent),
cognitive computing/AI (25 percent) andcyber security solutions (23 percent).
Fifteen percent of CEOs named
managing their ecosystem ofpartners/alliances as one of their
top strategic priorities over the next
3 years, and 39 percent of CEOs thinkthey collaborate well with external
parties well.
“This is going to be a new type ofcooperation,” says Mark A Goodburn,Global Head of Advisory, KPMGInternational. CEOs are expected
to manage the new ecosystem:
shareholders, partners, customers,
communities they operate in, andregulators, explains Goodburn. Whilethese stakeholders are not new, thedepth and intensity of relationships thatthey have with companies will continue
to increase. For instance, customers
these days are often involved in cocreation of the products and services,
partners can be entrusted with
proprietary and sensitive information,
regulators require technologicalchanges, and communities expect highsustainability standards.
In this ecosystem of multiple variables,
the traditional economic measure, GDP,is just one very important indicatorfor CEOs to consider, says Goodburn.
Other important indicators to watch
are customer expectations, ESG(environmental, social and governance)
metrics, purpose, ability to innovate
and cyber security preparedness.
This new type of cooperation has
the added benefit of embedding
innovation in the organization’s DNA.
KPMG’s Cowle adds, “In Asia Pacific
we are seeing a trend towards thedevelopment of innovation pods
where cross-functional parts of theorganization are ‘released’ from their‘day jobs’ to build new products
or ways of working. Extended
ecosystems are also on the rise,
whereby customers and third parties
are brought in to co-create new
business models, or change operating
models with ‘test and learn and failfast’ techniques.”
Managing these new constituencies
requires new capabilities, some ofwhich are still a work in progress atmany companies.

CEOs say their companies are highly capable at:Collaborating with external
parties, including customers,
partners and suppliers

39%

Connecting in a beneficial way
with universities

34%

Connecting in a beneficial way
with startups

34%

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

21

Technology and speed
The fourth industrial revolution
ushers in the era of the Internet ofThings, machine learning, cognitive
computing and artificial intelligence.
“The industrial internet will have amuch bigger impact on digitizing theworld than the social or consumer
phase of digitization ever had. We arestill in the early stages and the who,
what, how and why of the industrial

internet are wide-open issues,” says
Software AG’s Streibich.
The speed of change will be, quite
literally, inhuman, as the advance of
D&A and cognitive and machine learning
drive forward change more quickly thanhumans alone could ever achieve. At
the same time, CEOs are in learningmode themselves about what the newtechnologies mean for their business.

While the majority (63 percent) of CEOs
believe they use D&A effectively, only
30 percent of them think they are a D&A
leader in their industry. Interestingly,
42 percent of CEOs who expect to see
growth greater than 10 percent in thenext 3 years see their organization as aleader in D&A, compared to 26 percentof CEOs who expect growth at
10 percent or less.

The top uses of D&A are:Driving process and cost
efficiency

44%

Driving strategy and change

44%

Finding new customers

43%

Developing new products
and services

43%

Source: 2016 Global CEO Outlook, KPMG International22

Now or never: 2016 Global CEO Outlook

According to Christian Rast, Global
Head of Data & Analytics, KPMGInternational: “With so many
strategic decisions now riding on the
output of D&A, significant questions
are starting to emerge about trustin the data, the analytics and thecontrols. As more businesses use
algorithms to augment decisionmaking, there must be a heightened
focus on trust, and it should be an
integral property of D&A.”
CEOs believe there is room for
improvement in trusting theChristian Rast
Global Head of Data & Analytics
KPMG International

effectiveness (61 percent), security(60 percent) and accuracy (59 percent)of their D&A activities.
Rast adds: “Operating in increasingly
complex and dynamic ecosystems,
companies can derive tremendous
value from ensuring trust throughout
the analytics life cycle. Those who canmanage trusted analytics will havegreater confidence in their decisionmaking and trust in their customer
relationships.”
Mark Spears, Global Head of People
and Change, KPMG International,

agrees — particularly in decisionmaking in relation to training spend.
“Measuring the value of training haslong been an issue for organizations.
It’s rare that companies can accurately
answer how effective training has
been. Our survey findings suggest
this is a challenge; only 40 percent ofCEOs say their company is using D&A
to track return on training investment.
Given the scale of spending in training
and the need for employees todevelop and learn new skills, this has
to be a priority for CEOs.”

Mark Spears
Global Head of People and Change
KPMG International

Now or never: 2016 Global CEO Outlook

23

The cognitive future
Twenty percent of CEOs indicatedthat cognitive is one of the top threeareas they are devoting significant
investment/resources to in the next
3 years. And nearly 9 in 10 (85 percent)are concerned with having to consider
the integration of basic automatedbusiness processes with artificial
intelligence and cognitive processes.
We are just entering the fourthindustrial revolution, and the speedof change is exponential. But are we
ready for it?
“It’s in our nature to get fearful of what
has never happened before,” says Cliff
Justice, Innovation and Enterprise
Solutions Partner, KPMG in the US.
What we are living through today is on
the scale of the industrial revolution.
The only difference is that then we
automated muscle power and today weare automating brain power.
At call centers, for example, cognitive
systems are designed to takein information just like a humanbrain would, from visual images,
conversations, reading books or texts,
and inferring intent. This enables
them to perform judgment-basedtasks. Some of the technologies are
introducing emotional intelligence into

the systems, to be able to detect themood of a customer.

Won’t that put many
humans out of work?
Justice adds, “I don’t buy into the doom
and gloom scenario that there is going
to be massive unemployment causedby artificial intelligence. Big disruptionsin the past always produced newopportunities. The challenge is figuring
out in advance what those opportunitiesare. Nobody has all the answers, but
overall this is going to be positive.
Cognitive computing will relieve
humans of many tasks so that we will
have more time to spend on innovations
that are going to advance technology.”

What are some ofthese positives?
In healthcare, the cancer diagnosis andtreatment options are improving as aresult of cognitive computing. Every
week, hundreds of articles are being
published in medical journals aroundthe world with significant findings. No
human can read that. But a cognitive
system can, and it can also findcorrelations between different articles.
This may have relevance for a patient
who needs the most appropriate
drug regimen.

“Big disruptions in thepast always produced
new opportunities. The
challenge is figuring out
in advance what thoseopportunities are.”
Cliff JusticeInnovation and Enterprise Solutions
Partner
KPMG in the US

24

Now or never: 2016
GlobalGlobal
CEO Outlook
CEO Outlook
2016“We are looking at cognitive systems
to improve quality in the audit. With
cognitive systems it is theoreticallypossible to cover 100 percent of thedata, instead of a statistically valid
sample, as is the standard today. This
helps increase confidence in the capital
markets,” adds Justice.

But any system is only as
good as the data it is being
fed. Are you satisfied with
the quality of data wehave today?
Data quality is a fundamental issue
and challenge for every company.
Companies that are on standardized
enterprise resource planning (ERP)systems can compile data moreeasily, while companies that are very
fragmented may have issues. We alsoneed to change our understanding ofwhat constitutes data. It is no longer
only a tabular structure of rows andcolumns that are machine readable.
Eighty percent of data resides in emails,social media conversations or images —the so-called dark data. Cognitive
systems can access and interpret thisunstructured data, which allows formaking more data-based decisions,derived from a much bigger poolof data.

The innovationengineCEOs have clearly turned to innovationin order to address the organizationalchanges necessary to grow in the future.

level within their organization andembedded in everything they do — or‘Strategic’.

Fostering innovation was one of the
top three strategic priorities for theirorganizations; however, less thana quarter (23 percent) of CEOs saythat innovation is at the top of theirpersonal agenda.

“The role of ‘Change Agent’ is now
a requirement and a core skill of themodern CEO,” says Klaus Becker,
Chairman, KPMG in Germany.
“What was once a craft skill of a
select group of CEOs is now a corecompetency. What we are seeing in
the marketplace is that most CEOs areundertaking some form of significant
change or transformation within theirorganization. The impact of thesechanges to an organization’s businessmodel is requiring the CEO’s time,
experience and leadership.”Three quarters (77 percent) said it
was important to specifically include
innovation in their business strategy,
with clear targets and objectives. Yet,they also feel their organization has
work to do in embedding innovation into
their everyday operations.
Only 28 percent said their organization
was highly capable in terms offostering a culture of innovation — or‘Accelerated’ (see graphic below).
Thirty-five percent of CEOs saidinnovation was prioritized at a strategic

Klaus Becker
Chairman
KPMG in Germany

High-growth companies were more
apt to put themselves in the strategic
category (45 percent), whereas
companies expecting growth of under
10 percent put themselves in theaccelerated category (33 percent).

Where CEOs see their company with respect to innovation
3% 1%

1%

6%
28%
26%

35%

Innovation is best described as embedded in everything you do (relentless andcontinual), with strategic innovation objectives, a defined approach, resources,
leadership and innovation efforts that are optimized based on measures withinternal and external feedback
Accelerated Innovation is best described as regularly occurring with a defined approach,available tools, processes and resources to help you innovate in your role withsome direction provided by leadershipFoundational Innovation is best described as ad hoc, with innovation occurring on someprojects or within some departments but no repeatable approach, formula or
standardized tools and resources: there is room for improvement
Incubational Innovation is best described as ‘grass roots’, with innovation efforts unpredictable, uncontrolled and reactive, but your organization has an eagerness to be
more innovative
Departmental Innovation occurs on a ‘siloed’ basis, with little cross-pollination of intellectual
property and best practices
Buying vs.
Lack of internal resources or intellectual property requires that innovation bebuilding inbrought in via alliances or acquisitions
Not evident A conscious approach to innovation is not evident and innovation is not highon the leadership agenda
Strategic

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook25

Is the customer
always right?
“Being
customercentric means
spending moretime thinking
about whatcustomers want
and also about
what needs
they have,even if thoseneeds aren’t
immediately
apparent.”
Steven A. KandarianCEO, MetLife“Meeting client expectations used tomean doing exactly what the client
orders, with the highest quality,
rigorously meeting deadlines and in avery efficient way,” says Josu Calvo,
CEO of Gonvarri. But quality andtimeliness alone won’t do anymore.
Today, customers expect constantinnovation of products, multiple
shopping channels — and they often
want their input to be included in
product design.
Pietro Salini, CEO, Salini Impregilo,adds, “New trends in the infrastructure
sector, the focus on building megaprojects in mega-cities and thedemand for continual improvement inecologically sustainable processes, are
all factors that push us to adapt eachand every day to grasp new market
opportunities.““We are constantly exploring new
possibilities with key customers.
We offer them agility through coinnovation. Our customers know theirbusinesses and industries the best,
we know software the best. Together
we develop differentiating and agile
software solutions, fast. Pre-packaged
software doesn’t cut it anymore; itis too inflexible for the user,” says
Software AG’s Streibich.
CEOs recognize that meetingcustomers’ expectations is an

26

Now or never: 2016 Global CEO Outlook

ongoing effort. In fact, customer
loyalty is the top concern voiced byCEOs (88 percent), with concerns
about the relevance of their products
and services 3 years from now not
far behind (82 percent). Almost half
think they are not keeping pace withmeeting customer expectations or
not connecting with their customers
enough via digital means (45 percent
for both).
KPMG’s Goodburn dissuades CEOs
from “hiding behind the concept oferoding customer loyalty, because it
moves the blame onto the customer.”
In reality, lack of customer loyalty isoften more about companies being
too slow to understand the signalsthat customers are sending in dataand social media, as well as the paceof adoption of new technologies.
Most of the changes need to bemade at the company level, not thecustomer level, Goodburn says.
BNP Paribas Wealth Management
is keeping up by supplying its
private banking clients with newtechnologies. The company developed
apps such as Voice of Wealth, which
provides understanding about market
conditions, trends, reports and thebank’s offerings. It is also developinga next-generation application forthe younger generation of its most

important clients around the world.
This private app enables users to
expand their knowledge of financial
matters and to network with one
another.
Successfully meeting customers’
expectations depends on timing.
“The trick of it all is having technologies
ready when customers needthem, not before or after,” says
Software AG’s Streibich.
MetLife’s CEO, Steven A Kandarian,subscribes to the value-driven
approach. “Being customer-centricmeans spending more time thinking
about what customers want and also
about what needs they have, even
if those needs aren’t immediately
apparent,” he says.
Investing in digital solutions at MetLife
depends on customer preferences,which vary by region. In the US, people
are typically reluctant to purchasea complex annuity online. But in
Asia, many people who are just now
entering the middle class have nohistory of buying financial products
via more traditional channels. They areleapfrogging traditional distribution
channels and starting off digitally.
To this end, MetLife has placed its
innovation lab in Singapore.

For HESTA’s Blakey, digitization allowed
the fund to significantly increase thenumber of customer segments toinclude more targeted segments. The
fund’s ability to engage its 800,000
members via digital channels also
creates cost effectiveness.
Daniel Hunter is CEO of HealthShare
NSW in Australia, a state-wide
provider of shared services to supportdelivery of patient care. He believes
that in healthcare there is a need toeducate the customer about what
they need as opposed to what theywant. “We have a needs-based
customer service mentality. For
example, if you spend a lot of money
on hospital food, then there’s a lot
less money for clinical delivery,” hesays. The smart use of technology
allowed Hunter to improve ordertaking systems, keeping costs down
and cutting food order delivery timefrom 24 hours to 3 hours.
But he is discerning in his approachto new technology solutions.
“Technology was thought of as theultimate answer, but what was thequestion? Today the approach is:
what’s the question, and is technology
part of the answer?”Now or never: 2016 Global CEO Outlook

27

Cyber security forthe fourth industrial
revolution“When we went through the third
industrial revolution, we failed tosecure the internet effectively, buthave we learned our lessons?” asks
Malcolm Marshall, Global Head ofCyber Security, KPMG International.
The fourth industrial revolution, theage of the Internet of Things, machinelearning, cognitive computing and“When we went throughthe third industrial
revolution, we failed
to secure the internet
effectively, but have welearned our lessons?”
Malcolm Marshall
Global Head of Cyber Security
KPMG International28

Now or never: 2016 Global CEO Outlook

artificial intelligence, increases the
security risks exponentially.
Global CEOs are beginning to learn
the lessons from the third industrial
revolution and they recognize the risksof the new wave of technologies.
Cyber security is the top risk named by
global CEOs this year (30 percent), up
from the fifth highest ranked last year.

What risks are you most concerned about? (Top five)30%

Cyber security risk

28%

Regulatory risk
Emerging technology risk

26%

Strategic risk

25%

Geopolitical risk

24%

Source: 2016 Global CEO Outlook, KPMG International

But CEOs enter this new era with sometrepidation. For example, 85 percent areconcerned about having to consider the
integration of basic automated businessprocesses with artificial intelligence andcognitive processes.
Depending on the type of company,
says Marshall, cyber security does
not need to be the CEO’s direct
responsibility. But there needs to besomebody on the executive team
who has clear responsibility for cybersecurity. To be able to thrive in the
fourth industrial revolution, companies
need mainstream cyber capabilities:
people in all parts of the organization
who understand cyber issues. Eachmajor decision needs to be lookedat through the cyber security lens. A
business development executive should
consider the security implications ofan M&A deal before it gets done, tomake sure that it does not expose thecompany to liability for data breaches

or regulatory violations. Similarly,
marketing executives must be awareof privacy regulations and customer
preferences when using insights fromdata analytics for marketing campaigns.
Seventy-two percent of CEOs saythey are not fully prepared for a cyber
event, significantly higher than in 2015
(50 percent). In interviews, CEOs
frequently said: “We are as prepared
as we can be” or “You can never befully prepared.”

How prepared is your company for a cyber event?

25%

Fully prepared69%

Somewhat preparedNot where we need to be3%

Unsure2%

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

29

Marshall thinks this level ofapprehension shows understandingof the complexity and unpredictabilityof cyber security. “The majority ofthis generation of CEOs did not get to
the top of their corporations for theirtechnology prowess, let alone theircyber security capabilities. But the CEOs
we speak to increasingly understandthat while they might not personally be
the expert, they will be held accountable
if there is a major problem. They

recognize the need for senior people
they trust to equip their organization towithstand the cyber test.”
How to prepare? By practicing theability to respond to cyber events.
Companies need an ability to be agileand deal with the unexpected. Oftenorganizations that can deal with theunexpected in a business sense andhave more effective governance are
better prepared for cyber events. Beingagile enough to respond to a cyber
event often depends as much on anorganization’s governance as theirtechnology capability.
Cyber security is not just a cost,
it is also a revenue driver. The
survey reveals that cyber security iscorrelated with performance. MoreCEOs from top-performing companies
believe that they are fully prepared fora cyber event.

Fully prepared for a cyber event
High-growth companies(growth greater than 10 percent)

43%
21%

Rest of companies surveyed
Source: 2016 Global CEO Outlook, KPMG International

What is the correlation between
cyber security and growth? It starts
with confidence. “If you have close
to 100 percent confidence thatyour organization is able to build
new digitally enabled services

that have a very low risk of being
compromised, you are likely to bemuch more ambitious in what you do,”says Marshall. Different levels ofconfidence about cyber security arevery clear in digital banking, wheresome banks are taking advantage ofmobile banking while others are fallingbehind. The good news is that CEOs
recognize the importance of cybersecurity for innovation.

Security prompts innovation in products and services

88%

Agree
Disagree12%

Source: 2016 Global CEO Outlook, KPMG International

Customer privacy is also an issue.
Eighty-two percent of CEOs areconcerned that their customers may be
more worried about their privacy thantheir organization is. As the volumeof data grows exponentially, so do
the opportunities to use it. Typically,
when services are free, businesses
make money from the data, andthe consumer becomes, in effect, aproduct. Customers are beginning torecognize the value of data and see it
as part of a transaction. As customers
better understand the amount of datathat is collected on them, and how30

Now or never: 2016 Global CEO Outlook

companies are using it, there is adanger they will hit back. “With CEOs
recognizing the importance of privacy,
we are turning a corner towards amore open and transparent approach,”says Marshall.
The need for data privacy will affectbusiness models. Some insurancecompanies are already using different
data-driven pricing models. For example,
a driver who allows their insurer tomonitor data about their driving habits
can pay less for insurance than thedriver who does not. Some car makers

are now offering their own insurance
that uses the cars’ built-in technology toshare data for insurance.
Reassuringly, CEOs are open to sharing
their vulnerabilities for the purpose ofstrengthening defenses. A majority(82 percent) of CEOs say they are willingto share their experiences of a privacy
breach with peers.
“If they’re willing to share experiences
and learn collectively, the ability to
manage and respond is much greater,”says Marshall.

Confidence
and future
growthThere are signs that the European
economies are picking up slightly, but theeconomic environment remains fragile.
“CEOs need to take into consideration
the potential for continued volatility andthe uncertainties that come with it,” says
Yael Selfin, Head of Macroeconomics,
KPMG in the UK. So at first blush it may
come as a surprise that global CEOs are
optimistic in their outlook for the next
3 years for the global economy, theirnational economies and their companies.
This confidence is a testimony toCEOs’ resilience as leaders, andnot blind optimism or unrealistic
projections. “CEOs have to look ahead
with confidence, and see the future
and the growth of their companies,”says Dr. Ventzislav Kartchev, Chief
Economist, KPMG in Germany. Whilethe confidence is high, CEOs think thatthe levels of growth will be tempered.
The biggest group, 48 percent, expect
to grow annual revenues by between

Yael Selfin
Head of Macroeconomics
KPMG in the UK

2 and 5 percent over the next 3 years.
That is an overall growth roughly in linewith global GDP growth.
This optimism is somewhat moresubdued in the shorter term.
The balance between CEOs’ confidence
and realism is further confirmed by theimportance they attach to the global
economy, naming global economic
factors as having the biggest impact(16 percent) on the growth of theircompanies over the next 3 years.
Of course, CEOs’ prospects vary
globally, depending on the economies
and industries they operate in. BNPParibas Wealth Management’s Merlo,sees tailwinds ahead. The wealthpool of high net worth individuals
will be growing on average by a very
comfortable 6 percent, she says. On
the other hand, the private banking
sector in Europe will be tested
over the next 3 years by increased

Dr. Ventzislav Kartchev
Chief Economist
KPMG in Germany

Prospects for growthOver the next 3 years

Over the next 12 months

Prospects for growthfor your company

89%

Confidence in yourcountry’s growth

86%

73%

Confidence about
growth for your industry

85%

79%

Confidence in the growthof the global economy

80%

Source: 2016 Global CEO Outlook, KPMG International

84%

70%

Julio Hernandez
Global Head of Customer
Advisory Practice
KPMG International
Now or never: 2016 Global CEO Outlook

31

financial regulations, changing banking
economics due to lower interest rates
and the speed of change.
Some industries are expecting
significant growth. Digitization, driven
by the Internet of Things and theindustrial internet, will accelerate
growth in the medium to long term.
Software AG is forecasting double-digit
license growth for its Digital Business
Platform segment this year. Biocon’s
Mazumdar-Shaw expects high doubledigit revenue growth over the next 5
years through the company’s maturing
pipeline of Biosimilar drugs. The biotech
industry in India is at an inflection point
and will attain critical mass in the next 3
years, she says.
Similarly, Salini Impregilo’s CEO sees
growth in the future, coming froma link between economic outlook
and investment in his sector. “Theinfrastructure sector is strongly linked
to a country’s economic development,
and the forecasts for certain
geographic areas and for the sector
are encouraging. New infrastructure
investment worldwide is seen at
8 trillion euro from now until 2020.”
On the other hand, MetLife, which
is being highly affected by economic
growth rates, interest rates and theregulatory environment, delivers
shareholder value by controlling costs or
exiting less profitable businesses.
No matter the shape of the industry
or economy, the disruptive forces
will not subside. So CEOs need toProspects for annual top-line growth over the next 3 years

32

Now or never: 2016 Global CEO Outlook

48%

2% to 4.99%

30%

Under 2%
No growth/negative
growth2%

Source: 2016 Global CEO Outlook, KPMG International

contend with the need for action
in a slow-growth economy. “Riskaverse cultures can be an issue ina world facing uncertainties,” says
KPMG’s Kartchev. “Companies needto embrace a startup culture, where
failure is accepted as part of finding theright solution.”
It bodes well for the future that CEOs
today are not waiting out tough times.
Says KPMG’s Goodburn: “Whether thetide rises or falls with the economy,
CEOs understand very well that they
are at the helm and ultimately candetermine their company’s outcome.”
According to KPMG’s Scott: “CEOsof European companies are awarethat the upcoming 12 months will seesome relevant events taking place,which could have an impact on theirbusiness plans. Moreover, concerns
exist around the economic slowdown
in emerging economies, the monetary
policy divergence and the weakeconomic recovery in Europe.”“Whether the tide rises orfalls with the economy,
CEOs understand very
well that they are at
the helm and ultimately
can determine theircompany’s outcome.”
Mark A. Goodburn
Global Head of Advisory
KPMG International

21%

5% or more

All told, 96 percent of CEOs expect toincrease their headcount over the next
3 years, up from 78 percent last year,
and 10 percent of CEOs expecting
high growth say they will increaseheadcount by more than 25 percent
over the next 3 years.
Interestingly, CEOs highlighted primarysources of future growth as coming
from: new products (28 percent),
new customers (26 percent), newmarkets (25 percent) and new channels(22 percent).
New products are the most importantfactor for high-growth CEOs fordelivering growth: 34 percent rank thisas the most important factor versus
26 percent of CEOs from companies
expecting growth of less than
10 percent.
Julio Hernandez, KPMG’s Global
Customer Advisory Leader, thinks to
win the battle for growth and the race
for the customer, businesses need tounderstand what customers want, need“CEOs must now lookto attract and retain
an entirely new
breed of worker.”
Nhlamu Dlomu
Partner, People and Change
KPMG in South Africa

Prospects for headcount growth over the next 3 years
Increase of morethan 25%

2%
23%

Increase of 11% to 25%

48%

Increase of 6% to 10%

23%

Increase less than 5%
Stay the same/decrease2%

Source: 2016 Global CEO Outlook, KPMG Internationaland value, as well as appreciate the value
these customers generate. “Deliveringwell-executed and differentiatedexperiences requires businesses to beintentional in the experiences they designand deliver, with everyone from the front,
middle and back office understanding
their role in doing so,” he says.

Developing talent
Faced with significant transformationplans and ever advancing technology,

99 percent of CEOs report taking action
to develop existing or future talent. Inline with these findings, most CEOs
report some level of skills gap emerging.
Over 50 percent report skills gaps in key
business functions.
“CEOs must now look to attract andretain an entirely new breed of worker,”says Nhlamu Dlomu, Partner, People &Change, KPMG in South Africa. “One
who is accustomed to change andcomfortable taking the helm on mission-

critical issues that CEOs themselves
may not have the time or experience topersonally own.”
Giving employees the chance toinnovate and work in an entrepreneurial
or collaborative environment is seen as
the most effective way to attract new
employees (37 percent said this). Nonfinancial incentives are seen as the best
way to retain employees (39 percent
said this).

Top five ways in which CEOs intend to manage their skills gaps
Organize internal training

25%

Focus on automation

25%

Focus on engaging or
retaining mature workers

21%

Increasing focus on agility andproblem solving versus provencompetencies

21%

Strategic acquisitions in key areas

20%

Source: 2016 Global CEO Outlook, KPMG International
Now or never: 2016 Global CEO Outlook

33

Top growth geographies
CEOs’ views of geographic growthpotential have shifted since 2015. India,
China and the US are seen as the most
attractive foreign markets. India has taken
the top spot, moving up from number

five in 2015. While still among the leading
markets, the US and China decreased
since last year. Western Europe has
also seen a significant decline in its
attractiveness as a foreign market.

In which regions do you see the greatest potential for newmarket growth over the next 3 years? (Top five)

38%

India

34%

China

33%

United States
Australia

25%

Western Europe

25%

Source: 2016 Global CEO Outlook, KPMG International

As highlighted below, the regions
showing the largest decrease in interest
will be from the oil economies of the
Middle East (21 percent) and Russia(21 percent) this year. Geopolitical risks in

the Middle East region further add to theconcerns. Japan — for which the next 3
years will be a test of whether Abenomics
can put the country on a growth path — isalso seeing some decrease in interest.

In which regions do you see the potential for decreasing yourfocus over the next 3 years? (Top five)
Russia21%

Middle East

21%

Japan

20%

North Africa

20%

Sub-Saharan Africa
Source: 2016 Global CEO Outlook, KPMG International34

Now or never: 2016 Global CEO Outlook

19%

“Those who navigate
through the hurdles benefit
tremendously given thesize of the market in India.”
Richard Rekhy
Chairman
KPMG in India

India
This year, India tops the ranking ofgrowth geographies according to thesurvey, followed by China and the US.
India is said to have received the
maximum foreign direct investment in2015, ahead of China. The country is on
its second major round of economic
reforms post-1991, when India in effectopened up for foreign investment, says
Richard Rekhy, Chairman, KPMG in
India. The country has the demographic
dividend of a young population, and is
the fastest-growing large economy in
GDP percentage. Given this scenario,

Indian CEOs are projecting higher
revenue growth over the next 3 years
than their global counterparts. Thisfurther substantiates the optimistic
growth outlook for the economy.
India’s digital infrastructure is emerging
very significantly. With more than
1 billion biometric signatures, thecountry boasts the world’s biggest
biometric database. “The spread oftechnology is palpable; Indian Railways
sells about 70 percent of its tickets
online, making it one of the world’s
largest e-commerce websites.”

Challenges do exist for the Indian
economy. Low crude prices, while
beneficial to the economy, might betemporary. Geopolitical tensions in
the Middle East would in turn affectthe inflow of remittances to India.
An enabling business environment isneeded to sustain India’s economic
recovery. While steps to improve easeof doing business have been initiated, asignificant improvement is vital. “Those
who navigated through the hurdles
benefitted tremendously given the sizeof the market in India,” says Rekhy.

China
Global and domestic economic
uncertainty, rising costs, increasing
competition and technological factors
are creating a challenging environment
for CEOs in China. Companies in China
are fast adapting to the new landscapeby driving new products, incentivizing
and upskilling their workers, fostering
innovation, and using new disruptive
technologies to improve productivity
and efficiency, and achieve strongorganic growth.
This optimism over the future of
China’s economic growth is reflectedin the survey results. The findings
show that CEOs in China possess
greater confidence than their global
peers in the growth prospects for theirhome country, company, industry
and the global economy over the next
12 months.
Furthermore, two-thirds of respondents
in China view the country as having
the highest growth potential over the
next 3 years. Other regions of focus for
China’s CEOs are the US and ASEAN.
Importantly, global respondents view
China and India as the two regionswith the greatest growth potential —a positive sign that appetite for foreign
investment into China remains strong.
China’s CEOs are justified in theiroptimism over their companies’
growth prospects, especially as
China transitions from an investmentintensive, export-led model of growth,
to one driven by consumption, andmore importantly, innovation. The
central government recognizes theimportance of innovation in transitioning
into a high value-added economy,
and has placed it at the very top of its

Now or never: 2016 Global CEO Outlook

35

“five tenets of development” forthe 13th Five-Year Plan 2016–2020,
whereby the government outlines its
strategy for economic development,
sets growth targets and launches
reforms.
This policy is enabling China to emerge
as a leader in innovation. Fostering
innovation is the top strategic priority
for China’s CEOs, with almost all of the
respondents agreeing that including
innovation in business strategy,
with clear targets and objectives,is important to drive successful
innovation. Furthermore, CEOs in China
have a clearer focus on innovation thantheir international counterparts, withnearly half of them placing innovationon the top of their personal agenda,
compared to only 23 percent globally.
At the same time, Beijing has launchedseveral initiatives to increase theproductivity of China’s traditional
industries by leveraging the latest
advances in IT, advanced manufacturing
and automation technologies. Data
management technologies such as
cloud computing and big data analytics,
as well as the Internet of Things, will
enable Chinese companies to reduce
operating costs, increase efficiency andbetter address consumers’ demands.
It is therefore unsurprising that survey
respondents in China chose increasingdata analysis capabilities and Internetof Things as top focus areas for further
investment. “Several businesses
in China’s traditional manufacturingsector are recognizing that they could
achieve greater growth by using more
technology and data and analytics. Thisis something you definitely wouldn’t
have seen 5 years ago,” says Honson To,
Co-Chairman of KPMG China.
A number of companies are exploringnew business models in China. The
business models of companies likeAmazon, Alibaba, Uber or its Chinesecompetitor Didi Kuaidi, are basedon proprietary platforms, whichconnect customers with products
or services. They can scale up fast,
which is advantageous as the size of
the Chinese middle class has recently
overtaken that of the US, and continues
to grow at a rapid rate. Furthermore,
rapidly improving logistics infrastructure
and the advancement of mobile
technology in China — which is making
goods and services more accessible
than ever before — are creating ahuge rural customer base for Chinese
manufacturers and service providers.

“It is likely that businesses
can do very well in China
if they have the rightbusiness model, and areinnovative, disruptive and‘cool’ enough to go to
the consumer.”
Honson To
Co-Chairman
KPMG China

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Now or never: 2016 Global CEO Outlook

And while China is transitioning to
new business models, its traditional
manufacturing base continues to be
attractive to global CEOs. Expanding in
China is one of the top paths to growthfor Gonvarri Steel Services that willbuild four new factories in China by
July 2017 in an alliance with a Chinesecompany.
China remains a highly attractive
destination for multinational companies,
based on the sheer size and purchasing
power of its middle class, its physicaland technological infrastructure, and its
policies to support high quality growthand innovation. However, it is not easy
to satisfy Chinese consumers, whose
tastes are constantly changing, and
who are becoming more exposed to
new products and services.
As a result, many CEOs are altering
their growth strategies to focus ondeveloping new products, fostering
innovation, and enhancing data
analytics and disruptive technology
capabilities. “It is likely that businesses
can do very well in China if they havethe right business model, and areinnovative, disruptive and ‘cool’ enoughto go to the consumer,” says To.

“Compared to its OECDneighbors, the US is thenicest house in a badneighborhood.”
Constance Hunter
Chief Economist
KPMG in the US

USThe United States is third to India andChina as the region with the greatest
potential for new growth. When
comparing the US to other developing
economies, KPMG in the US’s Chief
Economist, Constance Hunter, refers
to the country as “the nicest housein a bad neighborhood, compared to
its OECD neighbors.” This stronger
growth is illustrated by a greater rate of
consumption and higher interest rates
than other developed, and even someemerging, markets.
Part of the source for US growthis what economists call ‘businessdynamism’. Or, to use Silicon Valley
parlance, failing fast. It is no surprisethen that 76 percent of US CEOs
(compared with 65 percent of non-US
CEOs) are concerned that new entrants
and competition are disrupting theirbusiness models. The US has among
the highest penetration of smartphones
and social media in the world and thismeans informed and often demanding
customers armed with the megaphoneof social media. US CEOs are rightfully
concerned about customer satisfaction

with 54 percent reporting concernthat their companies are not keeping
pace with their customers’ needs
and expectations. All this competitionand customer focus makes US firms
sharper and in many cases more nimble
than their global counterparts.
“US CEO forecasts for headcount are
in line with what our economic models
are predicting,” says Hunter. Global
conditions are now influencing USinterest rates, she says. As the rest of
the developed world follows a negativeinterest rate policy, this will keep longerterm US rates from rising very much,even as the Fed continues graduallyraising short-term rates. The stimulative
effect of low rates will continue to boost
growth and hiring especially over the
medium term. According to the survey,
49 percent of US CEOs are planning
to increase headcount by as much as
5 percent in the next 12 months alone,and 54 percent expect an increase of
employment of 6–10 percent in the next
3 years.
Compared with last year, “the Federal
Reserve has begun to gradually raiseinterest rates, and the uncertainties
associated with the elections havecome into focus,” says Hunter. But shesays there are still many advantages
to investing in the US, including themost competitive workforce in theworld, deep capital markets, and laws
and regulations that, on balance, arebusiness-friendly, including NAFTA andother trade agreements.
Gonvarri Steel Services will strengthen
its presence in NAFTA countries,
including both the US and Mexico.
“It may soon be a good time to makeacquisitions in Latin America, where
valuations have been coming down
and economic recovery may be closer,”says Calvo.
The US is also recognized as themost advanced market in terms oftechnology. “The US is, and will remain,
our biggest market,” says Software
AG’s Streibich. “The willingness ofenterprises and federal and state
governments in the US to invest in new
software technologies is higher thananywhere else on the globe.”

Now or never: 2016 Global CEO Outlook

37

Conclusions
The pace of change continues to accelerate as the fourth industrial revolution
ushers in the era of machine learning, cognitive computing and artificial
intelligence. The next 3 years will be critically transformative. This speed ofchange means that CEOs need to act now. They must also act knowingly, taking
into consideration the following ideas:
Vulnerability

Agility

You are not alone. CEOs in
the survey are revealing theirconcerns about meeting thedemands of the future, facing
all angles of disruption comingat their companies and finding
ways to pre-empt them. It is in
our nature to be fearful of what
has never happened before.
And much of what we areliving through today is on thescale of an industrial revolution.
Knowing what you don’t know
and admitting it shows openness
and maturity.

The speed of change is limiting
visibility into the future, making
short- or medium-term strategies
risky. The solution is to strategize
and execute change in an agile
manner, to account for the
unknown and unknowable.
The time of once-and-donetransformations is over. Today’stransformation is a continuous
flow of incremental steps, whichallows for quick adjustments andcorrections, speed to market
and measurement.

Ecosystems
Traditional boundaries androles no longer apply. The lines
separating industries, companies,
technologies and customers are
disappearing. Due to the needfor speed, CEOs are realizing that
renting or collaborating is a viable
and often preferable alternative
to building or buying. As aresult of these collaborations,competitors may be suppliers aswell as customers. This results
in a redefinition of power andresponsibilities and the need for adifferent type of leadership. CEOs
need to become comfortable with
ambiguity and undefined spaces.

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Now or never: 2016 Global CEO Outlook

Customer-centricity
With the ability to communicate
with the customer via digitalchannels, it is crucial to listen
to customers and meet their
expectations. But it is equallyimportant to discern whatcustomers truly want. This needhas to be balanced with the value
these customers generate.

Trust
Trust takes on additional
importance in the age of data.
With so many strategic decisions
now riding on the output of D&A
or algorithms, there must bea heightened focus on theaccuracy of data. At the sametime, data needs to be utilized
without violating privacy. This trustneeds to be upheld throughout
the whole ecosystem, including
the supply chain, partners andcustomers.

Risk
The fourth industrial revolution,
the age of the Internet ofThings, machine learning,
cognitive computing and artificial
intelligence, increases security
risks exponentially. Companies
need mainstream cybercapabilities: people in all parts of
the organization who understandcyber issues. Each major decisionneeds to be looked at through thecyber security lens.

While a majority of CEOs
foresee the next few years to
be challenging, with expectedmoderate economic growth, they
are optimistic they can successfully
manage through this environment.
It’s now or never.

Methodology andacknowledgements
The survey data published in thisreport is based on a survey of 1,268
chief executives from Australia,
China, France, Germany, India, Italy,
Japan, Spain, the UK and the US.
The findings from CEOs in an 18
additional regions and countries canbe found in the Appendix section ofthis report. Eleven key industries are
represented, including automotive,banking, infrastructure, insurance,
investment management, life
sciences, manufacturing, retail/consumer markets, technology,
and energy/utilities and telecom.
Two hundred and seventy-five CEOscame from companies with revenues
between US$500 million and
US$999 million, 595 from companies
with revenues from US$1 billion to
US$9.9 billion, and 398 from companies
with revenues of US$10 billion or more.
Eight hundred and ninety-three CEOscame from public companies and 375

from private companies. The survey
was conducted during 15 March and
29 April of 2016.
Figures may not add up to 100 percent
due to rounding.
KPMG and Forbes Insights would liketo thank the following for their timeand expertise:— Debby Blakey, CEO, Health
Employees Superannuation Trust,Australia— Gary Burnison, CEO, Korn Ferry,US— Josu Calvo, CEO, Gonvarri Steel
Services, Spain— Steven A. Kandarian, CEO,
MetLife, US— Kiran Mazumdar-Shaw, Chairman,
Biocon Limited, India— Sofia Merlo, Co-CEO, BNP Paribas
Wealth Management, France— Paul Polman, CEO, Unilever, UK— Pietro Salini, CEO, Salini Impregilo,
Italy— Karl-Heinz Streibich, CEO,
Software AG, Germany— Emma Walmsley, CEO, Consumer
Healthcare, GSK, UK— Chunhua Chen, former CEO, New
Hope Liuhe, China— Vittorio Colao, CEO, Vodafone, UK— Daniel Hunter, CEO, HealthShare
NSW, Australia

Now or never: 2016 Global CEO Outlook

39

Appendix
A view from selected regions and countries
In addition to the countries analyzed
in the main report, CEOs in otherregions and countries around theworld were also surveyed.1 Following
are the highlights of how thesecountries and regions affect how
these CEOs approach the future of
their organization in terms of strategic
priorities, growth, investments andrisks ahead of them over the next
3 years.2

Critical change
Around the world, the view of thecritical importance about the next
3 years varies. It is seen as the mostcritical by CEOs from Switzerland
and Taiwan (92 percent for both) and
ASEAN (83 percent). The lowest
number of CEOs from East Africa(50 percent) see the next 3 years as
more critical for their industry thanthe last 50 years. The appetite forsignificant transformation of theircompany also varies by country,with Mexican CEOs being highly
transformative, and Taiwanese CEOsless transformative.

CEOs who say the next 3 years will be more critical for theirindustry than the previous 50 years

83%

ASEAN

56%

Brazil75%

Canada50%

East Africa

65%

Ireland52%

Mexico56%

South Africa
Switzerland

92%

Taiwan92%

Source: 2016 Global CEO Outlook, KPMG International

Strategic and top investment priorities
The top three priorities for the core
10 countries’ CEOs address the threemain forces driving growth: innovation,technology and client focus. While thesepriorities are true around the world,
CEOs in other regions and countries

often need to pay attention to their own
specific business environments whenstrategizing for the future. In Canada,
for example, the top priority centerson ensuring effective measurement.
Taiwanese CEOs, on the other hand,seem to be recognizing the importanceof the business ecosystems, which
are created by collaboration between
different companies or researchorganizations.

ASEAN region comprises Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam; East Africa comprises Kenya,
Uganda, Tanzania, Rwanda and Ethiopia.

1

2

All data in this Appendix refers to expectations over the next 3 years.

40

Now or never: 2016 Global CEO Outlook

CEOs from the core 10 countries are most likely to prioritize increasing data analysis (25 percent), new product development (24percent) and cyber security (22 percent).

Top strategic priority for the next 3 years by region/country
ASEAN— Stronger client focus

Brazil— Implementing disruptive technology

Canada— Ensuring key performance Indicators are fit for purpose

and accurately measured

East Africa— Cyber security

Ireland— Becoming more data-driven

Mexico— Responding to short-termism/activist shareholders

South Africa — Responding effectively to regulatory change
Switzerland — Greater speed-to-market
Taiwan— Managing our ecosystem of partners/alliances

28%
24%
28%
26%
35%
26%
24%
22%
26%

Source: 2016 Global CEO Outlook, KPMG International

Once again, CEOs from around the world focus on investments that will ensure their growth in their particular countries orindustries. CEOs from Brazil and Canada expect to grow by acquiring a business, capabilities or assets. CEOs from Switzerland andTaiwan, in recognition of the importance of being customer-centric, will steer their biggest investments towards measurement andanalysis of customer experience and needs.

Top area of significant investment over the next 3 years by region/country
ASEAN— New product development

Brazil— Acquisition of a business, capabilities or assets— New product development

Canada— Acquisition of a business, capabilities or assets— Cyber security solutions

East Africa— Measurement and analysis of customer experience/needs

Ireland— Business model transformation

Mexico— Geographic expansion within home country

South Africa— Geographic expansion within home country— Measurement and analysis of customer experience/needs

Switzerland — Measurement/analysis of customer experience/needs
Taiwan— Measurement/analysis of customer experience/needs

43%
34%
30%
34%
32%
36%
32%
34%
28%

Source: 2016 Global CEO Outlook, KPMG International
Now or never: 2016 Global CEO Outlook

41

Top CEO concerns
CEOs from the core 10 countries aremost likely to be concerned about
customer loyalty and the impact of global
forces (both 88 percent). The concernsof the CEOs from around the world
are dependent on the maturity of theireconomies and businesses.

One of the measures of maturity is thequality of data, of utmost importancein a world moving towards data-based
decisions. The quality of data is a top
concern for CEOs from the East Africancountries and Mexico.

Not surprisingly, a substantial group ofCEOs is concerned about keeping up
with technologies and what’s new interms of products and services.

Top concerns of CEOs by region/country
ASEAN— The quality of the data I’m basing my decisions on— Whether our organization is staying on top of what’s next in services/products— Regulations will inhibit our growth

Brazil— The impact of global economic forces on our business— The amount of time I have to think strategically about the forces of disruption— Whether our organization is staying on top of what’s next in services/products

Canada— How Millennials and their differing wants/needs will change our business— The loyalty of our customers— The quality of the data I’m basing my decisions on

East Africa— The impact of global economic forces on our business— Regulations will inhibit our growth— Having to consider the integration of artificial intelligence and cognitive processes

Ireland— The quality of the data I’m basing my decisions on— The amount of time I have to think strategically about the forces of disruption— The quality of the data I’m basing my decisions on

Mexico— The impact of global economic forces on our business— The relevance of our products/services 3 years from now

South Africa— Whether our organization is staying on top of what’s next in services/products— The loyalty of our customers— The impact of global economic forces on our business

Switzerland— Regulations will inhibit our growth— The relevance of our products/services 3 years from now

Taiwan42— Regulations will inhibit our growth— The impact of global economic forces on our business

Now or never: 2016 Global CEO Outlook

Cyber security and risks
For CEOs from the core 10 countries,
cyber risk has moved up to the top of
the list of risks they are most concerned
about. Across the world, CEOs also see
operational risk and regulatory risk as of
top significance. Cyber risk, however,has emerged as a top risk in Brazil, East
Africa, Mexico and South Africa.

At the same time, CEOs are well awarethat they have a lot of ground to makeup in preparedness for cyber risk.

Top risk by region/country
ASEAN: Operational risk

Not fully prepared for a cyber event

34%
40%

Brazil: Cyber security risk
Canada: Environmental risk

32%

East Africa:
Cyber security risk
Ireland: Regulatory risk

ASEAN

35%
38%

87%
98%

East Africa

84%

Ireland
Mexico88%90%South Africa: Regulatory
risk and cyber security risk

32%

South Africa

Switzerland: Emerging
technology risk

32%

Switzerland

Taiwan: Operational risk

34%

TaiwanSource: 2016 Global CEO Outlook, KPMG International

76%

BrazilCanada50%

Mexico: Environmental andcyber security risk

58%

50%
92%

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

43

Top growth geographies
These are also top growth destinations
for the CEOs from the 10 core countries.

While the view of growth geographies
varies by location, there are several
countries and regions that are viewed
as growth areas by a majority of CEOs.
They are India, China and the US.

Regions/countries with the greatest potential for new market growth
ASEAN

34%

China

30%

India
Brazil

38%

India

28%

US
Canada
India

51%
40%

US
East Africa

58%

India

52%

BrazilIreland32%

Western Europe

29%South America
Mexico36%Australia

32%

India
South Africa

42%

Brazil38%

India
Switzerland

28%

India
China

26%

Taiwan

48%

US
China
44

Now or never: 2016 Global CEO Outlook

44%

Source: 2016 Global CEO Outlook, KPMG International

Confidence
The overall high levels of confidence
about the growth of the global anddomestic economies, as well as theircompany, of CEOs from the 10 core
countries carry over across the world.
Taiwan ranks as a top three region interms of confidence about each of
the categories.

Across the world, a vast majority ofCEOs expect their headcounts to riseby more than 5 percent over the next
3 years, led by Canada (96 percent),
Ireland (91 percent) and Switzerland (90percent).

The biggest group of CEOs anticipating
revenues to increase by more than
5 percent over the next 3 years arefrom Switzerland (32 percent), ASEAN
countries (21 percent) and Canada(19 percent).

CEOs most confident about their country’s growth bycountry/region
Taiwan92%

South Africa

90%

East Africa

86%

Source: 2016 Global CEO Outlook, KPMG International

CEOs most confident about the global economy bycountry/region

96%

TaiwanSwitzerland
Canada84%
81%

Source: 2016 Global CEO Outlook, KPMG International

CEOs most confident about their company’s growthby country/region
East Africa

100%

Canada96%

Taiwan94%

Source: 2016 Global CEO Outlook, KPMG International

Now or never: 2016 Global CEO Outlook

45

For further information about this report, and how KPMG can help
your business, please contact me:
John Veihmeyer
Chairman, KPMG International
Phone: 212-909-5040
john-veihmeyer@kpmg.com

kpmg.comkpmg.com/app

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Publication name: Now or never: 2016 Global CEO Outlook
Publication number: 133563-G
Publication date: June 2016