Digital transformation top CEO concern for 2020

| January 29, 2020

Digital transformation remains the very top concern of Australia’s business leaders as they look ahead to 2020, a survey of nearly 200 C-suite executives by KPMG Australia finds. The new entrants to the top 10 list this year are global political and economic environment; sustainability & climate change; leadership capability; and workforce upskilling.

The third annual edition of Keeping Us Up At Night: The big issues facing business leaders finds that an uncertain global political and economic environment (second place), climate change (equal fifth), leadership capability, accountability and stability (equal fifth) and workforce upskilling (tenth) have all risen noticeably on previous years and are now in the top 10 list of CEOs’ concerns.

Rounding out the top 10 places are: regulation (third place, as in 2019); innovation and disruption (fourth, down from second in 2019); public trust (equal fifth); customer-centricity (eighth) and domestic political paralysis (ninth) in the survey of leaders across business, industry and the public sector, carried out by KPMG Acuity, the firm’s research and insights business.

Gary Wingrove, CEO of KPMG Australia, said itt is not surprising that digital transformation remains the top issue, and in many ways pervades the survey, given its close linkage to fourth-placed innovation and disruption.

“This indicates Australian CEOs are acutely aware of the need to reimagine their organisation for the digital era, while harnessing new technologies such as blockchain and artificial intelligence.”

“C-level executives in business and government are also concerned about the effective delivery of large transformation projects. They may run large legacy organisations, with hundreds of products or services and find that untangling established processes, systems and mindsets, while profoundly necessary, can be extremely challenging.”

The regulatory environment remains a top three concern, with many respondents believing over-regulation is inhibiting innovation and greater weight should be given to the longer term in determining the right balance. Respondents also noted a growing tendency for regulations to be introduced quickly and with more limited consultation with business. The post-Hayne era of more stringent regulation is believed to be the new era for the 2020s.

New entrants

Grant Wardell-Johnson, Partner, KPMG Economics & Tax Centre, commented: “Concern for the geo-political and economic environment has risen significantly over the past 12 months. Partly it is short-term worries over the flow-on effects of escalating tariffs. Most business models rely on stability and predictability in the political environment. Some respondents indicated that uncertainty arising from greater volatility can act as an impediment to expansionary investment decisions.”

“But the survey also revealed concerns about deep structural issues and the rebalancing of power for the major economies. For example there is a fear that the world will experience a schism on technology such that one is forced to align with one or other of the major superpowers. Some Australian businesses and universities now fear it may be difficult collaborating with both the United States and China. A few years ago there was focus on the cross-pollination of ideas in technology but this may now be curtailed.

“Most fundamentally, there is concern about a decline of economic logic and its replacement by political logic. The rise in populism and decline in authority of organisations like the WTO are a worry. There is a perceived lack of global leadership and a fall in multilateralism,” he added.

On climate change – which was ranked 14th in the survey a year ago – many respondents regard this as a victim of political paralysis and are keen to see clearer direction, both from government and business.

Gary Wingrove commented: “We expect to see climate change continue its upwards momentum on the agendas of boards and CEOs. There is a clear obligation on businesses to acknowledge, understand and plan to mitigate the risks associated with climate change as a practical problem. These are now deemed foreseeable and material. Those in sectors not used to thinking about the natural environment as a critical factor need to change their mindset.”

Leadership capability is also new in the top 10, at seventh place, with respondents grappling with the challenges of leading in a complex environment. The report comments that organisations need to be increasingly conscious of reflecting diversity in order to derive the best ideas, and optimal culture.

“The key to unlocking the value in diversity is leadership. The benefit of different backgrounds, perspectives and experiences cannot be effectively leveraged unless an organisation has leaders capable of harnessing it – that means a commitment to inclusive leadership. Those leaders who are able to learn about the differences that make the members of their team tick, listen with humility and be vigilant about personal bias will be the ones to leverage the benefits of diversity in the 2020s and beyond,” concluded Gary Wingrove.

Workforce up-skilling moved into the top 10 from 15th last year. The KPMG report argues that true transformation will rely on staff skills and training and that Australian business will need to fundamentally rethink traditional attitudes and practices to ensure the right skills mix for the 2020s.

The top 10 big issues facing business leaders in 2020

1. Digital transformation
2. Global political and economic environment
3. Regulation and regulatory environment
4. Innovation and disruption
5. Sustainability and climate change
6. Public trust
7. Leadership capability, accountability, stability
8. Customer and citizen centricity
9. Political paralysis and effective government planning and response
10. Workforce upskilling and transformation.