The IBM Business Consulting Services report shows that many CEOs feel that the cost containment measures they have put in place over the last two years are now sufficient and given a more positive view of economic trends, they're focusing more aggressively on growth and investment opportunities.

This new growth view was reflected by CEOs across all industries and around the world. Two-thirds of the CEOs expect growth to come from new products they'll develop over the next five years, with more than half expecting to enter new markets in search of growth opportunities. Asia and China in particular were cited as key new markets for revenue growth.

In order to achieve their new growth objectives, 90% of CEOs expect to transform their enterprise to become more responsive, particularly to customer demand, within the next five years. More than half expect to be engaged in significant company-wide transformation initiatives within two years.

"Costs are totally controlled, and now we are focused on revenue growth," said the CEO of a bank in Spain.

"We are over the crisis and now we're in a new cycle of growing the business," said a media company CEO in the UK.

"Our company, like most in our industry, is over the cost-cutting stage. Now it is about growing the top-line," added the CEO of one of the world's largest telcos. "We are in attack mode, going into as many markets as we can."

Barriers to growth - significant skills deficiencies
As they reach for growth, however, CEOs highlighted several potential roadblocks. Most believe, for example, that their companies are not agile enough to identify and chase new market opportunities.

80% cited the ability to respond rapidly to changing market forces as a high priority in the next few years. Only 13% of CEOs rated their organisations as "very responsive" to changing business conditions, with less than 10% feeling that their companies are responsive to their top three threats.

In terms of becoming more responsive, the target most often cited by CEOs was the customer. More than 60% feel they need to do a better job capturing and understanding customer information rapidly in order to make swift business decisions. Almost 60% pointed to the ability to respond to customer dynamics in real-time.

More than 50% predict greater customisation of products by specific customer segments, with most CEOs focusing on significantly increasing customer input on the development of new and better products.

"We try pretty hard to identify external forces, and we do a pretty good job there," said the CEO of a top manufacturing company in Asia. "But then we are fairly slow in coming to decisions about what to do."

The CEO of a leading chemical company was even more pointed. "We have a history of not being flexible. We have 4,000 employees worldwide and we need to be reorganised to be more responsive."

As companies reorient themselves toward new growth objectives in new markets and overall responsiveness, approximately 60% of CEOs feel the major barrier to change is limited internal skills, capabilities and leadership to manage the necessary transition.

Just as CEOs recognise the need to change, they feel ill-prepared to do so. To date, less than 10% of CEOs rate their company's record of change management as having been very successful.

More than half believe that they do not have the requisite skills to move into new markets and capture emerging growth opportunities. As a result, 75% of CEOs believe that employee education will become a critical success factor.

People skills are now considered more important than such perennial factors as technology, globalisation and regulatory concerns. All these issues ranked higher on the CEO agenda than environmental, socio-economic or geo-political issues.

A bank CEO in Europe noted that his company "cannot find candidates with the specific skills required to run our business - hence we must train all new recruits."

Many CEOs cited the need to develop multifaceted professionals: "We have strong researchers who are not strong business people," said the CEO of a top technology company. "They need to do more listening to the customers."

"Clearly, CEOs are keen to transform their enterprise, to improve responsiveness, in order to go after growth objectives and new market opportunities, but they feel that they are at a crossroads - where there is strong desire but limited capability," said Ginni Rometty, Managing Partner, IBM Business Consulting Services. "Most CEOs feel that significant deficiencies in skills and capabilities, both inside and outside their organisation, may threaten the growth agenda."

The Global CEO Study 2004, the largest survey ever undertaken based on in-person CEO interviews, polled 456 top CEOs worldwide. The CEOs interviewed represent all major countries and industries. The survey is intended to provide a comprehensive view of the CEO planning agenda for the next two to three years.

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August 2004