CEOs Need to Focus on Diversification, Executive Education to Deepen Growth in 2019

CEOs mentioning “digital” within their top five strategic business priorities rose to include 20% of all surveyed.

By Mark Raskino

In late 2018, a CEO called together her leadership team to discuss strategies and focuses for the upcoming year. Although she had been focusing on opportunities for deeper, more structural growth, her strategy now is diversifying the organization and getting everyone on board with a digital business model. And she’s counting on the CIO to help.

The Gartner 2019 CEO Survey looked at responses from 473 business leaders from 32 countries. The leaders ranked simple growth, IT-related items, corporate (structural development), financial, workforce and customer as top strategic business priorities for 2019 and 2020. The findings reassure how CIOs must apply technology to help CEOs diversify revenue streams, sustain profitability and support key geographic moves in a waning global economic cycle.

Mentions of simple growth (grow revenue, increase sales, expand market share) increased, while mentions of structural development (change strategy, mergers and acquisitions, and company reorganizations) fell, reversing the trend from 2018. Additionally, CEOs mentioning “digital” within their top five strategic business priorities rose to include 20% of all surveyed.

Focus on diversification to increase growth
With weakening profit margins and softening growth prospects, CEOs are looking for new areas of revenue. Mentions of diversification were five times higher than in last year’s survey. The most effective options for diversification will depend on the industry and organization. For a retail company, the focus could be adding a few more products. For some organizations, purchasing a company in an adjacent industry will offer the best value. CIOs should consider how upselling or cross-selling might add additional revenue-producing channels to the mix. Some CIOs should help to create new digital products and services.

Leverage geographic changes
When asked where CEOs will look for opportunities in the face of slow growth, the most popular solution was to literally look elsewhere. Mentions of other states, cities, countries and regions — as well as “new markets” — highlight a focus on location hunting for growth when traditional or home markets lack opportunity. This is a chance for CIOs to integrate digital initiatives and blend them into the new facilities, locations, suppliers and markets. New geographic locations can also offer opportunities to test out new ideas without the competition or pressure the organization would face in the home market.

Highlight technology opportunities for growth
CEOs need CIOs to be more than service-oriented order takers. They expect IT leaders to work with business leaders to co-develop technology-related capabilities that will enable the business to innovate and grow. In fact, 49% of CEOs believe business and technology have an equal responsibility for the performance and quality of digital products and services.

This is an opportunity for CIOs to explore and advocate for technology that would increase productivity, and showcase how technology would allow the organization to lean into any economic downturn. This is particularly important given that 27% of CEOs ranked technology enablement as third in ways that organizations will exert cost controls. But 47% ranked technology enablement as one of their top two ways to improve productivity.

Elevate the executive committee
CEOs want to grow digital and are increasingly impatient with limited returns on large investments. The number of CEOs agreeing they had a management initiative or transformation program underway to make the company more digital rose to 82% this year, despite challenges with technology and cybersecurity concerns. However, very few organizations have made major changes in business models to support this new change or transformation.

Part of the issue is that the executive team will not all have equal amounts of digital business acumen, yet digital is a team sport. Without confident involvement of the entire executive team, it’s difficult to enact real change. Each member of the executive committee needs to be fully engaged, understand their role in the transformation and feel confident in execution.

Digital requires each executive to be on board, because digital products are complex and across the company. For example, Nike developed and marketed a shoe that fastens itself via mobile app and collects data via sensors to send back to the company. General Motors and Volvo developed and delivered the ability to have Amazon deliver packages to car trunks using a one-time digital key to unlock the trunk wirelessly. These complex, multifaceted endeavors require all the functions of a company.

The author of the article is the Distinguished VP Analyst at Gartner.

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