The number of CEOs expecting substantial change over the next three years has risen sharply since 2006 but proportionally fewer have experience of successfully managing the process.
IBM’s biennial Global CEO Study revealed that 83 per cent expected to see substantial change but only 61 per cent had successfully handled such a scenario in the past, creating a “change gap” of 22 per cent.
In 2006, the gap was only 8 per cent: 65 per cent were expecting change but 57 per cent had experience of managing it (see chart 1, below).
The main issues for CEOs were market factors and people skills, each highlighted by 48 per cent of respondents. Technological factors took third place, with 35 per cent seeing it as a top three driver.
But the percentage of CEOs who put market forces in the top three fell to 35 per cent from 67 per cent in 2006 and 84 per cent in 2004, as other factors such as environmental issues – up from 12 per cent in 2006 to 18 per cent in 2008 – and socioeconomic concerns – up from 15 per cent to 17 per cent – took on greater importance.
In an effort to prepare for such change, 69 per cent of CEOs said they were adapting their business models by implementing extensive innovations, and 40 per said they were changing their enterprise models to be more collaborative.
Sixty-five per cent of organisations rank innovation as one of their top three strategic issues – with 14 per cent claiming it is their number one priority – but many fail to measure effectively the impact of such initiatives.
According to research by McKinsey, 71 per cent of organisations claimed to be pursuing product innovation but only 54 per cent formally assessed the outcomes. And only 29 per cent of those companies that did attempt to measure innovation said they were able to assess the effectiveness of innovation spending using metrics.
Of these, 71 per cent were happy with the metrics their organisation had in place to monitor the results of their innovation spend. Sixteen per cent ranked revenue growth due to new products or services as the most important factor (see chart 2, below), followed by customer satisfaction (13 per cent) and the number of ideas or concepts in the pipeline (10 per cent).
MERGERS AND ACQUISITIONS
A failure to integrate organisational cultures in mergers and acquisitions effectively has a direct effect on the value derived from such transactions, according to Mercer’s Cultural Integration survey.
Fifty-seven per cent said their most significant transaction in the past 24 months had been harmed by cultural issues to at least some extent, with little notable difference on whether they were based in the US or Europe. Thirty-two per cent of US respondents estimated failing to manage cultural issues cost at least $5 million. In Europe, it was 29 per cent.
Seventy-two per cent of respondents felt their organisation thought culture was either “important” or “critical” to deal success, and 82 per cent believed senior management saw effectively integrating cultures as a key success factor.
In deals where cultural integration was identified as a concern, 42 per cent of organisations pressed ahead regardless (see chart 3, below). Senior management led the cultural integration efforts in only 27 per cent of cases, with 10 per cent admitting no one seemed to lead it.
Pressure to deliver cost savings in the current economic climate is driving CPOs to focus more on spend analysis, according to research by Aberdeen Group.
Its survey found that 54 per cent of sourcing and procurement professionals were looking to identify savings opportunities within categories while 41 per cent wanted to identify their top spend categories (see chart 4, below).
But 26 per cent of organisations did not have a spend analysis programme of any form, and 24 per cent had had a programme for less than 12 months.
The biggest hurdles to implementing such a programme were identified as poor quality data (55 per cent), too many sources (51 per cent) and a lack of standardised processes (45 per cent).
Spend analysis programmes were judged in terms of the cost savings they delivered in 67 per cent of cases, with 64 per cent assessing them according to the amount of spend brought under management.
Those organisations that were implementing fully automated, single systems could hope to deliver average savings of 11 per cent, the research claimed, compared with 8 per cent for automated, disparate systems, 5 per cent for partially automated packages and 4 per cent for fully manual systems.
Only 13 per cent of those currently conducting regular spend analysis had a fully automated, single system, with 50 per cent partially automated.
Organisations that push through compliance initiatives should deliver average cost savings on air fares of 19 per cent in 2009 despite rising prices, according to American Express’ Global Business Travel Forecast.
The survey predicts prices for business-class international trips will rise by between 2 and 7 per cent and could reach as much as 9 per cent in Europe, while short-haul economy trips could change by between -1 and 5 per cent. But if the economy remains stagnant for the entire year, fares could fall by a global average of 5 per cent, it added.
Hotel costs are also expected to rise due to limited supply, by up to 6 per cent in North America, 6.5 per cent in Europe and 12 per cent in Asia-Pacific.