It’s game on, or so Australian CEOs are saying about their growth prospects over the next year. This is particularly so with an anticipated up-lift in global and domestic markets. Given the uncertain geopolitical environments sweeping the United States and Europe, this sounds somewhat whimsical and almost divine. What it does say is that despite the uncertainty, Australian CEOs are getting on with business.
This is certainly a different story to the one our CEOs told last year, when they were less confident about growth; concerned about cyber security risks, the speed of technological change and a slowing down of China’s economy.
PwC’s recently released 20th Annual Global CEO Survey shows 43 per cent of Australian CEOs are ‘very confident’ they will see revenue growth in the next 12 months, up from a third of CEOs last year. Interestingly, their international peers are not as confident, with only 38 per cent anticipating revenue growth and 29 per cent expecting an increase in global economic growth.
Organic growth is the name of the game for our CEOs with 93 per cent staking their growth prospects on this. Mergers and acquisition activity will also be a considerable driver of growth with 60 per cent looking at expansion plans, but deals do take time to bed down, and plenty are not what they are made out to be. We will wait with bated breath to see what our CEOs are saying next year following a flurry of activity.
As always, cost reductions are still on the cards with 65 per cent of CEOs continuing to look for opportunities to trim expenses and get the low hanging fruit. However, many will not be focused on cutting back their workforces. In fact, many Australian CEOs believe they will increase headcount over the year. This is great news for the many Australians still looking for work, or those wanting to effect some change in their lives.
Private business CEOs are closely aligned to their public company counterparts. It is no surprise both are wary of the immediate outlook and prospects for the global economy, but private business CEOs are more confident this year about the prospects of their own businesses than their peers.
The most significant challenge of the private business CEO is technology. Nearly three-quarters expect their market to be transformed by technology over the next five years, however, they are less worried about driving innovation to stay ahead, or cyber security risks. Compare this with 67 per cent of businesses that prioritise ensuring the long-term future of the business.
There are a number of key issues facing Australian private businesses when it comes to addressing technological change, and less than half actually have a plan for addressing this. This is a concerning thought for the future of many of our businesses because we must ask: what are private businesses missing in the middle, while at the same time they are endeavouring to plan for their long-term future? One thing is certain, technological change and innovation is a red flag for those who expect their market to be transformed by technology over the next five years.
So what is driving this? To innovate and embrace the digital age, it is readily acknowledged businesses need to have talented people in the right place to address a skills gap in this area. This should begin at the board level and filter down in a coordinated and planned approach into the business itself. Many businesses miss this point and either take a ‘head in the sand approach’ or wait for someone in the organisation with a passion to engender change. Surprise, surprise… these are generally the people who leave the business, see an opportunity to disrupt the industry and start their own business. These people are known as disruptors.
It’s encouraging to hear our CEOs say they’re excited about their growth prospects this year and we look forward to supporting them and helping to navigate uncertainty and disruption.
James Blackburn, Partner, PwC