The recession and the state of business these days has left many organizations in transition, but what exactly are CEOs, especially successful ones, planning strategically in future terms?
While 60 percent of leaders are currently experiencing a high to very high level of complexity within the economic environment, 79 percent expect similar levels of complexity throughout the next five years.
Additionally, slightly less than half (49 percent) of leaders feel prepared to deal with it, according to "Capitalizing on Complexity: Insights From the 2010 IBM Global CEO Study," which was based on face-to-face interviews with 1,541 CEOs, general managers, and senior public sector leaders representing various-sized companies from 60 countries and 33 industries.
"Complexity is defined as [business that is] more interconnected, multifaceted, and multidimensional, and how that permeates everything that an organization has to do and address," says Ragna Bell, program director for the CEO study and strategy lead at the IBM Institute for Business Value. "Less than half of leaders feel prepared, and looking at that gap was one of the areas that's a real opportunity for those organizations to take advantage of these very complex periods."
The report identified certain organizations as "standouts," or those that are deemed to have turned complexity into financial advantage during the last five years. These businesses were specifically studied to create an agenda for how to efficiently manage and profit from complexity.
One of the three major findings from the study was that standouts tend to rely on creative leadership; that is, experimentation in the form of calculated risks and innovation, both in terms of finding new ideas, as well as leading and communicating dynamically.
"Organizations have to embrace the idea of ambiguity and encourage and reward breakthrough thinking," says Bell.
Creativity as a leadership quality was stressed across both geographic areas and industries. And there is an increased willingness to break down existing assumptions and move away from the status quo within organizations, whether it's operations, business models, or ways of generating revenue.
Companies need to continually rethink and improve their existing business models and communication and management styles by looking at different options at the same time and constantly testing out new methods, Bell advises.
The second successful attribute of standout organizations included cocreating products and services with customers, in addition to integrating customers into their core processes.
"There is a clear new opportunity to consistently engage the customer in product development efforts," says Bell, citing the explosion of social networking sites. Whether it's direct feedback loops or involving customers in the naming and marketing of a product, Bell sees this trend as pervasive across various industries and an enabler of both business-to-consumer and business-to-business collaborative opportunities.
The third major finding from standout organizations was increasing operational dexterity by simplifying products and processes, accessing resources, and entering new global markets. Leaders who excelled at this quality expected 20 percent more revenue to come from new sources.
"It's about promoting a mindset of fast and flexible and removing procedural or policy roadblocks, empowering employees at appropriate levels, and recognizing and rewarding when flexibility actually generates value," says Bell. "It's also really crucial that organizations become better at cost-correcting as needed."
The participant sample for the study was geographically composed as follows: 42 percent from Europe; 25 percent from the growth market, which includes Latin America, Asia-Pacific excluding Japan, the Middle East, and Africa; 21 percent from North America; and 12 percent from Japan. In terms of sectors, the breakdown was 25 percent distribution, 24 percent industrial, 20 percent public, 18 percent financial services, and 13 percent communications.