Aussie CEOs point to trade war as threat to business growth

One in three Australian CEOs are projecting a decline in global GDP growth this year, up from just 7 percent a year ago, according to PwC’s 22nd Annual Global CEO Survey.

The survey, which interviewed approximately 3,200 CEOs from 91 countries, including 131 respondents from Australia, also shows a dip in the confidence of Australian CEOs when looking at their own organisation’s revenue growth for 2019 and over the next three years, with 61 percent pointing to trade conflicts as a threat.

Australian CEOs are also looking inward for growth, with 71 percent relying on operational efficiencies and 80 percent on organic activity to drive growth.

PwC Australia CEO Luke Sayers said “what we’re seeing in PwC’s latest global CEO survey is global business leaders adjusting their strategies to seek out their most opportunistic path for growth.

“This is not the case in Australia though, with a lack of action from business leaders to minimise the potential impact of trade conflicts on their organisation’s growth, or better yet, to seek out strategic opportunities.

“Australia might not be in the firing line, but that doesn’t mean we should be sitting on the sidelines and not thinking about how we could be impacted, either positively or negatively.

“While Australian CEOs are not shifting their business models in response to trade tensions, two-thirds of CEOs around the globe have made changes to their operating model and growth strategies and a further one in four are shifting their growth strategies to alternative markets.

“In this dynamic, fast-paced environment, Australian CEOs have an opportunity to secure more advantageous supply-chain arrangements, and they should also be looking at opportunities to invest in markets behind the trade barriers to take advantage of them.

“At the same time it’s essential we support our government in maintaining and improving on the trade rules that underpin the international multilateral trading system because there are rarely any real winners in a trade war,” Mr Sayers said.

Australia usurps US as China’s top market for growth

Trade tensions between China and the US have had a significant impact on how Chinese CEOs are thinking about market opportunities over the next 12 months and has led to Australia being identified as the top market for growth outside their home market, a major change from 2018 when Australia did not even make the top 10.

PwC’s survey shows Australia has usurped the US for the number one spot, with 21 percent of Chinese CEOs now naming the lucky country as the top market for growth. Chinese CEOs are radically revising their growth ambitions and only 17 percent of Chinese CEOs now name the US as a market for growth, down from 59 percent in 2018.

Australia comes in at 10th place overall as a market for global CEOs growth prospects over the next 12 months, with 5 percent of global CEOs naming Australia in their top three most attractive markets. However, CEOs were strikingly non-committal when identifying their top three most attractive markets — ‘don’t know’ at number three ranks higher than Germany and India.

PwC Australia CEO Luke Sayers said “with current geopolitical tensions it is not surprising that Australia features highly as a top market for growth for Chinese CEOs in 2019, after dropping off the list last year as a result of resources coming off the boil and technology taking centre stage.

“If you look around the developed world our economic performance is second to none and it has been for 28 years. We have a relatively long history of interest from Chinese companies and we’re seen as a stable, predictable and developed market.

“There are a number of sectors and industries that will present challenges for foreign companies in terms of FIRB scrutiny, but we are certainly not a hostile environment for Chinese investors outside of sensitive sectors. Government could view this as an opportunity to remind Chinese companies that Australia remains open for business.”

Up data creek without a paddle

Not surprisingly, 95 percent of Australian CEOs know the long term success and durability of their business depends on data about their customers’ and clients’ preferences and needs. Worryingly, only 7 percent believe data about their customers’ and clients’ preferences and needs is comprehensive, slightly behind the global average of 15 percent.

In fact, Australian CEOs believe the data they had 10 years ago was more adequate than it is today, with around half of the respondents blaming a lack of analytical talent, data siloing and lack of sharing, poor data reliability and inadequate IT infrastructure.

PwC Australia’s Analytic Intelligence Leader, John Studley said “our CEO survey confirms that Australian CEOs are still wrestling with data legacy issues, but they only require minor tweaks.”

“To fix the problem we need a shift in approach to data and analytics from tech-led to business-led. Problems identified in the survey like data siloing and lack of sharing come down to poor strategic direction and leadership, not technology or data.”

“Most large organisations have systems, warehouses or data lakes where they capture all their data. Most store all the customer transactions, operational activities and workforce statistics. Some even keep a recordings of every contact centre agent call and recommendation. But a critical point here is that data has no value until you use it for an intervention, action or outcome.”

“There are more than enough technologies, tools and data for advanced analytics, automation and intelligent decisions”.

“Leaders need to start by asking what do we need to solve for or improve or enhance. For example, is it a pricing issue, an issue around employee safety or customer delivery times? What’s the manner in which deep data science can be used to underpin strategy development and execution?”

“Once you’ve narrowed this down, it’s much easier to surface and mobilise the data sets that are going to solution that specific problem in a sustainable way,” Mr Studley said.

AI to displace more jobs than it creates

The majority (86 percent) of Australian CEOs know that Artificial Intelligence (AI) will significantly change the way to do business in the next 5 years and more than half (57 percent) believe that AI will have a larger impact on the world than the Internet Revolution.

Nevertheless, only 29 percent have plans to start introducing AI initiatives in their organisations in the next 3 years, compared to 35 percent of their global peers.

PwC’s survey also shows while 73 percent of Australian CEOs believe that AI is good for society, almost half (47 percent) agree that “AI will displace more jobs than it creates in the long run”.

“It’s great to see Australian CEOs recognising the power of AI and the dramatic change it will bring to the way Australians interact and transact,” Mr Studley continued.

“AI has the potential to bring so much good to society, but the concern about job displacement is one we can’t dismiss lightly. The imperative is on businesses to start identifying and planning for the impact of AI on their industries, business and people.

“Another area of focus should be planning for the responsible use of AI and the ethical settings around that,” he said.
For more, access our Global CEO results here.