Thriving in an age of continuous reinvention

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This year’s Global CEO Survey, the 27th we’ve conducted, suggests that the vast majority of companies are already taking some steps towards reinvention. Yet even as CEOs attempt meaningful changes to their companies’ business models, they are even more concerned about their long-term viability. Although the 4,702 CEOs responding to this year’s survey were more optimistic about global economic growth than last year, 45% of them are still not confident that their companies would survive more than a decade on their current path. Among the other key findings:

• The impetus to reinvent is intensifying. CEOs expect more pressure over the next three years than they experienced over the previous five from technology, climate change and nearly every other megatrend affecting global business.
• Survival-conscious CEOs among the 45% who are less confident of their company’s viability are slightly more likely than other CEOs to have taken action aimed at reinventing their business models. Small company chief executives are more likely than their larger company counterparts to feel their company’s viability threatened.

• CEOs perceive enormous inefficiencies across a range of their companies’ routine activities—everything from decision-making meetings to emails—viewing roughly 40% of the time spent on these tasks as inefficient. A conservative estimate of the cost of that inefficiency would be tantamount to a self-imposed US$10 trillion tax on productivity. Generative AI, which about 60% of CEOs expect to create efficiency benefits, could help relieve some routine burdens.

• Four in ten CEOs report that they have accepted lower hurdle rates for climate-friendly investments than for other investments—in the majority of cases, between one and four percentage points lower. This is clear evidence that some CEOs are willing to make complex trade-offs as they strive to boost the sustainability of their businesses. 

• Meanwhile, two-thirds of CEOs report reallocation of resources (financial and human) of 20% or less year to year. The connections among reallocation, reinvention and financial performance suggest that more aggressive reallocation—up to a point—is required to succeed.

The stakes are high, but so is CEO awareness of both the urgency to change and the need to deliver sustained outcomes for stakeholders and society. To clarify the nature of the challenge and the opportunities associated with meaningful business reimagination, we’ve organised this year’s report in nine sections under three themes. 

1. An enduring imperative to reinvent

Technological disruption, climate change and other accelerating global megatrends continue to compel CEOs to adapt, as a whopping 97% of respondents to PwC’s 27th Annual Global CEO Survey report having taken some steps to change how they create, deliver and capture value over the past five years. During that span, 76% of CEOs took at least one action that had a large or very large impact on their company’s business model. That finding reflects a growing unease, as 45% of respondents doubted their company’s current trajectory would keep them viable beyond the next decade—up from 39% just 12 months earlier.

2. Pressures and threats 

Another sign that the need to reinvent is rising is a notable increase in the pressure CEOs expect over the next three years from factors that influence business model change. Compared to the last five years, for example, CEOs expect changes associated with technology, customer preferences and climate change, among others, to have a far larger impact on the way they create, deliver and capture value. Only the impact of supply chain instability declines in relative terms as CEOs look ahead to the next three years.

The growing importance of trends like these stands in contrast to CEO perceptions of exposure to several near-term threats, which have declined overall since last year. Geographically, however, CEOs still see pockets of concern. Inflation remains the top concern for CEOs in the United States, for example, despite receding in terms of expected exposure for global CEOs overall. Similarly, geopolitical threats are still among the top concerns for CEOs in Central and Eastern Europe, as well as the Middle East, despite receding for global CEOs overall. This may be because companies have already been taking measures to insulate themselves from the effects of some conflicts—and the full impact of others is still unclear. In Western Europe, CEOs are most concerned about cyber risk over the next 12 months—that’s especially true in France and Germany, where it’s perceived as the top threat. US CEOs also rank exposure to cyber risk high on their list of concerns.

3. Planetary work in progress

Among the megatrends pressuring CEOs to reinvent themselves, none is more important than climate change. Here, CEOs report mixed success at meeting their stated objectives. Roughly two-thirds have efforts underway to improve energy efficiency; another 10% report completing such initiatives; and about half say they have work in progress to innovate climate-friendly products or services. CEOs in Western Europe are more likely to have energy efficiency and climate-oriented innovation initiatives in progress or completed. And CEOs everywhere are accepting lower hurdle rates for climate-friendly investments, as we will explore later. 

However, too many CEOs report having no plans for a range of other climate actions. For example, fewer than half of all respondents have incorporated climate risk into financial planning—and nearly one-third have no plans to do so. That may be because CEOs have: 

• already factored climate risk into their insurance profiles with respect to recent severe weather events, without necessarily considering the long-term, chronic impacts of climate change

• only looked at what’s within their own corporate boundaries without fully considering the interdependencies in their supply chains.

Among the other climate actions that CEOs say they aren’t likely to take are two with big societal implications. The first, upskilling or reskilling the workforce, is an important part of ensuring a just transition to a net-zero economy. The second, investing in nature-based climate solutions, will be vital if companies are to account for the surprisingly high dependence they have on nature. In fact, PwC estimates that 55% of global GDP—equivalent to about US$58 trillion—is moderately or highly dependent on nature.

4. The AI opportunity

In addition to climate change, a second megatrend with systemic, existential implications is technological disruption. Specifically, our survey looked at generative AI, which has all the hallmarks of a technology that could significantly change how companies operate. It’s also approaching a critical juncture, seemingly poised to transform business models, redefine work processes and overhaul entire industries. 

CEOs in this year’s survey appear to believe in both the fast pace of generative AI adoption and its outsized potential for disruption. For example, over the next year, about half of CEOs expect generative AI to enhance their ability to build trust with stakeholders, and about 60% expect it to improve product or service quality. Within the next three years, nearly seven in ten respondents also anticipate generative AI will increase competition, drive changes to their business models and require new skills from their workforce. So far, experience apparently buoys expectations. CEOs who say they have adopted generative AI across their company (about one-third of our sample) are significantly more likely than others to anticipate its transformative potential over the next 12 months, as well as over the next three years.

Overall, CEOs anticipate many positive near-term business impacts from generative AI. These include applications that increase revenues, such as through improved product quality and customer trust, as well as those that boost efficiency. This trend is consistent with PwC’s Global Risk Survey 2023, which found that 60% of respondents see generative AI as mostly or fully an opportunity rather than a risk.

At a societal level, the effects of generative AI are still uncertain. Some of those efficiency benefits appear likely to come via employee headcount reduction—at least in the short term—with one-quarter of CEOs expecting to reduce headcount by at least 5% in 2024 due to generative AI. Companies making early reductions to capture efficiencies in some areas may already be offsetting them with hiring in others, as growth and revenue opportunities become clearer. For example, although 14% of technology CEOs anticipate reducing headcount in the next year due to generative AI, 56% of them also anticipate hiring in 2024—at a rate almost 20 percentage points higher than the global average in our survey. (Overall, 39% of CEOs expect their company’s headcount to increase by 5% or more in the coming 12 months.)

These findings drive home the need for CEOs to bring their people along when it comes to generative AI. Being transparent, purpose-driven, and trusted regarding AI-related plans and decisions can help employees who are wary of AI (and what it may mean for their jobs) feel more comfortable experimenting—and innovating—with it. Ultimately, CEOs must embrace this as a new facet of their role: understanding, explaining and managing the inevitable tensions between short-term job losses and long-term job creation potential from AI.

5. The AI challenge

Even as the momentum of generative AI surges, a range of experts in the field are voicing concerns over the potentially significant, unintended consequences that could emerge as its reach grows. CEOs reflected similar sentiments in their responses to the survey. Consider, for example, that when it comes to generative AI, CEOs are most concerned about cybersecurity risk—and over half agree that it is likely to increase the spread of misinformation in their company. One-third of CEOs also expect generative AI to increase bias towards specific groups of employees or customers in the next 12 months. Almost as many disagree, suggesting bias is likely to be an area of growing attention as the scope and complexity of generative AI’s role in business expands. Interestingly, familiarity with generative AI does not seem to mitigate concerns about the risks among CEOs whose companies have already broadly adopted it.

Taken together, these findings underscore the societal obligation that CEOs have for ensuring their organisations use AI responsibly. Indeed, given the pace of innovation and the inevitable delay in establishing new norms and regulations, much of the onus for managing this advancing technology falls, for now, to businesses. As Robert Playter, CEO of Boston Dynamics (a robotics manufacturer), told us in a recent interview, ‘While there are potential risks with [AI and large language models], we believe more in its potential and creating boundaries to mitigate any risk. This integration, like all applications of our robots, must adhere to…ethical principles, which strictly prohibit weaponizing the robots or using them for purposes of harm or intimidation.’