China CEOs remain confident as focus shifts toward innovation

21 July 2016 Consultancy.uk

CEOs in China are prioritising innovation as a means of deriving growth for the coming three year period, as they seek to develop new products and services to meet the growing consumption demand in China. China CEOs remain relatively upbeat about the country’s growth trajectory; the CEOs’ major concerns for their company’s growth centres around managing technological changes, and developing the right products and services.

KPMG, as part of its 2016 Global CEO Outlook, surveyed more than 1,300 CEOs worldwide – including 129 from China – to derive insights into their strategic and investment priorities, concerns and growth strategies. One component of the research is a more detailed exploration of the sentiment of China-based CEOs.

Top strategic priorities for China CEOs

The China CEO respondents remain upbeat about the prospects of the Chinese economy. 46% of China CEOs predicted 5% or greater growth over the next three years compared with 21% of global respondents. And almost two times as many China CEOs (40%) plan to increase headcount by more than 5% over the next 12 months than the global average (22%). Another area where Chinese CEOs are leading is gender diversity: one quarter of China CEO respondents are female compared with 8% globally.

Chinese priorities
The survey finds that the top priority for Chinese firms in the next three years is fostering innovation, which is incorporated into the business strategy of 92% of Chinese firms as part of the search for new products, while being the top agenda item for 47% of CEO respondents. A strong client focus is the second to top most cited agenda items for CEO, at by 29% of respondents. Respondents were also relatively keen to act on implementing disruptive technology and digitalising their business, coming in 4th and 5th respectively.

How China's CEOs approach innovation in their organisation

Innovating new products/services
One of the pillars of the latest five year economic plan for the Chinese economy, aside from a shift from investment-led growth to consumption-led growth, is innovation. Innovations, such as within the e-commerce and logistics space, are opening up wide swathes of rural China to consumption and growth, creating new business opportunities and growth. China too has emerged as the most desirable destination for R&D and innovation activities for international businesses, having surpassed Europe.

In comparison to the global CEO’s personal agenda items, the 47% for Chinese CEOs is well above that of the global response rate of 23%. Global CEOs are concerned about innovation, however, reflected in 65% of them having it within their top three agenda items. Very few respondents delegate innovation approaches to their management team, at 2% of Chinese CEOs and 10% of global CEOs, with even fewer delegating it to technology teams, at 3% and 2% respectively. 

Top concerns for China's CEOs

In terms of what is most concerning Chinese CEOs surveyed, ‘whether the company is staying on top of what’s next in products/services’ is top, as cited by 74% of respondents. Second on the list is the relevance of the company’s products/services three years from now, a 73% of respondents. Both responses are related to innovation.

The respondent CEOs also believe that the current three years are relatively critical for their industry than the past 50 years – highlighting the high level of flux the Chinese market is currently dealing with. Global economic forces, from political uncertainty to economic uncertainty, too weigh on China CEOs concerns. The rise of the robots, and their potential effect on global business – and employment – was cited by 70% of respondents as a concern.

How Chinese organisations use Data & Analytics

Industry 4.0, and its integration of vertical and horizontal supply chains, integration of robotics and the IIoT, is another area of concern for China’s manufacturing capacity. Innovation in this space is one on the national agenda in its ‘Internet Plus’ and ‘Made in China’ plans: the latter is China’s answer to its current decreased industrial competitiveness and by 2030 is projected to boost economic growth in China by 1.8 trillion, according to  a recent report. In KPMG’s survey, the use of data & analytics in Chinese organisations is cited as one of the key innovative areas that is integral to these technologies.

According to the China CEO respondents, 57% are leveraging data analytics to drive process and cost efficiencies, 52% are using it to manage risk, while 50% use it to develop new products and services. In addition, 48% of respondents use the technology to drive strategy and change, while 40% use it to improve financial reporting.

Partnerships and M&A on the rise

Additional capabilities
While new products/services is top of company strategy in China, entering new markets takes second spot. The respondents were most keen on focusing on expansion within their domestic market, cited by 68% of respondents, followed by ASEAN markets, cited by 37%, and the US, cited by 33% of respondents.

A number of methods exist to spread to new markets, including partnerships, joint ventures and M&A activity. The research highlights however that companies are much more focused on achieving expansion and growth ends through engagement with other firms than global peers. Additionally, 43% of respondents are planning to enter into M&A agreement to buy assets or capabilities from other firms.

Another recent research held among Chinese CEOs, conducted by McKinsey, found that corporate governance is constraining CEOs in the country. In terms of corporate security, China’s current operating environment, for international businesses operating in China or domestic businesses aspiring to operate globally, is problematic as businesses face an inadequate enforcement of laws and regulations surrounding Intellectual property rights, patent laws or data security breaches.

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Two thirds of UK employees not empowered enough to innovate

18 March 2019 Consultancy.uk

A culture of equality can drive innovation at work, but only a third of UK employees feel empowered to innovate at present. This demonstrates a significant disconnect between workers and their bosses in the UK, with 76% of business leaders also claiming they empower employees to be innovative.

Despite innovation increasingly being seen as integral to the survival of businesses, innovation remains relatively difficult to achieve. A lagging disconnect between management and staff remains the driving force behind this. One study by PA Consulting previously confirmed that while 66% of companies believe they will not survive without innovation, only 24% said they had the skills needed for that, and only half thought they had the right leadership in place to change that in time.

In order to find a way around this problem, global consultancy Accenture has completed its own study into innovation, polling around 700 bosses and workers across the UK to do so. The key finding of the research is that companies with a culture of equality can see an individual’s willingness and ability to innovate improved by seven times that of the least equitable workplace cultures. At the same time, an innovation mindset is almost twice as high in the most-equal companies as in typical ones.

91% of employees want to innovate but just 34% in typical United Kingdom companies feel empowered to

What remains clear, however, is that most companies are failing to adequately create an equal culture, where staff of all ranks feel comfortable contributing new ideas. 91% of employees want to innovate but just 34% in typical UK companies feel empowered to. That is higher in the most equal companies, where 75% of staff feel confident making suggestions, compared to just 5% of the least equal, and 34% of typical companies. Since those equal companies are comparatively fewer, when averaged out, only a third of UK staff feel they are empowered to innovate.

That figure stands in stark contrast to the perceptions of UK executives, however.  76% of business leaders in Britain believe that they do indeed regularly empower their employees to innovate. As a result, it seems that leaders mistakenly believe that some circumstances encourage innovation more than they actually do. For instance, they overestimate financial rewards and underestimate purpose.

The opportunity which is presented by addressing this divorce is enormous. Accenture calculates that global gross domestic product would increase by up to £6 trillion over 10 years if the innovation mindset in all countries were raised by 10%.Top 10 workplace culture factors - by strength of impact on innovation mindsetAccording to Accenture, the best way to impact positively on a company’s innovation mindset is through the provision of relevant training – associated with a 10.5% uplift to staff’s confidence innovating. Allowing the freedom for employees to be creative followed, contributing an 8.1% boost, while ensuring that training times are flexible and the firm allows a healthy work-life balance both see a more than 7% improvement. Similarly, remote working being available and being common practice will buoy creativity by 6.9% – further demonstrating the importance of flexible working to improve innovation culture at a firm.

Commenting on the report, Rebecca Tully, executive sponsor for Human Capital and Diversity for Accenture in the UK and Ireland, said, “Our research reveals that a workplace culture of equality is an overlooked driver of innovation within companies. By understanding what motivates their employees and fostering an environment where people feel empowered, business leaders have the opportunity to unleash the innovation required to compete effectively in an era of disruption.”

The research came as part of a global survey by Accenture, which queried more than 18,000 professionals in 27 countries and 150 C-suite executives in eight countries. The overall research determined that an empowering environment is by far the most important of the three culture-of-equality categories in increasing an innovation mindset, which consists of six elements: purpose, autonomy, resources, inspiration, collaboration and experimentation. The more empowering the workplace environment, the higher the innovation mindset score.