CEOs plan to feed the omnivores

7 May 2008

Information omnivores and socially-minded consumers are forcing CEOs around the world to radically rethink their modus operandi, a major new study by IBM has found.

The IBM Global CEO Study, the largest study of chief executives ever conducted, highlighted a dramatic increase in the number of global business leaders who see important change ahead, with the majority planning most of their future investment in matching the expectations of these two new types of consumer.

The ‘information omnivore’ is a consumer who craves all types of information and often broadcasts his or her views and expectations worldwide via the internet. These customers are swapping passive roles for much deeper involvement, according to IBM, and often create entertainment and advertising content for their peers, while demanding flexibility and responsiveness from companies with whom they choose to do business.

Although these customers are more demanding, the majority of CEOs do not see them as a threat, but rather as an opportunity for differentiation based on meeting the heightened expectations of this group and capitalising on new market opportunities that will emerge, the survey found.

Overall, CEOs are planning a 22pc increase in investments in the next three years to serve these more sophisticated and demanding customers.

CEOs of firms with higher net profit margin growth indicate that investments targeted at information omnivores will increase 36pc over the next three years. The majority of these new investments will be dedicated to new operational capabilities that improve collaboration and product innovation and that are more oriented to transparency and tailored to specific market segments.

In Europe, CEOs indicated they plan a 23pc investment targeted at these customers over the next three years, a 20pc jump from the previous three years. In North America, CEOs plan a 19pc investment, a 27pc rise over three years ago. Asia Pacific CEOs plan a 16pc investment – a 20pc jump – and Latin American CEOs indicated a 16pc investment – up 18pc over the past three years.

The emergence of the ‘socially minded customer’ represents more of a challenge for global CEOs, with CEOs planning on increasing their investment by 25pc over the next three years to accommodate this segment, the largest percentage increase of any trend identified in the survey.

The study showed that while increasing CEO concern about environmental issues has doubled over the past four years globally, this concern is not evenly distributed worldwide. Asia Pacific and European CEOs lead the world in focusing on environmental issues, followed by the Americas.

CEOs also revealed that corporate social responsibility (CSR) reputations are also an important tool to attract and retain employees. They are also recognising that their organisations are being held mutually accountable, along with the public sector, for the socioeconomic well-being of the regions in which they operate.

Overall, CEOs reported a surprising level of optimism about change as an opportunity to build new competitive advantage. Some 83pc of surveyed CEOs expect substantial change in the future, an increase of 28pc over two years ago. However, CEOs report their ability to effectively manage change is increasing at a far slower pace.

Collectively, CEOs set their organisation’s ability to manage change 22 percentage points lower than their expectations for the level of change they will have to manage, a ‘change gap’ that is widening, according to IBM.

“The enterprise of the future accepts change as a permanent state in an organisation. Those CEOs who demonstrate the capacity to manage major change know they can beat the competition by reaching new classes of customers, and making bold moves to shift business design around principles of global integration,” said Ginni Rometty, senior vice-president, IBM Global Business Services. “It’s clear that out-performers are distancing their enterprises from the competition based on their organisational capacity to take advantage of change.”

The IBM Global CEO Study was based on face-to-face interviews with 1,130 CEOs from 40 countries across 32 industries. It was conducted by IBM Global Business Services in conjunction with the Economist Intelligence Unit.

By Niall Byrne