This article first appeared in Digital Edge, The Edge Malaysia Weekly on May 3, 2021 - May 9, 2021

The IBM Institute for Business Value (IBV) has launched its most extensive CEO research project ever, in a bid to uncover the mindsets, themes and challenges that top leaders are grappling with in the age of Covid-19. 

The study, which involved polling more than 3,000 top leaders all over the world, distilled five key themes that, on balance, could predict a leader’s long-term success at an organisation — leadership, technology, employees, open innovation and cybersecurity. 

IBV first adjusted for the good fortune of certain businesses operating in a sector that benefited from the pandemic, as opposed to industries that were hammered regardless of what businesses did during the pandemic. 

With all the variables accounted for, the IBV report found stark differences, both in polling responses and business outcomes, between so-called Outperformer and Underperformer CEOs. 

Perhaps most telling was that Outperformers entered 2020 with higher revenue growth than their competitors — an advantage they have built on over the last year. 

Outperformer leaders opened up anywhere between a 5% and 7% difference in annual revenue growth rate on their less successful counterparts. For organisations at the US$10 billion annual revenue mark, this difference in revenue growth was equivalent to an additional US$700 million a year. 

Underperformers, on the other hand, were 31% more likely than Outperformers to cite cash flow as a future concern. They were also twice as likely to agree that the competitive gap between winners and losers was widening — a reflection of the vulnerable position they found themselves in.

When asked about their organisation’s top priorities over a three-year period, Outperformers, regardless of geography, tended to be very focused on customer-related issues, and wielded company resources to strengthen those dynamics. 

Underperformers, by contrast, lacked consensus on their priorities, with customer experiences ranking third in their responses. For Outperformers, better customer experiences and stronger customer relationships were the top two priorities over the next three years. 

According to Catherine Lian, managing director at IBM Malaysia, Outperformers relied on flexible and scalable technology foundations, a sustainable workforce, as well as strategic partnerships to stay on top of their short- and medium-term priorities. 

“Across the board, the CEOs cited cloud, artificial intelligence (AI) and Internet of Things (IoT) applications as technologies that would benefit their businesses,” Lian tells Digital Edge. 

Sixty-three per cent of Outperformers cited strategic partnerships as becoming increasingly important to both driving business performance and tackling major global challenges, from climate change to the global talent gap. 

Curiously, both Outperformers and Underperformers tend to be in agreement on the regulatory environment posing a challenge to businesses. 

When leaders were queried about elements that would pose the greatest challenges to their organisations over the next few years, both sets of leaders (the Outperformers and Underperformers) cited regulation as their second biggest concern. In fact, 51% of Outperformers cited regulation — 3% more than Underperformers. 

However, there was a major divergence between both sets of leaders on challenges around market shifts. Where market shifts came in dead last on the list of challenges for Outperformers, it was the topmost concern for Underperformers, with half of underperforming leaders citing it as a major challenge. 

Meanwhile, Outperformers and Underperformers tended to have markedly different views on the impact of technology on their businesses. Sixty-two per cent of Outperformers cited technology infrastructure as their organisation’s greatest challenge, making this the topmost priority for this class of leaders. Underperformers, on the other hand, cited this as the fourth-biggest challenge to their organisation. 

Even the tone of the discussion on technology differs between Outperformers and Underperformers. The report found that when it comes to specific technologies, Underperformers seem to be a full technology cycle behind. 

They identify chatbots, voice technology and natural language processing as key to delivering future results at far greater rates than the Outperformers. Their more successful counterparts, on the other hand, expect AI to deliver business results in the next two to three years. 

This gap in technology appreciation indicates that those who are already trailing in AI adoption may fall further behind in time. In this regard, Outperformers appear to have picked up on the opportunity to gain an early-mover advantage on their competitors. 

Outperformers view the outsized performance gains of AI, coupled with their low levels of adoption so far, as being critical to their organisation’s ability to deliver results over the next two to three years.

One corollary of the pandemic has been a refreshing reinforcement among corporate leaders of the importance of their people’s mental and physical well-being, the report notes. However, there are notable divergences between top leadership and their people on the ground on this issue. 

Outperformer leaders overwhelmingly focus on employee well-being, with 77% of them saying they would support employee well-being even at the expense of profitability. On the other hand, just 39% of Underperformers said they would do the same. Also, when asked if companies were supporting the physical and emotional health of employees, 80% of executives agreed or strongly agreed. 

Yet, when the same question was posed to employees, the figure came in at just 46%. Further, when asked if organisations were providing adequate training on how to work in new ways as a result of the pandemic, 74% of executives agreed, while just 38% of employees said the same. 

The message here, according to the report, is that for many organisations, sensing and responding mechanisms are either underdeveloped or simply ineffective. If leaders believe they are providing a benefit that the employees simply do not experience, then leadership has failed on that count. 

In this regard, the report suggests there is room for improvement when it comes to comprehensive employee well-being.

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