SBI has released its 2022 CEO MacroView Report titled “Don’t Create Confusion, Create Value.” The report contains an analysis of results from a survey of 150 CEOs as they face economic uncertainty, talent challenges, and shifting demand. Through online surveys, phone interviews, and virtual roundtable discussions, we learned that successful CEOs will be those who take decisive action compared to those who choose to wait and see what will happen.
Key Takeaways from SBI Research:
- CEOs are taking on far too many growth imperatives heading into a recession. Organizational focus – particularly across the commercial team – is a critical factor in maintaining growth through a recession or similar economic event. Getting clear on your value creation plan, and the precise growth initiatives related to that plan is key.
- CEOs are taking on the wrong growth imperatives based on their value creation plan. CEOs are prioritizing growth imperatives that have little bearing on their value creation plan. For instance, a vast number of CEOs who identify their value creation model as Accelerating Growth with the Same Operating Expense are prioritizing changing the revenue mix of their firms to improve the margin profile, where far more resources need to be directed at commercial productivity efforts almost exclusively.
- Most CEOs said they believe inflation and rising interest rates will eventually have a negative impact on their businesses. 46% anticipate a “somewhat negative impact” while another 9% expect “significant negative impact”. In anticipation, they are increasing near-term pricing to keep pace with higher labor and material costs, which is reflected in a six percent median price increase reported across the survey.
- Nearly two-thirds of CEOs have developed contingency plans (65% reported taking financially or budgetarily explicit actions to prepare for an economic recession in late ’22 or early ‘23) that are overly focused on cost reduction instead of defending growth bets or reallocating expenses to maintain growth in the face of recession.
According to one CEO, “Pricing will be a key lever. The challenge is that it is tough to know how markets will respond unless you trial pricing changes in a controlled manner. To do that, we need a highly functioning commercial team that does not rely on discounting practices – this lets us quickly evaluate pricing and packaging as the economy ebbs and flows.”
The media has the public believing that companies are taking aggressive cost containment actions due to economic uncertainty; however, results of our survey indicate that investment in growth is still happening and experienced CEOs understand that taking decisive action and executing against their plan is how they will remain on a positive growth trajectory. The first step is to understand where an organization sits in the Value Creation Quadrants. Read the report to learn more as you prepare for 2023.