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IMPLICATIONS FOR MIDSIZE ORGANIZATIONS
GLOBAL CEO STUDY 2 the enterprise of the future
INTRODUCTION
We conducted 1,130 interviews with chief executives, general man-agers, business leaders and public-sector heads in the course of completing the research for our third biennial Global CEO Study, which aims to identify the key characteristics of the Enterprise of the 1Future. Here we focus on the responses of the 136 "midmarket CEOs" who head midsize organizations (defined as companies that employ 2fewer than 1,000 people).
As part of our research, we sought to understand the differences between the responses of financial outperformers and those of underperformers. We compared the revenue and profit track records of those companies with publicly available financial information 3against the averages for their industries within our sample. We labeled companies that performed above the average on a particu-lar financial benchmark outperformers, and those below the average underperformers. Throughout our analyses, we looked for insights based on these top- and bottom-half groupings. implications for midsize organizations 3
Our findings show that the Enterprise of the Future is:
. Hungry for change. Innovative beyond customer imagination . Globally integrated . Disruptive by nature . Genuine, not just generous.
HUNGRY innovative GLOBALLY DISRUPTIVE GENUINE, FOR BEYOND INTEGRATED BY NOT JUST CHANGE CUSTOMER NATURE GENEROUSIMAGINATION4 the enterprise of the future
HUNGRY
FOR
CHANGE
Midmarket CEOs foresee significant
change ahead, but they're not confident
about their ability to manage it. So how
will they fare in an increasingly turbulent
environment?
Midmarket CEOs anticipate more change than other CEOs but are less successful at managing it. The gap between those who think that their companies will need to make substantial changes over the next three years and those who say that they have previously suc-ceeded in managing change is even bigger in midsize organizations than it is in our overall sample (see Figure 1).
Many midmarket CEOs also report that they are struggling to keep up. They feel that consumers are now dictating the pace of change, whereas formerly they were the ones in control. "Change in the orga-nization is not happening fast enough.The gap is widening," one Dutch midmarket CEO told us. implications for midsize organizations 5
This may seem surprising, since people often assume that smaller companies are more agile than large ones. But midsize organizations typically have fewer resources and thus less "bandwidth" for han-dling unexpected or disruptive external influences. They also oper-ate in fewer countries and offer fewer products or services, so they have less experience in managing such turbulent, global change.
Moreover, the sheer breadth of the changes midmarket CEOs face is increasing. In 2004, market factors (such as variations in customer purchasing patterns, growing competition and industry consolida-tion) dominated the boardroom agenda. Today, however, midmarket CEOs have to focus on a much broader range of concerns. Market factors remain their top priority, but access to people with the skills they need, regulatory compliance, technological factors and global-ization also weigh heavily on their minds. Regulation is a source of particular anxiety; 37 percent of midmarket CEOs think it will bring major changes, compared with just 30 percent of the total survey population.
FIGURE 1 the change gap in midsize organizations Managing change is an even bigger challenge for midmarket CEOs than it is for the total survey population.change needed 83%Entire Sample Past change success %change gap61% 22
change needed 86%Midsize Organizations Past change success %change gap57% 296 the enterprise of the future
These issues are connected. Any company that wants to capitalize on the trend toward globalization and expand into new markets will need to understand the potential opportunities and risks. It will also need to recruit people with the expertise - be it industrial, technical or managerial - to operate in an increasingly complex, geographi-cally diversified environment; contend with different regulations in different jurisdictions; and build a technological platform capable of supporting ... [download for more]
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