Turn things around

Leaders who wish to transform their organisations need to focus on the customer and encourage innovation

As India experiences enhanced business activity across sectors, Indian CEOs are betting high on the need to embrace transformation, which is critical to stay relevant to future market needs. With changing customer preferences and continual evolution of technology, businesses are driven to adopt innovation and customer centricity as the default DNA of their operating model. Today, several organisations are involved in transformation in some form or the other - either enterprise-wide or function-specific. KPMG's Global CEO Survey 2016 illustrates the concerns and focus of CEOs with regard to making transformation a reality. Among them are 125 Indian CEOs heading companies across sectors.

The survey suggests many CEOs are looking at multiple manifestations of transformation with an aim to streamline the processes, eliminate red tape and undertake overall restructuring with an objective to effectively respond to dynamic market needs.

Forty-six per cent of CEOs believe their businesses are likely to be transformed into a different entity over the next three years, giving a positive outlook toward transformation. This is an excellent insight, given that the Indian government is making provisions for "ease of doing businesses", "Digital India" and other flagship programmes in the country. A critical outside-in view suggests that both global and Indian CEOs (at 54 per cent) peg India as the new market with the greatest potential in the next three years.

Highlighting the importance of business transformation, 88 per cent of CEOs indicated that their organisation needs to transform in order to meet varied demands of millennial consumers. Almost 30 per cent of Indian CEOs consider new customers and 25 per cent consider new markets as key areas for growth in the next three years. As a result, 76 per cent of Indian CEOs are convinced about investing in new competencies and 22 per cent consider fostering innovation as their most strategic priority. However, there are a number of challenges accompanying this positive rhetoric:

nOnly 42 per cent CEOs indicated that their organisations had the ability to respond quickly to market developments.

nOnly 36 per cent CEOs indicated that their organisations had the ability to secure adequate investment to drive innovation initiatives.

nOnly 40 per cent CEOs indicated that their organisations had the ability to create a "safe to fail" environment.

Further, when asked, CEOs shared common concerns, irrespective of scale and sector of operations. The top three concerns are: competitor's ability to take business (91 per cent); relevance of their existing products/services (84 per cent); and new entrants with new business models and better customer connect (81 per cent).

These observations explicitly demonstrate the need for innovation and focus on customer engagement as primary drivers for business transformation. This is similar to the findings of the KPMG Global Transformation Survey conducted earlier this year, covering 1,600 senior executives across 16 countries. Both these surveys acknowledge the presence of millennial consumers and their changing demands, not just in products/services but also in the way they want to interact with the organisation throughout the customer lifecycle (pre-sale, sale and after-sales service).

To cite an example, the e-commerce boom in India shook the traditional players in the retail sector. With leading e-commerce players eating away their share of customers, the brick-and-mortar outlets were compelled to develop their own shopping websites, and move towards omni-channel or physical shopping. For example, one of India's leading retailer is working consistently toward adapting to the evolved shopping needs of digitally-savvy consumers. Similarly, other related companies are staying relevant by building a digital strategy to reach customers at mass, increase product awareness and manage sales force more efficiently. Even India's banking sector today is completely transformed with a significant focus on the digital operating model. While ATMs, net banking and mobile banking were transformations of the last decade, the next decade will be dedicated to mobile wallets.

It is also crucial to acknowledge the challenges involved in the realisation of benefits from the transformation agenda. We have observed that one in three global CEOs indicate that their organisation fails to achieve the anticipated value from such initiatives.

However, it is critical for CEOs to recognise the complexity involved in changing operating models, people and cultural issues, inability to execute plans as desired, business vs technology-led changes and short-term vs long-term gains. CEOs need to invest in the right resources, executive commitment and building a culture that allows transformation to be a success. They must understand that the ability to adapt and innovate has to be embedded in the heart of organisational culture driven by a "business values first" approach.

That transformation is the way ahead for all businesses is now an accepted fact. But CEOs who want to transform their organisations in these volatile times, need to focus on the customer, embed continual innovation into the business and learn to thrive on change.

Romal Shetty
Chief operating officer, advisory services and leader, transformation services, KPMG India