Transformation is the new normal for business success

More than a quarter (28 per cent) of Irish CEOs do not believe that their business will be viable a decade from now without significant reinvention and transformation, according to the PwC 2024 Irish CEO Survey.

“More and more business leaders are acknowledging the need to reinvent their businesses for sustained success,” says Amy Ball, transformation lead with PwC Ireland.

“Last year, 21 per cent of Irish CEOs were not confident about the sustainability of their business models within 10 years if they continued on their existing path.

“This year, that figure rose to nearly three-out-of-10 suggesting that the need for continuous reinvention of business models will be a new norm for CEOs. Businesses won’t continue thriving without reinvention.”

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The majority of Irish CEOs see generative AI (GenAI) as a catalyst for reinvention that will power efficiency, innovation and transformational change. Nearly two-thirds (63 per cent) believe that GenAI will significantly change the way their company creates and delivers value in the next three years, while 60 per cent say the technology will increase the competitive intensity in their industry.

CEOs are optimistic about the short-term impact of GenAI with 51 per cent expecting it to improve the quality of their products or services over the next 12 months while 69 per cent expect it to have a positive impact on their employees’ time at work. Of those surveyed, 38 per cent believe it will increase profitability and 32 per cent expect it to boost revenue.

Climate change is another reinvention driver, with many seeing the required transition as an industry disrupter containing distinct opportunities as well as risks. Some 87 per cent of Irish CEOs expect climate change to shift the way they create and deliver value over the next three years.

“What’s coming through in the survey results is that the pace of change has never been faster,” says Ball.

“We experienced an exponential rate of change during Covid, and we are seeing that continue. In the last 12 months major issues for CEOs have included climate change reporting and response and Gen AI.

“No one was even talking about GenAI 18 months ago, now it seems to be all they are talking about. Even small companies need to adapt and prepare for it. They are not sure what it can do for them, but they need to find out. New regulations are also an issue. There is so much coming at businesses, they are under more pressure than ever.”

Those pressures are leading companies to reassess their current value propositions. “They are asking what will make them stand out against their competitors over the next five or 10 years,” Ball says. “Once they have clarity on that they can set out a vision for the organisation and build a strategy around it.”

Any reinvention process or effort requires the support of the people in the organisation, Ball advises.

“You need to bring the people along with you. People deliver change but they can be afraid of it. Change is good for us, but it can be hard. Technology-enabled solutions are essential, however, without people adapting to new processes or ways of working, the return on investment may not be realised,” Ball says.

“You need to give people clear examples of what change looks like and deliver quick wins to demonstrate that you are moving in the right direction. It takes real leadership skills to get everyone aligned and moving in sync.”

Reinvention is far from an abstract concept. Companies can look at repurposing the skills or relationships with customers they already have, for instance. “Look at what you have already,” Ball says.

“For example, a company might realise that part of its business is moving goods around the world and could be using a logistics channel that is not carbon neutral. They can look at how they can fix the supply chain by looking at it through an environmental, social and corporate governance lens. Reinventing the supply chain can help a business stand out in the market.”

Reinvention might involve a reorganisation of the workforce. “Covid demonstrated that we can work from anywhere and deliver services as easily from Antigua as Athlone,” Ball says. “We are in a global marketplace and competitors are no longer two doors down the road, they can be on the other side of the world. Organisations have to look at how they can compete in that environment.”

The employee experience is also important. “People want the same experience as they get when they are shopping online. They want that frictionless experience in their workplace and be able to get, for example, their payslips with a single click and the same goes for performance reviews and other workplace interactions,” Ball suggests.

“If companies want to hold on to talent, they are going to have to meet those expectations and change their workforce experience. It’s about constant adaptation and evolution. If you’re standing still, you’re falling behind.”

GenAI and its use will naturally play a role in the reinvention process, she says. “GenAI is out there. You can’t avoid it. It’s incumbent on all of us to get a grip on what it means and what it doesn’t mean. AI has been around for a couple of decades. It’s just that its development has accelerated at an extraordinary pace over the last few years.

“It’s fantastic or dangerous, or both, depending on what you read or who you listen to. What we are hearing from clients is that they can see its potential and know they have to adapt but need to understand how to do so responsibly.”

Ball advises businesses to look for examples where technology can deliver real value. “Set key performance indicators and see if GenAI can help to achieve them. You also need to have the skills to use it. You can train models through prompt engineering but there is a new skill in doing that [which] involves critical thinking and questioning,” Ball says.

“For example, you can change the tonality of a bot to get rational or emotional responses, or somewhere in between, so the way in which the prompt is constructed has an impact on the result. You also need to have a proper compliance framework in place for the data you are using and how you are deploying the model. Trust is critical and operating GenAI in a safe and secure environment is important. Before this you could build an automation model and it was one and done. But GenAI can learn and evolve over time.”

PwC recognises the value and the importance of responsible AI development. “Everyone is learning at the moment. PwC announced in 2023 plans to invest US$1 billion over the next three years to expand and scale its AI offerings and help clients reimagine their businesses through the power of GenAI,” Ball says.

She believes its overall impact will be positive. “We are hearing client organisations speak to significant productivity gains. And they are not talking about reducing headcount. They are using the gains to create the space for people to develop and gain new skills that will be important for meeting the evolving needs of the business,” Ball says.

“They should be evaluating the potential for their business and be considering GenAI as an enabler to their strategy.”

Businesses setting out on a journey of reinvention should take the broadest possible view. “You can’t just look internally,” Ball advises. “You need to look at the market, at peer organisations and at different industries to see what you can learn from them. Look at different business models that can be adopted. And get external advice to bring learning from other sectors and outside perspectives.”

In the end, however, it all boils down to people. “Reinvention won’t be done at the side of a desk. The leadership needs to establish teams and resource them to get it done. And if you don’t have your people on your side, you’re likely to face an uphill battle.”

To read more on the PwC 2024 Irish CEO Survey see www.pwc.ie/ceosurvey