How has adversity become a springboard to growth?

Our CEO Imperative and Capital Confidence Barometer studies look at now, next, and beyond the pandemic to how leaders can reframe the future of their organizations.

Where was your company when COVID-19 struck? It’s tempting to assume strategy, in the broadest sense, mattered little in the past 12 months. After all, extraordinarily well-run organizations overnight found markets had disappeared, while a rising tide in other sectors lifted all boats. Yet our research into how companies weathered the short-term impact of the pandemic, are now navigating the medium-term, and where that leaves them in the long-term reveals a universal truth: leadership matters.

This CEO Imperative study finds the performance of companies is highly correlated with their trajectory before the pandemic. Thrivers (34% of organizations surveyed) were growing before the crisis and are leaning into this pivotal moment, accelerating their existing transformation agenda. Survivors (32%) were already experiencing declining revenue, will keep seeing flat or declining growth over the next three years, and are slowing their transformation priorities. Between them are maintainers (34%), which are companies more likely to have had low or flat growth before the pandemic and whose growth will remain flat or grow moderately over the next three years.

Does that mean companies are trapped on their current trajectory? No. But for survivors to narrow the gap to thrivers, CEOs must urgently accelerate their transformation efforts. The CEO cut of our latest EY-Parthenon Global Capital Confidence Barometer provides a window into that effort. It finds 13% of CEOs – what we call “value visionaries” – have embraced new practices to reframe their enterprises. They view COVID-19 as a wake-up call to fuel their bold growth ambitions, which will yield value for a broader range of stakeholders, not just shareholders. The remaining 87% – “pragmatists” – are leaders who recognize the need to re-orient for a post-pandemic business landscape but have not fully committed to action plans.

So, where’s your company? And which kind of CEO are you? Where you are today isn’t necessarily where you’ll be tomorrow. But our research shows the importance of moving from intention to execution, and closing the key capability gaps to acquire the DNA of the future enterprise: one built around human-centered transformations that increase ability and innovation while driving long-term value.

Creating long-term value emerged as an important cross-cutting priority. However, a pronounced “say-do” gap suggests CEOs are unclear about the definition of long-term value and how to achieve this objective. Significant work remains to reorient companies toward long-term value creation.

Only 26% of CEOs identify the growing climate imperative as one of the trends having the most impact on their companies. This lack of awareness of the broad-based risks posed by climate change likely contributes to the long-term value “say-do” gap.

Digital-led transformation has topped the CEO agenda for years but remains a challenge because many efforts in recent years were insufficient in scope, and technology change means there can be no such thing as a single transformation. To keep up, transformation must be continuous.

Relatedly, CEOs indicate significant gaps in their organization’s ability to generate value from data. The most pronounced gap – call it a chasm – is related to data and trust: Only 34% of CEOs say customers trust them with their data. This data chasm stands in the way of many priorities, from business model reimagination to supply chain visibility and new customer propositions.

While agility, innovation, and diversity are critical to thriving, culture shortcomings are key barriers to these objectives: only 44% of CEOs affirm having an innovation mindset across the organization, while 32% say mid-level leadership personally models shared purpose and vision. A meager 28% say they create diverse and inclusive teams at all levels.

These shortcomings are pronounced when it comes to C-suite change: CEOs prioritize more efficient decision-making over diversity or bringing in outside perspectives.

While companies increasingly say they are focused on developing and orchestrating ecosystems, only 47% of CEOs affirm making significant investments to do so. And ecosystems are still driven from the bottom up: just 31% of CEOs say external ecosystem partnerships are a part of business strategy.