Arthur D. Little (ADL), a consulting firm with over 130 years of history, held a media roundtable in June to coincide with the publication of “CEO Insights 2024.” The company’s Chairman and CEO, Ignacio Garcia Alves, who visited Japan, gave an overview of “CEO Insights 2024” and ADL’s panoramic view of CEOs, which was very interesting.
CEOs around the world are optimistic about the future
ADL was founded in 1886. It is known in the industry as the world’s oldest management consulting firm. The company has been involved in innovative projects around the world, such as supporting the Apollo 11 project that landed on the moon in 1969, and formulating the national mobility development roadmap for Dubai Roads and Transport Authority (RTA) in 2019. ADL’s CAGR (compound annual growth rate) from 2014 to 2023 is 15.5%, which is about 2.5 times the market average.
ADL’s “CEO Insights 2024” survey interviewed 282 CEOs with global revenues of over $1 billion.
The business areas of the target companies are evenly distributed across six major industries: communications, energy & utilities, manufacturing (including automotive), travel & transportation, healthcare, and financial services, providing an unbiased view of the attitudes of entrepreneurs around the world.
The most notable aspect of this insight is that CEOs are fairly “optimistic” about the economic outlook.
Ignacio Garcia Alves, Chairman and CEO of Arthur D. Little (ADL).
“66% of CEOs are very positive about the global economic outlook over the next three to five years, up from 22% last year – a three-fold increase. That’s an astounding number.
In Asia, the figure is particularly high at 78%.”CEOs are realizing that even as we experience crises such as the pandemic, crises also create opportunities,” Alves said.
There were also some surprising results when asked, “To what extent have companies implemented a company-wide AI strategy that spans all departments?”
Only 13% of companies have adopted a company-wide, comprehensive AI strategy. ADL analyzed that “we are still in a transitional period until we fully understand the impact of AI and incorporate it into the entire company.” In particular, the percentage of respondents in South America, Africa, and North America who answered “we have a company-wide strategic vision” was relatively low. “The United States has become a creator and producer of AI, but overall, some industries are not yet fully prepared for AI,” said Alves.
He also pointed out the following regarding the purpose of introducing AI:
“The goal seems to be to use AI instead of people to improve work efficiency or reduce costs. However, AI has the potential to go beyond simply cutting costs; it can also improve quality and create new business models,” Alves said.
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“The impacts of climate change are inevitable, but there is a way out.”
Alves also explained the “Blue Shift Report,” which supports companies’ strategies for adapting to climate change. The impacts of climate change, such as extreme weather, rising sea levels, and loss of biodiversity, are now inevitable. ADL explored how technology can help businesses adapt to the effects of climate change and came to seven conclusions.
“The first is to use existing technology to cost-effectively solve local challenges and address them sustainably.
Second, functional expectations such as climate-proofing business, protecting the workforce and maintaining productivity remain consistent across all scenarios.
Third, the importance of IoT for data collection, augmented reality and virtual reality for simulation, and AI including computer vision and graph neural networks (GNNs).
Fourth, in light of the difficulty of forecasting, it is important to prepare a variety of scenarios rather than just one approach.
Fifth, recognize that technology alone cannot solve problems.
Sixth, global challenges cannot be addressed through short-term profits.
Seventh, we must work together to create new types of collaboration between governments, communities, businesses, and individuals.” (Alves)
In times of turmoil, the focus is often on short-term instability and uncertainty, but ADL’s research and analysis shows that CEOs are prioritizing ambidexterity — the ability to balance long-term innovation with short-term productivity — to turn uncertainty into opportunity and build a better future.
A major turning point for society and industrial systems
Yusuke Harada, Managing Partner and Japan Representative of ADL Japan.
In the second half of the roundtable, ADL Japan Managing Partner and Japan Representative Yusuke Harada also gave a speech.
Harada says that the rise of consulting firms is correlated with the respective historical backgrounds and demands of society.
The period from 2010 to the present is one in which society and industrial systems are at a major turning point, and we see this as an era in which new business model ideas will emerge from the combination of many different technologies.
“ADL is facing innovation from both the perspective of societal demands and the means of achieving them in this VUCA era.”” says Harada.
He then introduced the following six new trends that ADL has noticed while working on various projects with cutting-edge companies.
- Social infrastructure: A huge market emerges that requires action
- A time of change in the industrial structure: Redefining the value proposition of your company
- AI/ModernICT: Creating win-win-win new businesses through technology
- In the VUCA era: The choice of not creating a mid-term plan
- Changing geopolitical starting point: Increasing India-US collaboration
- New ESG perspectives and initiatives: Building a regional value chain
The first issue is how to address social infrastructure.
“We live in an era of population decline and an aging society, and there is a demand for the creation of social infrastructure by private companies that is not bound by traditional frameworks, such as a re-examination of the boundaries between public and private. We are moving away from asset-based infrastructure toward the construction of purpose-driven social infrastructure based on social issues,” said Harada.
The second example was the air conditioning equipment company Daikin Industries. Going beyond the framework of air conditioning production and sales, the company has been collaborating with companies in a variety of industries, including electronics, office furniture, consumer health, food, and insurance, since 2019 as a platform aiming to “create the office space of the future.”
“We are currently at a turning point in the industrial structure, and an increasing number of companies are working to solve social issues and create new value that is centered on consumers, and are redefining the value they provide,” says Harada.
As a third example of technology creating a win-win-win new business, he cited a climate tech startup that is predicting the risk of flooding.
“By combining technology, it will become possible to create new business models that make everyone happy, including service providers, service users, and even local governments, and to create new ways of moving society,” said Harada.
The fourth reason is that in this VUCA era, an increasing number of companies are choosing not to create mid-term business plans. By setting a three- to four-year mid-term plan as the premise, the plan itself can become an end in itself, and changes in the business environment can lead to a divergence between the mid-term plan’s goals and reality.
The fifth is the restructuring of the global supply chain through increased collaboration with India and the United States. In particular, India’s population is growing, and there are an increasing number of projects related to food, clothing and shelter. In the technology field, there is also a movement among major Japanese IT companies to involve Indian companies and human resources in their own research and development.
The sixth is the creation of a regional value chain that incorporates ESG perspectives such as carbon neutrality, respect for human rights, and biodiversity. For example, JetBlue, a major U.S. low-cost carrier, is improving the beach environment in the Caribbean and conserving mangroves and coral reefs, thereby increasing the number of tourists to the Caribbean and reflecting this in its profits.
“In Japan too, various companies are now embarking on initiatives to create new social systems by solving issues in the field of sustainability, centered around regional revitalization,” says Harada.
Both Alves’s and Harada’s commentaries show that CEOs around the world are not stagnating, but rather creating new business ventures, finding hope in the midst of turmoil, and moving forward with a positive attitude.
Source: BusinessInsider
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