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March 23, 2012

Striking Differences Found in Strategy and Challenges Among CEOs in Emerging and Mature Economies, New Study Reveals: U.S. and European CEOs Are Concerned About Political and Economic Risks, While Asian Counterparts Focus on Innovation and Human Capital

Top executives in Europe and the U.S. say global political and economic risk, and government regulation are their most pressing concerns, while Asian CEOs name innovation as their top challenge, closely followed by human capital — attracting, retaining and rewarding talent, according to The Conference Board CEO Challenge 2012, a global survey of business leaders, which discovered striking differences in focus and strategy between Asia's emerging economies and the mature economies of the West. Between September and December 2011, CEOs, presidents and chairmen from the world's leading companies were asked to identify the most pressing challenges they face in today's business environment. Nearly 800 survey respondents then named their top strategies for addressing each problem, creating a dynamic picture of executive thinking across continents and industries. "The divergence between regions in CEO Challenge 2012 is illuminating," said Bart van Ark, executive vice president and chief economist at The Conference Board, and a co-author of the report, in a news release. "While American and European CEOs continue to focus on issues related to the eurozone debt crisis and a changing regulatory environment, their counterparts in Asia appear to be addressing core factors to advance business growth," he added. "It seems Asian companies hoping to sustain recent success into the long-term are turning inward to improve their pipelines of innovation and world-class talent. Faced with a fragile recovery — or, in Europe, renewed recession — Western leaders are understandably more worried about external shocks and pressures."

Distinctive Concerns

Leaders in each of the three regions surveyed named a different top challenge for 2012:

  • In the U.S., CEOs say government regulation is the most critical challenge they face, followed by global political and economic risk, innovation, and human capital. CEOs are viewing the growing uncertainty of the overall regulatory environment as a hindrance to long-term planning.
  • European CEOs cite global political and economic risk as their primary challenge, followed by innovation and government regulation, with cost optimization and global expansion tied for fourth. Europe was the only region not to rank human capital concerns in its top five.
  • Among Asian CEOs, the most critical challenge is innovation, followed closely by human capital. Global expansion and sustainability tied for third place. In a time of rapid economic development and change for the continent, Asia was the only region to rank sustainability as a top-five challenge for 2012.

"In Asia, it's become clear to leaders that internal talent development — creating the effective leadership to drive business results — is a critical key to success," said Rebecca Ray, senior vice president of Human Capital at The Conference Board, and a co-author of the report, in the release. "This is particularly true in China and India, where CEOs rated human capital as their primary challenge, as well as in service and manufacturing industries worldwide, where human capital concerns are playing a critical role in a firms' path toward continued growth."

In addition to interregional discrepancies, priorities also varied — sometimes dramatically — with company size and industry, as well as between countries in the same region.

Global Challenges

Despite these differences at the top, CEO Challenge 2012 nevertheless revealed a number of broad global trends. Overall, CEOs cited innovation, human capital, global and economic risk, government regulation, and global expansion as the top five most critical challenges they face.

Across industries and geographies, innovation — of products, processes, organization designs, and business models — was never far from executives' minds. Moreover, CEOs perceive innovation to be intimately linked to other challenges. Intriguingly, even as they continue to identify technology as the number-one driver of innovation, many leaders are exploring ways to leverage human capital to gain an innovation edge on competitors. From marketing and communications to working conditions and training, nourishing the human element of innovation appears to be gaining steam as a long-term strategy.

"One key finding of this year's survey is a growing awareness that collaboration, with both traditional and non-traditional partners, is a requirement to achieve growth and remain competitive," said Jonathan Spector, president and CEO of The Conference Board, in the release. "The importance of networks — business, personal, formal, and informal — is growing and alliances between businesses, governments, competitors, NGOs, and labor unions are requiring a higher level of trust and interdependency that shatters the old fashioned 'leader-knows-best' models."

Underscoring the realities of operating in a truly borderless business environment, global expansion rose to a top-five challenge for CEOs worldwide. For 2012 the interdependence of regions, companies, consumers, and supply chains will continue to grow tighter, but leaders must also address a newer phenomenon: the shift in wealth creation from the developed to the developing world. Indeed, where global markets were once the domain of the largest multinationals, CEO Challenge 2012 found that smaller and medium-sized companies are increasingly cognizant that staying competitive means expanding beyond home borders.

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