Take on Tomorrow @ The World Economic Forum in Davos: What does it take to thrive in an uncertain world?

0:00Would you like to know what's on the mind of some of the world's leading CEOs? What are they planning to do in the year ahead? To prepare to thrive in an uncertain world. Today, we're going to find out. I'm Femi O 'K, a broadcaster and journalist. And I'm Lizzie O 'Leary, a podcaster and journalist. And this is Take On Tomorrow, the podcast from PwC's management publication, Strategy and Business, that brings together experts from around the globe to figure out what business could and should be doing to tackle some of the biggest issues facing the world. Today, we're in Davos, Switzerland, for the World Economic Forum Annual Meeting, a gathering of some of the biggest minds in business, government and society.

0:48On this episode, we are unpacking the findings from PwC's 28th Annual Global CEO Survey. More than 4 ,700 CEOs from around the world took part. and what they said might surprise you. Let's get right into it and join our host for the day, PWC's Sarah Vaughn Fisher.

1:15Welcome to Take On Tomorrow here in Davos. We're so excited today to be joined by PWC's Carol Stubbins, Global Chief Commercial Officer, and Paul Griggs, PWC's U.S. Senior Partner. Welcome to both of you this morning. Hi, good to be here. Thank you. Well, we want to talk a little about the CEO survey today. Carol, I'm going to start with you. CEOs feeling pretty confident, more confident than they've had in past years. 60 % expecting global growth to increase over the next 12 months. That's three times as many as three years ago, which is pretty interesting. Kind of unexpected. So what's driving this change?

1:49Yeah, so I would say there's a number of factors driving the change. I'd probably pick out two specifically. One is we've actually seen a decrease in inflation and we're starting to see interest rates go down. But I think we have to remember that there's 4 ,700 CEOs in 109 countries. So not everybody is the same optimistic cells. So if you look at Germany, for example, we've seen very low optimism in terms of growth in the economy. If you look at India, it's nearly 90 percent. So huge variation. But it's also cautious optimism, because if you think about the concerns that CEOs have, The top four are really geopolitics, no surprise there, inflation coming back, the lack of available skills to really drive businesses forward, and cybersecurity in a number of areas as well.

2:44Another key part of the survey and really a lot of the talk here in Davos is, of course, AI. Everybody's talking about that. This is pretty interesting, though. We saw last year almost half expecting to see Gen AI increase profitability. We asked them again this year if they had seen that impact, and only about a third had, but really not denting the optimism here. Because when we're looking towards the future and the impact of AI in the future, 49 % saying that they think Gen.AI will increase profitability in the coming year. So why do you think leaders are so positive? Well, and if I contrast the two as well, Sarah, a couple of things.

3:19One, if you roll back a year ago, my hypothesis is that CEOs stared into the opportunities of the technology and were hyper optimistic. But remember, in order to maximize the benefits of the technology, you've got to have the human element as well. So I think of that as a bit of a yin and a yang. You've got technology, but the technology only works, only maximizes its power if your people know how to use it. So in my mind, what's changed over the last 12 months is that you've now built programs to upskill people, to change workflows, to change and produce outcomes for clients, to see the benefits, which builds confidence and enables technology and its implications on profitability to only grow.

4:01And so I think the next 12 to 24 months is going to be a progressive period for what we see the technology do. And another thing I think people are talking about here in Davos is about trust. And we talked about that in our survey as well. A third saying they have a high degree of trust in having AI embedded into the key processes into their companies. How can CEOs work to build trust in these systems with their workforce, with how they're using them every day? Any technology that gets deployed in business will only have sustainability if it is, in fact, trusted. Let's start quality as an example.

4:37I as a CEO or I as a user of technology need to believe that the outcomes are going to be high quality. I need to understand and expect them to produce logical, sensible results. And what we see clients doing is this is where these responsible AI programs come into play. So think companies establishing governance risk control processes around the underlying data, around the models themselves, around the outcomes of those models, ensuring that the information is secure, security matters. Again, explainability, interpretability matters. And so what is important to CEOs is not just putting the technology in people's hands, but ensuring that CEOs build frameworks that enable that trust, that enable that confidence, which then makes it useful in how it creates, distributes, and captures value for its organization.

5:27And I want to shift a little bit to talking about workforce, Carol, when it comes to AI, because you can't have AI unless you have your workforce along for the ride, really. We're seeing more CEOs say they've actually added jobs because of AI. So what's driving that change, would you say? Yeah, look, I think there was a big narrative out there that AI is coming after your job. And that creates a lot of fear and anxiety in workforces. Now, we know that every time we have an industrial revolution, there are more jobs created than lost. The challenge here is that the skills you need for the new jobs is quite different to the skills of the old job.

6:03So there's a bit of a mismatch and that's creating that anxiety. But it's great to see that the data and the stats and it's not only the CEO survey that kind of demonstrates this. We are seeing new jobs emerge. We are seeing organizations hiring. So we've seen more CEOs hire and we see more CEOs wanting to hire again. And I think to Paul's point, this isn't just about embedding AI into your workforce. In fact, it's more important to get your people to embrace the technology if you're going to be successful. Carol, we also talked about climate change in our CEO survey. And we're looking at climate-friendly investments and what CEOs were finding from those.

6:46They're starting to see some payoff. One in three reporting increased revenue for those climate-friendly investments. Why is that? So there's a number of things driving that. What I would say is climate can be a huge risk to a business. So it can be a risk to operations. It can be a risk to supply chain. So actually, organizations truly understanding the enormity of that risk and putting in place mitigating factors enables them to operate in a much more environmentally friendly way. There is also upside as well if you think about consumers demanding more climate-friendly products, for example.

7:28So those organizations that have invested there have seen a much bigger take into the market. What I would also say is the huge amount of reporting that organizations have to do, they're getting data that's really meaningful and valuable to the firm. So actually taking that data and doing something different with it is hugely, hugely beneficial and an upside there as well. The other thing I would say about climate is when we look at CEOs who have climate targets embedded into their overall performance, we are seeing an uptick in the performance of the business. Paul, obviously reinvention is a big conversation we have at BWC and we asked about it in our CEO survey as well.

8:14almost four in 10 CEOs saying their company's starting to compete in new sectors in the last five years, which is interesting. So what's driving that change, would you say? Well, first know that as is not unique to 2025, CEOs are constantly assessing the horizon and trying to find opportunities for growth. We spend a lot of time talking about the possibilities of tomorrow and how we power things, how we make things, build things, how we care for ourselves, how we feed ourselves, how we move. And CEOs are doing the same thing. And so, you know, naturally, you see it in the news today. You see technology companies who by themselves are becoming energy companies, energy producers, and therefore, you know, supplying the energy that they need for data centers and their consumption, which is only increasing in the age of increasing technologies.

9:02And so to me, Sarah, it is all about how do I capture and identify opportunities for growth, which allows me to create value for my firm and certainly deliver value for my customer. And I think this is definitely a question we'll be looking at in coming CEO surveys for sure. Carol, what about CEOs, though, that aren't taking that action that Paul is talking about? I mean, what's at stake if you're not making those changes? Well, we know that a significant portion of CEOs don't believe that their business is viable in the next 10 years if they don't reinvent their business model. One of the challenges for a lot of organizations and actually being at Davos this week and talking to so many clients, the theme that I'm hearing is how do I change my business when I've got such a legacy business and a culture that's resistant and reluctant to change?

9:56And that's a really challenging place to be. And I would say there's a couple of things holding companies back. One is the reallocation of capital and resources. So we know that when you reallocate capital and resources to new and growing areas, we see a much bigger increase in distribution in terms of kind of new revenue models from different businesses. But a lot of organizations allocate money to multi-year programs that they continue to invest in, regardless of whether they're still driving value or not. So really being much more agile and much more focused around starting stuff, stopping stuff and moving to where you believe the opportunity is.

10:41I also think decision making and critical decision making is really important and actually getting the right people in the room with the right framework around how you make decisions at a management level and a CEO level is critical. So there is a lot of pressure to keep doing what you've always done. And we've also seen that the tenure of CEOs impacts this as well. So those CEOs who have tenure of less than two to three years are less likely to go on a reinvention journey because they're not necessarily going to be there to reap the benefits. Whereas those CEOs that have longer tenure really have the ownership, the responsibility and the duty to kind of drive that business forward.

11:27So that's a really interesting statistic coming out. Yeah, and Paul, in the conversations you've had with CEOs here or even on your day-to-day job, is there anything standing in their way of reinvention? Are you hearing some of these same things that Carol is? I'm definitely hearing the same things Carol outlined. I mean, the way I'd summarize it is that CEOs broadly today, staring into this environment, appreciating its challenges, still see opportunity. And as a result, there is opportunity and there is optimism. And I guess, you know, to wrap up, Carol, starting with you, What lessons from the CEO survey, I guess, should we take forward?

12:02What will you be talking to clients about? So, I mean, I love Paul's comment around kind of opportunity and optimism because there is so much to be optimistic about. 2024 was the year of investment in AI specifically. Everybody had to do it. It was a non-negotiable. This is the year where it starts to pay off and organizations start to see big results. but actually be bold, be brave, and really think about the opportunity and what your business looks like in the future. And I know when I talk to clients that that's what they want to talk to because they're really grappling with how do they start, where do they start, and what do they need to drive differently.

12:45So I'm really excited about 2025. I love it. Paul, any final thoughts? I'd echo Carol's point. My encouragement to business leaders today would be continue that reinvention journey. And you're never one and done. I think organizations that are continuously putting thought leaders at the table, challenging their own thinking, allows those leaders to challenge how they point themselves in the future and brings their people along. And so I'm definitely an opportunity and optimism person. I see it and hear it from our CEOs. And again, I can't wait to see what 2025 holds and how we all prepare and invest for 2026 and beyond.

13:26Ending on a positive note. I love it. Well, thank you so much, Paul Griggs, Carol Stubbings. We appreciate you coming on. Thank you. Thanks, Sarah.

13:37Well, that's it for today. Thanks for joining us for this series of Take On Tomorrow. and stay tuned. We have something special we're working on and we'll be sharing more in the months ahead. For more, search Take On Tomorrow in your favorite podcast platform or head to pwc.com slash takeontomorrow. Take On Tomorrow is brought to you by PwC's Strategy and Business. PwC refers to the PwC network and or one or more of its member firms, each of which is a separate legal entity. Thank you.