Capitalizing

on Complexity
Insights from the
Global Chief Executive
Officer Study

Executive Summary for India, Sri Lanka,

Nepal and Bangladesh
 2 Capitalizing on Complexity

Introduction
How are leaders responding to a competitive and economic environment
unlike anything that has come before? To find out, we held face-to-face
interviews with 1,541 chief executive officers, general managers and
senior public sector leaders, including 61 respondents from India and
South Asia (ISA) – specifically, India, Sri Lanka, Nepal and Bangladesh.1
These conversations offer valuable insight into the agendas and actions
Figure 1 of global leaders.
Performance analysis framework
Standouts represent organizations from In our past three global CEO studies, CEOs consistently said that coping
different industries and from all
with change was their most pressing challenge. In 2010, we identified a
geographies.
new primary challenge: complexity. CEOs told us they operate in a world
that is increasingly volatile, uncertain and complex. Many shared the
Top 50 percent

view that incremental changes are no longer sufficient.

Steady-state performance

Standouts We carried out extensive statistical and financial analyses, including a

comparison of responses from CEOs based on financial performance.
Organizations that performed well during both good and bad economic
Long term

conditions – we call them “Standouts” – approach complexity differently

Top 50 percent
than those that performed less robustly. Figure 1 illustrates how
Standout organizations ranked in the top 50 percent for both the
Short term long-term period of 2003 to 2008 and the short-term period of 2008 to
Crisis performance
2009.

The most successful organizations are using entirely new approaches to

tap new opportunities and overcome the challenges to growth. Four
primary findings arose from our conversations:

The vast majority of CEOs anticipate even greater complexity in

the future, and more than half doubt their ability to manage it. But
there is a huge disparity between the overall sample and the Standouts,
who have turned increasing complexity into financial advantage over the
past five years.
Executive Summary for India, Sri Lanka, Nepal and Bangladesh 3

CEOs believe creativity is the most important leadership quality.

Creative leaders encourage experimentation throughout their organiza-
tions. They also plan to make deeper business model changes to realize
their strategies, take more calculated risks and keep innovating in how
they lead and communicate.

The most successful organizations co-create products and

services with customers, and integrate customers into core
processes. They adopt new channels to engage and stay in tune with
customers, and glean more intelligence from the barrage of available
data to make customer intimacy their number-one priority.

Better performers manage complexity on behalf of their organiza-

Figure 2
tions, customers and partners. They do so by simplifying operations
and products, and increasing dexterity to change the way they work, The complexity gap
ISA CEOs are more confident about
access resources and enter markets around the world. Dexterous their ability to handle the complexity
leaders expect to generate 20 percent more of their future revenues from they anticipate than the vast majority of
new sources than other CEOs. their peers.

A drastically different world

Increasingly interconnected economies, enterprises, societies and 7%
complexity
governments have given rise to vast new opportunities. But greater gap
connectivity has also created strong – and too often unknown – interde-
pendencies. The new economic environment, CEOs agree, is substan-
tially more volatile, much more uncertain, and increasingly complex.
Interestingly, views on the strength and impact of these shifts differ by
70%
vantage point.
63%

Understanding the sharp differences emerging by region becomes more

significant in a world where economies and societies are closely
linked. Organizations confront these variations as they increasingly
operate across boundaries and across different regions.

A surprising number of CEOs told us they feel ill-equipped to cope with

this drastically different world. ISA CEOs, by contrast, are remarkably
confident about the future. Only 70 percent expect the level of
complexity to grow significantly over the next five years, and 63 percent
believe they know how to deal with it successfully – a gap of just 7 Expect high/very high level
percent, compared with the global average of 30 percent. In short, ISA of complexity over 5 years

CEOs not only anticipate much less complexity than their peers in every Feel prepared for
expected complextity
other territory except Japan; they are also much less worried about it.
 Embody
creative
leadership

4 Capitalizing on Complexity
Build
operating
dexterity

Reinvent
customer
relationships

Seizing the opportunities

Embody Yet certain organizations have delivered solid business results even in the
creative
leadership recent economic downturn – and the people who lead them feel much
more prepared for complexity. So, what are these Standouts doing to
thrive? Our extensive analysis shows that CEOs who are capitalizing on
complexity embody creative leadership, reinvent customer relationships
Build
operating and build operating dexterity.
dexterity

Reinvent
customer
relationships
Embody creative leadership
In an uncertain and volatile world, CEOs realize that creativity trumps
other leadership characteristics. Creative leaders are comfortable with
ambiguity and experiment to create new business models. They invite
Embody disruptive innovation, encourage others to drop outdated approaches
creative
leadership
and take balanced risks. They are open-minded and inventive in
expanding their management and communications styles, in order to
engage with a new generation of employees, partners and customers.

Build ISA CEOs are adept at dealing with ambiguity; 52 percent use iterative
operating
dexterity strategic planning processes as distinct from formal annual strategy
reviews, while 36 percent favor quick decisions. ISA CEOs are also
Reinvent
customer willing to embrace new management and communication techniques:
relationships 63 percent tend to persuade and influence rather than to command
and control; and 31 percent prefer managed viral communication to
top-down communication.

Figure 3
Total sample
Decision style 25% 42% 33%
ISA CEOs are comfortable relying
on quick decisions.
20% 44% 36%
ISA 9%
more

Thorough decisions Both Quick decisions

Executive Summary for India, Sri Lanka, Nepal and Bangladesh 5

How will you develop the critical capabilities to enhance creativity among
“I’d
  replace the word ‘innovation’
your leadership team?
with ‘disruption.’ It’s necessary to
In what ways can you explore, reward and globally integrate diverse and continually disrupt monotony, to
unconventional points of view? challenge and hence expand our
limits.”
How are you challenging every element of your business model to get the
most from untapped opportunities? Media and Entertainment CEO, India

How will you leverage new communications styles, technologies and tools to
lead a new generation of talent and encourage breakthrough thinking?

Reinvent customer relationships

In a massively interconnected world, CEOs are prioritizing customer Figure 4
centricity as never before. Globalization, combined with dramatic Focus on customer intimacy
increases in the availability of information, has exponentially expanded ISA CEOs are marginally less likely to put
getting closer to customers at the top of
customers’ options. CEOs know that ongoing engagement and
their agendas than other CEOs.
co-creation with customers produce differentiation. They consider the
information explosion immensely valuable in developing deep customer
insights.
1%
less
However, ISA CEOs are slightly less proactive than their peers in many
other regions about putting customers – or citizens, in the case of public
sector leaders – front and center. “Getting connected” to better under- 88% 87%
stand, predict and give customers what they really want is the top
priority for 87 percent, one percent less than the global average. That
said, ISA CEOs are fully aware of the value of customer data; 77 percent
are investing much more effort in collecting insight and intelligence to
realize their strategy.

How will you engage customers in new ways that increase interest and
loyalty to generate new demand and revenue sources?
How can you involve customers more effectively and directly in product and
service development?
Can you hear the voice of your customers through the vast amount of data?
Can you understand and act upon the information? Total ISA
sample
6 Capitalizing on Complexity

Build operating dexterity

Figure 5 In an increasingly complex world, CEOs are learning to master
Plans for simplification complexity in countless ways. They are redesigning operating strategies
ISA CEOs are among those most for ultimate speed and flexibility. They are embedding valued complexity
actively simplifying their products and
in elegantly simple products, services and customer interactions. And
processes to better manage complexity.
they are carefully considering how best to take advantage of global
efficiencies while addressing local needs.

13%
more ISA CEOs are no exception; 54 percent are focusing on simplifying their
products and operations to manage complexity more effectively. The
most dexterous CEOs in our total sample are also much more intent on
reducing their fixed costs and increasing their variable costs, so that they
can rapidly scale up or down.

In what ways can you simplify processes and develop the agility required to
54% execute rapidly?
48% How can your organization benefit from taking on more complexity on
behalf of customers?
How will you integrate and analyze timely information to gain insight,
make quick decisions and enable dynamic course correction?
Have you implemented asset and cost flexibility and defined partnering
strategies to compete in your chosen markets?

How to capitalize on complexity

Total ISA
sample

For ISA CEOs and their organizations, avoiding complexity is not an

option – the choice comes in how they respond to it. Will they allow
complexity to become a stifling force that slows responsiveness,
overwhelms employees and customers or threatens profits? Or do they
have the creative leadership, customer relationships and operating
dexterity to turn complexity into a true advantage?
Executive Summary for India, Sri Lanka, Nepal and Bangladesh 7

The combined insight from our 1,541 interviews calls for CEOs and their
teams to:

Embody Reinvent Build

creative customer operating
leadership relationships dexterity

• Embrace ambiguity • Honor your customers • Simplify whenever possible

• Take risks that disrupt above all else • Manage systemic
legacy business models • Use two-way complexity
• Leapfrog beyond communications to sync • Promote a mindset of
“tried-and-true” with customers being fast and flexible
management styles • Profit from the information
• Be “glocal”
explosion

We invite senior leaders to use this latest Global CEO Study to spur
ongoing discussions about how to navigate the hurdles of complexity
and how to prosper because of it. As your organization explores many
options to capitalize on complexity, we look forward to working with you.

For further information

For more information about this study, please contact one of the
IBM leaders below. Or, visit ibm.com/capitalizingoncomplexity or send
an e-mail to the IBM Institute for Business Value at [email protected].

India/SA Clifford Patrao [email protected]

IBM Institute for Business Value Peter Korsten [email protected]

How our research was conducted © Copyright IBM Corporation 2010

Between September 2009 and January 2010, we met face-to- IBM Global Business Services
face with 1,541 CEOs, general managers and senior public Route 100
Somers, NY 10589
sector leaders representing organizations of all sizes in 60 U.S.A.
countries and 33 industries, to better understand their chal-
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lenges and goals. Our response sample in each region has May 2010
been weighted according to actual regional Gross Domestic All Rights Reserved
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We also analyzed the differences between financial standouts trademarked terms are marked on their first occurrence in this
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short term. Notes and sources

1 For readability, we have referred to this collective group as

About IBM Global Business Services “CEOs.”
Strategy & Change 2 IMF World Economic Outlook Database. “2008 Actual Regional
IBM Global Business Services offers one of the largest Strategy GDP.” October 2009. . http://www.imf.org/external/pubs/ft/
weo/2009/02/weodata/index.aspx
& Change organizations in the world, with over 3,250 strategy
professionals. IBM Strategy & Change practitioners help clients
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About the IBM Institute for Business Value

The IBM Institute for Business Value, part of IBM Global
Business Services, develops fact-based strategic insights for
senior business executives around critical industry-specific and
cross-industry issues. This Global Chief Executive Officer Study
is part of our ongoing C-Suite Study Series.

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