CEOs Say Revenue Growth Is More Important Than Cost-Cutting

CEOs, whether they're based in New York, Tokyo, Frankfurt, or Rio, share similar agendas for their companies' near-term future: Growing revenue has a higher priority than cutting costs.

As the global economy expands, 83% of CEOs from major global companies identified revenue growth as their top goal over the next three years, according to the Global CEO Study 2004 released Monday by IBM Business Consulting Services. Cutting costs remains a top priority of more than six in 10 CEOs surveyed. No other areas came close. "Costs are almost totally controlled, so we should focus on revenue growth," one CEO told interviewers, many of whom are partners in IBM's consulting unit.

There were few differences between the responses of CEOs based on geography, though the gap between growing revenue and cutting costs was smaller among European and the Japanese chiefs than among CEOs from the Americas and the non-Japanese Asia-Pacific region. Eric Pelander, leader of IBM's strategy and change services practice, suggests that American and Asian-Pacific nations are ahead of their counterparts in Europe and Asia in employing technology to trim costs.

One incongruity of the study, at least on the surface, relates to the role of the customer. Sixty percent of the CEOs who see rapid response as an important factor say capturing and employing customer information to make rapid decisions is important. Yet only 40% say implementing and leveraging customer-relationship-management processes and applications are actions they'll take to rapidly respond to customers. Pelander says the difference could be CEOs' uneasiness about the effectiveness of specific CRM system modules and marketing schemes that might not have worked as promised.

The study suggests that CEOs are comfortable with technologies. About one-quarter cited technological uncertainty as the technology factor that would have the great impact on their business; but seven of 10 cited adopting new technologies as the greatest tech factor to have a big influence on their organizations.

Other findings of the survey of 456 CEOs, including about 70 from U.S. businesses, that was conducted in the fall, include:

• Overwhelmingly, by more than 80%, the CEOs identify market forces as the biggest external force that would have an impact on their companies, followed by people skills and macroeconomic factors, both at about 40%. Most CEOs don't see technology as a major external force, with only about one-third citing technology as among the top three forces that will have a major impact on their companies. These findings suggest the pervasiveness of IT within big companies; technology is ingrained in the business world.

• Eight of 10 CEOs see increased competition as the greatest market factor to have a big impact on their companies, with about half identifying changing market dynamics.

• About two-thirds of the CEOs say new products and services represent the greatest opportunity to grow revenue, with nearly half identifying new markets as a place to get extra bucks.

• More than 30% of the CEOs cite economic uncertainty, workplace issues, and regulations as the most significant external barriers their companies confront. The most significant internal barriers: Half the respondents point to limited capabilities and leadership resources to manage change-related projects.