CEOs Confident, Concerned about Innovation vs. Regulations

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Although CEOs in the United States are largely confident about their business prospects in the next three years, they also express concern about maintaining relevancy and their ability to innovate, says a new study from KPMG, an audit, tax, and advisory firm that operates a large practice in Detroit.

“Recent years have seen a slow moving recovery coupled with fast moving innovation and global market shifts, presenting today’s chief executives with an unprecedented landscape in which to set a course for growth,” says John Veihmeyer, chairman and CEO of KPMG in the U.S. “While confidence is growing in the fundamental strength of the economy and business prospects, CEOs face mounting concerns over managing risks and regulatory burdens and ensuring the continued relevance of their products.”

The study, which surveyed 400 CEOs, found that 62 percent are more confident about their growth prospects over the next three years than a year ago. In looking at the next five years, 28 percent tabbed 2016 to be their greatest year for profits and 29 percent said 2017.

In turn, 72 percent of the respondents said they were concerned about whether their products and services will be relevant three years from now. In addition, 90 percent expressed concern about their competitors’ ability to take business away from them.

The study also identified innovation — with an emphasis on improving existing products over delivering new ones — as the key-differentiating factor to improve year-over-year growth and profitability.

When asked to identify barriers to innovation, 43 percent of the CEOs noted rapidly changing customer dynamics; 35 percent cited budget constraints; and 19 percent were concerned about conflicting visions among executive leadership. Only 17 percent of the CEOs said they have a fully developed process for innovation implemented across all units. However, 47 percent of CEOs from companies with revenues exceeding $10 billion said they have a formal, company-wide innovation process.

Those surveyed also identified the regulatory environment as the top issue that could have the greatest impact on companies, with 34 percent of the CEOs spending more time with regulators or government officials or considering doing so.

“The pace of regulatory change is accelerating around the world,” Veihmeyer says.  “CEOs will be spending increased time on the regulatory front over a number of priorities competing for attention.”

To read the full report, click here

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