Actions the best CEOs are taking in 2023

Courtesy of McKinsey & Company

by Carolyn Dewar, Scott Keller, Vikram Malhotra, and Kurt Strovink

Key takeaways

The latest CEO Excellence Survey by McKinsey shows leading CEOs’ evolving priorities and the actions they’re taking in response. Their answers suggest that the three factors that matter most are digital disruption, the economy, and geopolitics. In response, CEOs are tackling the issues that emerge from these factors by showing a consistent mix of defensive (protecting against risks) and offensive (capturing new opportunities) maneuvers, which create a powerful playbook for leaders in 2023.

1. Actions to deal with digital disruption

·        Developing advanced analytics (62 percent of CEOs): OpenAI’s introduction of ChatGPT in late 2022 put gasoline on the already well-lit fire of companies looking to leverage advanced analytics for competitive advantage. Companies such as beverage maker Diageo are already seeing the value of applying advanced analytics: its use of geolocation data to personalize and target content for consumers has led to a 17 percent increase in media spend ROI.

·        Enhancing cybersecurity (48 percent): JPMorgan Chase has been one of the most outspoken firms on why spending billions on cyber-related changes, ranging from modernizing infrastructure and developer tools, to embedding cybersecurity controls into the business, to training employees to be vigilant is vital.

·        Automating work (45 percent): Walmart has used automation to cut in half the number of steps needed to ship products at some of its e-commerce distribution centers.

2. Actions to deal with the risk of high inflation and economic downturn

·        Reduce operating expenses (76 percent): Examples of this broader set of levers the best CEOs are using include supply chain renegotiations, tax optimization, deferring capital spending, tightening expense policies, and increasing employee productivity.

·        Redesign products and services (61 percent): The aforementioned cost discipline frees up cash that CEOs can use to improve products and services to better attract and retain customers.

·        Reassess strategic and economic assumptions (54 percent): CEOs are revisiting their strategies on an ongoing basis, or as one CEO put it, staying nimble, creating agility and adaptability is critical.

3. Actions to deal with the escalation of geopolitical risks

·        Build robust compliance capabilities (65 percent): Many companies are building up their trade compliance organizations and improving how they screen different customers and companies in order to mitigate risks related to trade compliances.

·        Create resilience in supplier networks (62 percent): The best CEOs have already addressed potential points of failure in their supply chains. Now they are working to continuously improve resilience in this area such as diversifying their supplier networks to prevent shortage of materials.

·        Invest in monitoring and response capabilities (56 percent): Having good early-warning indicators and the ability to act quickly during a crisis can turn a threat into an opportunity.

A second block of three areas that a meaningful number of CEOs also flagged as important are talent, ways of working, and climate change. Here is how numerous successful CEOs are approaching these areas:

·        Talent: While the talent market remains tight, our survey respondents indicated they feel the time has come to refocus on employee performance, after several years of focusing more on helping employees weather the pandemic and other challenges. While this will be uncomfortable for some, the best CEOs believe that talented employees are by and large welcoming of such a stance.

·        Ways of working: In line with the topic of talent, on balance the best CEOs are also expecting employees to spend more time in the office or with customers in 2023. The rationale is that doing so is ultimately good for both employees and customers: it increases mentorship, builds community, sparks innovation, and creates a stronger sense of meaning in the workplace.

·        Climate change: CEOs remain committed to thoughtfully transitioning to net-zero. They are not interested, however, in getting caught up in “check the box” exercises related to ESG rankings and ratings. Leaders are paying particular attention to areas where revenue can be generated by focusing on sustainability. Russia’s invasion of Ukraine has also reinforced that being a socially responsible company means ensuring reliable, affordable traditional products can be provided during the transition.

To read the full article, please visit https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/actions-the-best-ceos-are-taking-in-2023

About the author(s)

Carolyn Dewar is a senior partner based in McKinsey’s Bay Area office. Scott Keller is a senior partner in the Southern California office. Vikram Malhotra is a senior partner in the New York office where Kurt Strovink is also a senior partner.

The authors would like to thank Blair Epstein, Selin Neseliler, Tanmay Tapase, Jen Whitaker, and Jessica Zehren for their contributions to this article.