PricewaterhouseCoopers unveiled their annual CEO survey at this year's meeting of the World Economic Forum at Davos. The survey offers a broad sentiment sample from over 1300 CEOs from 68 countries. The report is available online, as is a really rich interactive tool that allows you to slice the data and see how your company compares with some of the global sentiment. We caught up with PwC U.S. Chairman and Senior Partner Bob Moritz in Davos to find out what he found surprising about the report and understand how his company is using data differently itself. An edited version of the interview transcript appears below.
What do you see as the mood at this year's Davos?
A bit of optimism but it's definitely cautious optimism. We're a heck of a lot better at this event than we were here over the last three or four years, and that's probably because there's no one catastrophic or imminent issue that's on the table.
That correlates with what your survey reports.
Definitely. Of the CEOs surveyed, 50%-plus said things will stay the same for their companies. Last year, 50% said things would get worse. So on a year-over-year basis, that's good. What's really interesting is the CEO's confidence in increasing revenue year over year is down. Why is that, when you have a more stable view? There are two reasons for this, based on our hypothesis and some of the feedback we've gotten here. One is we've got some hangover problems: European issues, the fiscal cliff issue that got kicked down the road. We haven't really tackled some of the crosshair issues that need our attention. The second is that in a sustained low-growth environment, the pie isn't getting any bigger, so everyone's competing for a smaller slice of that pie. So you have to innovate, do things better, and customer service becomes more important. 82% of the CEOs in the survey said they were going to spend time changing their customer strategies in 2013.
Some of that focus on customer strategy in the survey translates into increasing use of analytics and big data.
When CEOs talk about customer strategy you have to figure out what they really mean. One thing is identifying the customer and what product offerings you want to make — there, the innovation piece is really important. Second, how do you interact with customers more effectively to get higher retention and a longer-term relationship with them? And third, how do you interact with customers both personally and enabled by technology?
One example of a client using data to change the nature of their customer relationship comes from a large mortgage insurer. They had been using their agents just to sell insurance, and typically those agents would be contacted by customers after they already selected a house and needed to buy mortgage insurance. We worked with the insurer to supply the agents with more data so they could contact clients further upstream, say three months before the purchase. Then they could provide information on the insurance, obviously, but also on the demographics of the area, comparable homes with insurance info, data on schools — that kind of thing. The data turned what had been a transaction into a service and an experience.
How are you using data in new ways at PwC?
One interesting thing we are doing now because of increasing access to data is hiring different kinds of people. We're hiring outsiders more than ever before. As I mentioned, CEOs today need help with customer service and we're hiring for that. We're also hiring more doctors. If you want to go after the health care system, you need to understand what information is needed at diagnosis, how does it then go through the supply chain, etc. That's analytics, big data, predictive data and we're making a lot of hires there.
Let's jump back to the survey for a second. What was most surprising to you about the report?
The lack of M&A activity was surprising, especially when you look at the cash on the balance sheets. After dissecting the issue, we expect that people will be looking at deals in 2013 but they'll be smaller. And any M&A activity that does happen will probably be towards the end of 2013 given the uncertainties. Another big surprise was the variability by country of the confidence levels. The last surprising thing for me was the extent to which people are still focused on cost management initiatives. It was 80-something percent last year. This year it's still in the 70s.
And what are the uncertainties — the crosshair issues you mentioned — that you don't think people are dealing with?
When you look at political agendas, there's increased uncertainty in Europe with what Cameron said about putting the EU membership to a vote. When you look at how we are going to tackle the healthcare issue around the world, are we really focusing on it on a long-term basis with a long-term plan? No we're not. The reality is you need all parties — politicians, local communities, and business — and you need more leadership. You can't allow people to manage by the numbers and the demographics and social media to see what the next big ideas we should follow. It's definitely important to engage and dissect that info, but it's more important to take it, step back, and then say this is what we're doing and explain it to those constituencies and move the ball forward.