The Conference Board Governance Center Blog

Apr
19
2012

CEO Challenge 2012 Reveals Critical Link Between Innovation and Human Capital

The top five challenges facing business leaders worldwide this year are Innovation, Human Capital, Global Political/Economic Risk, Government Regulation, and Global Expansion, according to nearly 800 chief executives, presidents and chairmen from leading companies in Asia, Europe and the United States who took part in the Conference Board CEO Challenge 2012.

The Conference Board has conducted the CEO Challenge survey every year since 1999, asking top executives across the globe and from many different industries to identify and rank their most critical business challenges and their strategies for addressing each one.

The 2012 survey report, Risky Business: Focusing on Innovation and Talent in a Volatile World, which was published in March, was authored by three Conference Board executives: Charles Mitchell, executive director for knowledge content and quality; Rebecca Ray, senior vice president of human capital; and Bart van Ark, executive vice president and chief economist. Through the combination of their insight and the candid responses of those who were surveyed, the report provides an in-depth look at global and regional business trends and a dynamic picture of the strategic thinking of leading executives on three continents.

Although the top five business challenges are clear when the executives’ responses are viewed collectively, the survey also reveals sharp differences from region to region, as shown by the following excerpt from the report:

The varying speed of economic recovery in the world’s regions, the lack of a qualified labor pool in many geographies and industries, and the peculiarities of regional cultures, customers and government attitudes means that CEOs in Asia, Europe and the United States each see a unique set of challenges that reflects the business realities they face locally and globally. Only Innovation and Global Political/Economic Risk make the top five challenges in all three regions.

United States – For U.S. CEOs, the biggest challenges reside outside the corporate walls. Faced with a divided Congress and political inertia regarding national debt levels and taxation, as well as the uncertainty of pending legislation that may significantly affect business models and healthcare costs, U.S. CEOs ranked Government Regulation first. Cost Optimization was fifth, a telltale sign that there is less than full confidence that the economic recovery can be sustained over time.

Europe – Against a backdrop of government cutbacks, reduced revenue, recession fears, and ticking demographic and pension time bombs, the focus of CEOs in Europe is on Global Political/Economic Risk—their top challenge. CEOs in the region see a combination of Innovation, Cost Optimization and Global Expansion as a way to fuel top- and bottom-line growth in a volatile business climate. Due to weak growth, CEOs are keeping a careful watch on the bottom line in a return to the frugal attitudes that characterized the 2008/2009 recession.

Asia – CEOs in Asia are focused on the region’s relatively high-growth business environment. Asian CEOs ranked Innovation and Human Capital their top two challenges. Their selection of Innovation as number one coincides with an explosion of R&D expenditure in the region. The high ranking of Human Capital underscores the view that the continuation of the extraordinary growth trajectory in the Asia-Pacific region will require solutions to such human capital issues as attracting innovative talent and developing effective leaders.

Innovation was on the minds of CEOs in all regions and industries, yet while executives continued to view technology as the leading driver of innovation, the survey shows that they also recognize the critical link between innovation and human capital—the role that talented people play in creating and nurturing innovative ideas and bringing them to market.

As the report observes:
Ranked as the second most critical challenge globally in 2012, Human Capital is also the key to conquering this year’s top-ranked challenge of Innovation. Of all of the highest rated challenges, none is so heavily dependent upon effectively addressing Human Capital issues as Innovation.

In addition to examining key challenges and strategies in Asia, Europe and the United States, the report also gives special attention to India and China, two emerging economies with enormous influence on global markets due to their rapid economic growth, large populations and changing demographics. Companies in India and China operate in very different business environments, yet CEOs in both countries rank Human Capital as their number-one challenge.

If India and China, the world’s two most populous countries, can succeed in developing their billions of people into a creative, highly skilled and innovative workforce, it will have far-reaching consequences for the global economy.

The CEO Challenge 2012 report is complimentary to members and can be downloaded now. The Conference Board is also offering a series of CEO Challenge Business Perspectives Briefings in a number of locations worldwide. Register today for a briefing near you



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