Now’s the time for companies in Australia to speed up their business model reinvention.
Kevin Burrowes |CEO, PwC Australia
CEO survey introduction video
Our survey shows that most companies have been implementing new technologies and partnerships, and assess themselves as leading their global peers on their climate response. While generative AI is not yet adopted at an enterprise scale, CEOs see potential for generative AI to make a significant impact to their company’s productivity and value creation.
However companies in Australia are slower than the global average at shifting their business models to generate revenue from new products and services.
Our CEOs say their biggest barriers to business model reinvention are regulation and competing operational priorities, as they manage operational challenges such as regulatory compliance, technology implementation, workforce management and cost reduction.
In 2024, inflation and uncertainty about the Australian economy will continue to put pressure on CEOs to make tough decisions balancing their short and long-term priorities.
There could also be another inhibitor to reinvention: thinking they have more time. Our data shows that 85% of CEOs surveyed say their business would still be viable 10 years from now even if they were to stay on the same path - compared to just 53% globally.
Meanwhile, CEOs in Australia generally have high expectations of revenue growth in the next three years, mostly from existing products and services.
In other words, most don’t think they have a burning platform for reinvention - yet.
But as generative AI and climate risks accelerate the pace of transformation, companies face a reinvention imperative.
Now’s the time for companies in Australia to speed up their business model reinvention.
Keeping up with the pace of change
CEOs identify technology as the biggest driver of business model reinvention
CEOs in Australia plan to reshape their businesses in the next three years to adapt to emerging technologies, government regulation and changing customer preferences. Climate change is the fastest growing factor, yet only one in five see it as having a large impact on their value creation.
Please indicate the extent to which the following factors will drive changes to the way your company creates, delivers and captures value in the next three years/last five years?
Actions taken over past five years
Over the past five years, the most common business model reinvention action that CEOs in Australia say their company has already taken is adopting new technologies, followed by forming new strategic partnerships.
To what extent have the following actions impacted the way your company creates, delivers and captures value over the last five years?
Fewer companies in Australia are making more than 20% of sales from newer products and services
Companies in Australia are still mainly relying on existing products and services for most of their revenue and are not shifting to new sources of value at the same speed as companies globally.
What percentage of your company’s total sales from this year are attributable to new products or services introduced in the last three years?
NET: more than 20%. Percentage of respondents shown.
Most CEOs don’t think they have a burning platform for reinvention (yet)
Most CEOs surveyed in Australia believe their company would still exist 10 years from now - even if they don’t make changes to their business model. By contrast, 45% of global CEOs think their companies will not be viable in a decade from now if they continue on their current path.
If your company continues running on its current path, for how long do you think your business will be economically viable?
“CEOs in Australia recognise the need for transformation and most are implementing new technologies to support that. However they generally think they still have time to make changes before their revenue growth and viability would be seriously impacted. Is this thinking misguided? Is it also a result of having a smaller local market in Australia? From PwC’s perspective, the data indicates that CEOs in Australia are not moving fast enough to adjust their business models - and the operational resources that support them - to adapt to the reinvention imperative.”
Spotlight on: Generative AI
CEOs see high potential for AI-enabled efficiency
Many companies rely on AI-enabled services and platforms to run their business, but far fewer are yet to apply generative AI at-scale. Generative AI has the potential to unlock a new wave of value from automation, however it is still early in its business adoption cycle and our survey shows that most are yet to move beyond experimentation and small-scale pilots.
CEOs in Australia see significant unrealised potential to achieve operational efficiencies from generative AI - so long as they can manage risks such as cybersecurity effectively.
To what extent do you agree or disagree with the following statements about generative AI?
“In the current economic environment, business leaders are primarily focused on using technology like generative AI to drive efficiency and cost-savings, however, there are also significant opportunities for companies to leverage generative AI for top-line growth by transforming business models, differentiating products and services, improving customer and employee experience, and for driving an uplift in quality, safety and risk management.”
Spotlight on: Climate risks
More measures ‘in progress’ than global peers
Companies in Australia assess themselves as being ahead of the global average for climate-related business measures.
Which of the following best describes your company’s level of progress on each of these actions?
Regulatory complexity cited as main barrier to decarbonisation
Regulatory complexity is seen as a barrier to decarbonisation by about four out of five CEOs in Australia, which could be due to conflicting regulatory requirements across Australia, the US and Europe. It could also be a reflection of the perception that the Australian regulatory environment for decarbonisation has more ‘sticks’ than ‘carrots’, compared to other jurisdictions, for example, the Inflation Reduction Act in the United States.
To what extent, if at all, are the following factors inhibiting your company’s ability to decarbonise its business model? (Top 3 shown)
“While it’s good to see that companies in Australia are making progress on numerous climate-related measures, stakeholder expectations are continuing to evolve based on community expectations as well as increasing disclosures by companies within competitor sets. To meet the increasing expectations, and for transformation to happen at the pace and scale needed to achieve decarbonisation targets, companies will need to cooperate through ecosystems that transform whole value chains.”
Spotlight on: Deals and partnerships
Companies primed for uptick in activity
Companies in Australia are primed for deals, with one-third planning to make three or more acquisitions in the next three years.
How many acquisitions is your company planning to make in the next three years?
“The data aligns with our expectations that companies will increasingly seek partnerships and deals as a way to accelerate transformation in the coming year. Australia’s leading companies are proving particularly adept at creating value from partnerships. They’re using business ecosystems and partnerships as a cost-effective, lower-risk means of accessing a range of skills and capabilities, including new digital capabilities, as well as a way to access new markets and customer data. Beyond partnerships, we also anticipate an uptick in M&A activity from pent-up demand now that there is more certainty around interest rates and the economic outlook compared to 12 months ago.”
Barriers to reinvention
Regulation tops list of barriers to business model reinvention
While regulation tops the list, CEOs in Australia are also more likely to cite ‘competing operational priorities’ as a major barrier to business model change compared to global peers. On the flip side, CEOs in Australia enjoy greater board buy-in and support from internal stakeholders than CEOs globally.
To what extent, if at all, are the following factors inhibiting your company from changing the way it creates, delivers and captures value? (Only moderate to very large extent shown)
Regulation also tops lists of internal and external business challenges
Regulation is not only seen as the No.1 barrier to business model reinvention in Australia, it’s also the biggest internal and external business challenge in the next 12 months.
Which internal factors do you believe will present the greatest challenges for your company over the next 12 months? (Top 3 shown)
Which external factors do you believe will present the greatest challenges for your company over the next 12 months? (Top 3 shown)
“It is not surprising that CEOs perceive regulatory complexity as the biggest challenge to reinvention, given that the consequences of non-compliance have increased dramatically over past years. Additionally, new governments and regulatory bodies are also trying to keep up with the global megatrends by implementing new rules and standards for businesses. While regulatory compliance is commonly viewed as a challenge or barrier to corporate change efforts, it can also be viewed as an opportunity for the business to better understand the ultimate objectives of regulatory changes. It allows CEOs to take a holistic view of the suite of controls available to them and ensure that they are delivering across these objectives in the most productive way possible and getting the most from their existing risk functions.”
Economic volatility and inflation continue to place pressure on business decisions
CEOs in Australia need to make difficult decisions about business priorities in a local economy where just as many CEOs expect it will decline as those who expect it will improve.
How do you believe economic growth (i.e., gross domestic product) will change, if at all, over the next 12 months in your territory?
(Excludes 'Don't know') *View of global economy by CEOs in Australia
Source: PwC's 27th Annual Global CEO SurveyInflation is still considered a key threat and all of Australia’s CEOs surveyed say their business is exposed to it in some way.
How exposed do you believe your company will be to the following key threats in the next 12 months? (Top 3 shown, moderate and highly exposed)
“While official forecasts show declining GDP growth, Australia’s CEOs are more optimistic than they were 12 months earlier. This likely reflects a pull-back in the inflation rate and the view that the interest rate cycle is at or near the peak, with consequent hopes that interest rates will fall and consumer sentiment will pick up.”
Your reinvention playbook: Four actions CEOs can take to accelerate reinvention
About the report
All data shown in graphs above is derived from the Australian sample, unless specified otherwise.
PwC’s 27th Annual Global Survey took place in October 2023, receiving more than 4,700 responses from 105 countries and territories, including 27 CEOs from among Australia’s biggest companies. The research was undertaken by PwC Research, our global centre of excellence for primary research and evidence-based consulting services.
Australian sample represents the following sectors: financial services; private equity, energy, utilities & mining; retail & consumer; telecommunications, media & technology; health & education; industrial, manufacturing & automotive. Company size: <US$1 bln 44%, US$1 bln - US$10 bln 33%, >US$10 bln 19%.
Percentages shown may not total 100 due to rounding. Multiselection answer options may exclude the display of certain responses, including ‘other,’ ‘none of the above’ and ‘don’t know.’
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