The top six strategic priorities of Australia's leaders in 2019

Big Four firm KPMG recently polled over 220 of Australia’s C-suite leaders in the private and public sector to identify the top issues facing businesses in the nation. The top six strategic priorities that executives identified were digital transformation, innovation and disruption, regulation, political paralysis, customer centricity, and cost competitiveness.

Unsurprisingly, digital transformation was the number one issue identified by Aussie execs in the survey conducted by KPMG Acuity – the firm’s insights arm. “Just about every CEO has ‘digital transformation’ at top of mind but it can mean different things,” commented Ian Hancock, KPMG National Managing Partner, Management Consulting. “In 2018, the term ‘digital transformation’ means so many things there is a very real risk that this lack of clarity is causing confusion, leading to diverse agendas and ultimately missed opportunities.”

KPMG relates that digital transformation includes not only investment in digital technologies, but also the evolution of organizational functions, back office tech, and even the re-thinking of core business models. Complete transformations should also include cultural realignment, according to the firm.

Centrally, digital transformations need to be ‘connection-based.’ That means staying connected to market dynamics and digital trends, connecting front, middle, and back offices to execute growth agendas, and connecting with customers and employees on a compelling value proposition.

“[CEOs] know they are being measured on their ability to deliver against a transformation agenda,” Hancock added.

The next-most pressing issue for Australian leaders was innovation and disruption. It’s a constant worry for business leaders that competitors will use new technologies and methods to deliver products or services that better, cheaper, and more appealing to consumers. Compounding that fear is the pattern that disruption creates a winner-takes-all environment where only a few firms see spectacular growth on the back of their innovation in an industry – like Amazon, Google, and Uber – while curb-stomping the remaining industry players.

The authors caution against trying to disrupt for disruption’s sake, however. “In 2019 a response cannot be as simple as rushing headlong into big new innovative tech and organisational practice,” said James Mabbott, Head of KPMG Innovate. “That’s because the population has developed a general sense of scepticism about whether the benefits of ‘innovation’ and ‘disruption’ are really for them, or rather for a small elite who can generate an outsize payoff. So any business leader looking to prosecute an aggressive innovation agenda will likely be met by stakeholders wary about what this actually means for them, including employees.”

Third place was taken by concerns over regulation – including the challenges of aligning business regulation, cutting red tape, and the capabilities of the nation’s regulators. Leaders are also concerned about new regulation around mortgages, credit cards, and insurance contracts arising from the potential extension of the Banking Executive Accountability Regime (BEAR). Even outside of financial services, leaders are increasingly concerned about over-regulation.

“While we don’t wish to see needlessly bureaucratic demands on business, there is a danger of seeing new regulation as purely negative,” remarked KPMG Law Partner Astrid Raetze. “Reporting can be a strong discipline to get things done, so we would urge businesses not to take their eyes off the ball and get into a defensive mindset if additional regulations are introduced in their sectors, or generally in 2019.”

Political paralysis was the fourth-most worrying issue. Business leaders were critical of the ongoing political log jam in the federal government, lacking confidence that the nation’s major parties could work together effectively to pass national agenda items.

“Business leaders are concerned with growing political polarisation and the difficulty of gaining support for complex reforms,” said Grant Wardell-Johnson, KPMG Partner, Geopolitics and Tax. “This is perceived to hang over many other issues we face and have a long term detriment for Australia. In a world where we should be less ideological and more evidence and scientifically based in our public policy processes, the opposite seems to be occurring. This leads to less bipartisanship. Now more than ever we need full, frank, and fearless advice from senior public servants.”

In fifth place was customer centricity. Leaders increasingly understand that they have to put the customer first and place it at the core of their strategy – as Amazon has done to wide-ranging success.

“Successful outcomes put the customer at the centre and respond to a human need,” commented Paul Howes, KPMG Partner-in-Charge, Customer, Brand & Marketing Advisory. “Customers talk about outcomes, not necessarily service delivery models.” That means using digital transformations as an enabler to better serve customers, rather than having new technology as the goal itself.

Companies like Amazon that get it right combine digital and customer service facets to create a strong whole. “These companies understand they need to have engaged, helpful people delivering outstanding service. That these people need to be working in alignment with a great digital experience. And that it is this combination that drives loyalty, advocacy, and commercial performance,” added Howes.

Number six on the list of top C-suite concerns was cost competitiveness. The C-suite identified rising costs of energy, raw material, taxes, and even labour – despite the notably stagnant real wages of workers in a low unemployment environment.

KPMG Chief Economist Bredan Rynne weighed in: “Analysis by KPMG Economics has shown we suffer from poor labour cost competitiveness, particularly in the manufacturing sector, where labour costs typically represent between 40% - 60% of the cost base.”

And though wages have stagnated in Australia, they’ve also floundered in the rest of the world, meaning that the country’s labour has seen no increase in cost competitiveness. Meanwhile, Aussie business leaders wouldn’t mind seeing the lower corporate tax rates being brought in across the globe. “While corporate rates are falling in some countries (though not all), in Australia this has seemingly been kicked into the political long grass. This clearly acts as another cost burden to Australian businesses,” Rynne added.

Rounding out the top ten concerns were public trust, cybersecurity & data privacy, big data, and infrastructure and liveable cities.