Arthur D. Little: Global CXOs predict return to pre-downturn business conditions within two years
UK

A majority of CXOs in every economy and industry predict that despite the current cost pressures caused by the global economic downturn, they will return to pre-recession conditions by 2011.  According to its new survey of over 360 CXOs worldwide, management consultancy Arthur D. Little found that across industry, 84 per cent of executives believe their businesses will fully recover in the next two years, with nearly half (48 per cent) expecting full recovery by the end of next year.  In “Beyond the Downturn: Waking up in a New World,” Arthur D. Little surveyed CXOs across all industry sectors to determine just how severely businesses have been affected by the liquidity crisis and resulting downturn so far, and to ask how their spending and management priorities are shifting in response. Hitting bottom While 16% of CXOs are concerned that their businesses may not have fully recovered by 2012, these less optimistic executives come from either financial services, or cyclical sectors such as construction, processing (e.g. chemicals), and manufacturing (e.g. automotive).  The overwhelming majority, however, are optimistic about the prospects for full recovery, and particularly so in non-cyclical sectors such as ICT, business services and healthcare. CXOs are looking to the downturn to differentiate themselves and consolidate their markets, with nine in ten executives predicting that the crisis could have a cleansing effect on their industries.  By eliminating weaker competitors, the CXOs surveyed predict that businesses emerging from the downturn will have leaner business models and enjoy increased cost-efficiency through economies of scale. Michael Traem, Global CEO of Arthur D. Little, commented on the findings: “With companies across the board forecasting their sales figures to drop by as much as 50%, expecting a return to pre-downturn trading in less than two years is very positive.  However, as the CXOs we surveyed are well aware, the rebuilding process will not be easy, and will require strategic and innovative responses that cut costs in the short term while creating new business models and smarter ways of working in the longer term.” Questioning how we do business in the future With unmonitored and under-regulated business practices in the financial sector at the root of the current recession, 73% of CXOs surveyed believe that rather than being a cyclical economic downturn, the uncertainty caused by the collapse of the financial sector has led to a fundamental rethink about the way in which businesses are run. Along with questioning the sustainability of traditional business models and ways of working across all sectors, according to the CXOs surveyed, the downturn will usher in a new era of government working closely with industry, through increased macro-economic strategising and industry regulation.  Michael Traem continued:  “What began as a banking crisis has ended in an implosion of business-to-business confidence across industries.  However, CXOs recognize the role integrity and innovation will play in eliminating uncertainty, re-establishing trust between businesses and consumers, and developing new and sustainable business models.” CXOs response: Cut costs & reduce risk In today’s climate no business can avoid rationalizing operations and cutting overhead costs: 80-90 per cent of businesses across sectors are giving these actions high or very high priority.  However, while these are the two most frequent actions CXOs are taking in response to the downturn, there is evidence that executives are investing resources in a diverse set of activities to help them to create and leverage the opportunities that emerge as the economy recovers.  Other high and very high priority activities the CXOs identified include:

  • keeping talent on board – 82 %
  • improving risk management strategies – 70%
  • maintaining R&D and innovation capacity – 67%
Interestingly, 40% of CXOs are continuing to give high priority to activities that prepare their business to transition into the low-carbon economy. Richard Clarke, global head of Arthur D. Little’s Sustainability & Risk practice, commented: “If we are to avoid charging into a different crisis – one of a dangerously altered climate – we believe we must also be a low-carbon economy. To emerge as sustainable leaders, companies need to develop a carbon and clean-technology strategy.” So, while CXOs are taking action to minimise the effects of short-term financial pressures, they remain dedicated to investing in long-term sustainability and growth strategies to ensure success after the economy recovers.    To conclude, Michael Traem commented: "Now, for the first time in history, the world is facing a truly global and nearly concurrent economic downturn.  Despite current pressure to cut costs in order to generate short-term cash flow, the majority of CXOs we surveyed remain dedicated to longer-term issues like R&D and workforce retention.  It is our opinion that in order for CXOs to survive today’s challenging environment; they must re-double their innovation efforts in order to compete in an increasingly technology-intensive global economy.  As the survey results show, there will be opportunities that emerge from this downturn, but they will only exist for companies that have taken an aggressive approach to investing in innovative technologies and processes." To access the full findings of Arthur D. Little’s global executive survey, please visit: www.adlittle.com/waking_up About the survey Arthur D. Little’s global survey on priorities in the economic crisis was conducted during the first half of March 2009. A total of 363 senior company executives participated. The survey covered companies of all sizes in terms of revenues: less than US$100 million (22 per cent of respondents), between $100 million and $1 billion (32 per cent), between $1 billion and $10 billion (27 per cent) and more than $10 billion (19 per cent). The companies were more or less equally split between stock-market listed (47 per cent of respondents) and non-listed (53 per cent). The companies represented 29 industries that we grouped into 10 sectors: ICT (19 per cent of respondents), manufacturing (15 per cent), financials (12 per cent), energy (12 per cent), process (11 per cent), health care (7 per cent), consumer (7 per cent), construction (6 per cent), business services (6 per cent) and travel and transport (5 per cent). The majority of respondents were based in Europe (77 per cent), with the remainder in Japan (9 per cent) and the rest of the world (14 per cent). We invited the survey participants by e-mail to respond via a website with controlled access. We purposefully designed a short survey, consisting of closed-ended questions, each with an ordinal scale (e.g. from “very high priority” to “very low priority”). The questions addressed four topics: the nature of the crisis, the impact of the crisis, the priority actions in response to the crisis and the duration of the crisis.

Notes for Editors

About Arthur D. Little Arthur D. Little (ADL), founded in 1886, is a leading global management consulting firm that links strategy, innovation and technology to master complex business challenges while delivering sustainable results to our clients.  Arthur D. Little has a collaborative client engagement style, exceptional people, and a firm-wide commitment to quality and integrity.  ADL is proud to serve many of the Fortune 100 companies globally in addition to many other leading firms and public sector organisations.  Arthur D Little has over 30 offices worldwide, employing over 1,000 people.  If you would like additional information on the firm, please visit www.adl.com.

Further Information

Further information from: Petter Kilefors
Arthur D. Little
Tel: +46 8 708 83 00 42
kilefors.petter@adlittle.com
Sue Glanville/ Maita Soukup
Say Communications
Tel: +44 (0)208 971 6423 / 6407
sglanville@saycomms.co.uk
msoukup@saycomms.co.uk