This week at the action-packed World Economic Forum in Davos, Intercontinental Hotels Group (IHG) launched its 2017 Trends Report, which highlights the ‘uncompromising’ nature of today’s customer, who increasingly expects brands to deliver experiences that satisfy often contradictory needs.
IHG’s research identifies four paradoxes that are driving the decisions customers make in a landscape constantly changing through advances in technology. In this environment, customers do not want either/or solutions; they want the best of both worlds where the best trade-off is no trade-off. The four paradoxes are:
- The Paradox of Separate but Connected: Seeking a constant belonging with people, brands and places, while also seeking individuality and the desire to communicate uniqueness of self
- The Paradox of Abundant Rarity: A desire for luxury to be both scarce and available
- The Paradox of Seeking a Better Me and a Better We: Seeking personal self-improvement, while seeking public, civic or global improvement
- Do It Myself and Do It for Me in My Way: A desire to be in control while not being the controller
IHG says global brands must address these paradoxes through being both locally relevant and personally differentiating. The hotel group has identified six best practices through which brands can create experiences that strengthen customer relationships and grow brand loyalty:
- Aim for integration rather than balance: Balancing conflicting customer needs is not enough; a better holistic experience needs to be created through the integration of these opposing needs
- Use needs-driven, occasion-based segmentation for superior business management: Segmentation is not solely a marketing tool; it needs to be a core part of a company’s thinking
- Communicate with conversation: Brands must listen to customers to understand their needs and communicate with them in a way that makes their experience more meaningful to them as individuals
- Manage the brand’s multi-dimensionality: A brand must include relevant and differentiating features as well as functional, emotional and social benefits. The combination of these builds a distinctive brand character
- Develop ambidextrous brand-business teams: A brand needs teams that include divergent thinkers, with individual strengths and passions, who can also work in an integrated manner to create the cohesive initiatives that drive brand success
- Address the Paradox of Brand Control: Businesses must not give up control of the brand to the external world, yet they must allow the consumers to have their say and help influence the brand’s reputation
The 2017 IHG Trends Report is the fifth in a series of reports that share insights into the changing world and provide best practices to help make brands fit for the future. The insights it contains are based on a series of related studies spanning a five-year period and involving nearly 40,000 interviews with travellers across the globe.
Since the first report in 2013, the series has examined developments including the transition from brand experiences to brand relationships in the hospitality sector; delivering global, local and personalized brand experiences; the growing importance for companies to build both brand and organizational trust and how to make membership meaningful at a time when loyalty is becoming ever more important to many industries.
Also this week, PwC released its 20th annual survey of CEOs worldwide, which revealed that, despite concerns about economic uncertainty (82%), CEOs have growing confidence in both their company’s growth (38% vs 35% in 2016) and global economic growth (29% vs 27% in 2016) in 2017.
The findings released in Davos show that while business leaders are more positive in their outlook, their levels of concern about over-regulation (80%) and availability of key skills (77%) remain very high. Also worries about protectionism are growing, with 59% of CEOs concerned about protectionism, increasing to 64% for CEOs in the U.S. and Mexico.
While positive on the benefits of globalization in building the free movement of capital, goods, and people, CEOs question whether globalization has done anything to close the gap between rich and poor or mitigated the issue of climate change. This is in contrast to the first PwC CEO survey in 1998, when CEOs were positive about the drivers of globalization.
“Despite a tumultuous 2016, CEO confidence is moving back up – albeit slowly and still a long way from the levels we saw back in 2007,” said Bob Moritz, Global Chairman at PwC. “But there are signs of optimism right across the globe, including in the UK and US, where despite predictions of a Trump slump and a Brexit exit, CEOs’ confidence in their companies’ growth are up from 2016. And that mood is reflected elsewhere, with more CEOs across the world targeting the US and UK for investment than a year ago.
“While CEOs are more confident in the opportunity for growth, this year they told us these three concerns that were top of mind: a people and technology strategy that creates a workforce fit for the digital age; preserving trust in their businesses in a world of increasingly virtual interactions; and making globalization work for everyone by engaging ever more with society and collaborating to find solutions – all topics that will be high up the Davos agenda.”
Confidence in revenue growth climbs
In sharp contrast to 2016, CEO’s confidence in their own one-year revenue growth is on the rise in nearly every major country across the world - with India (71%); Brazil, where confidence levels have more than doubled (57%); Australia (43%) and the UK (41%) topping the table. Confidence also rose by 11 points in China to 35%, 6 points in the U.S. to 39% and 3 points in Germany to 31%. In Switzerland, confidence levels have more than doubled to 34%.
Bucking the confidence trend are Mexico and Japan, where confidence levels have dropped – markedly so in Japan, where confidence plunged from 28% in 2016 to 14% today.
When asked what drives growth, organic expansion tops the agenda for over three-quarters of CEOs (79%) in the coming year, while 41% are planning new merger and acquisition activity in 2017, and nearly a quarter (23%) intend to strengthen their innovation capabilities to capitalize on new opportunities.
58% of business leaders think it’s become harder to balance globalization with rising trends in protectionism. The concerns contrast with their views in the first PwC CEO survey, which reported ‘the typical global corporation has as much freedom of trade as it needs’.
For the past 20 years, CEOs have been largely positive about the contribution of globalization to the free movement of capital, goods, and people. However, this year respondents are skeptical that it has mitigated climate change or helped close the gap between rich and poor. This is similar to the public’s view on these issues in a separate consumer poll commissioned by PwC of over 5000 people in 22 countries: Only 38% of the public believed globalization has had a largely positive impact on improving the movement of capital, people, goods and information, compared with 60% of CEOs. Almost two-thirds (64%) of the public believe globalization has helped create full and meaningful employment (CEOs: 76%). The public are also less convinced than business leaders that globalization has created, to a large extent, a skilled and educated workforce (29% of the public vs 37% of CEOs).
“Public discontent has the potential to erode trust, which is needed for long-term sustainable performance,” Moritz said. “The real challenge here, though, isn’t just one of how CEOs navigate, it’s about the need for CEOs to have a deeper, two-way relationship with stakeholders. Understanding the root cause of the potential discontent or perception is a critical first step towards communicating the benefits of business for society. There’s a lot at stake if we do not achieve inclusive global growth.”
Technology and Trust
CEOs feel technology is now inseparable from business’ reputation, skills and recruitment, competition and growth: 23% believe technology will completely reshape competition in their industry over the next five years.
In an increasingly digital-driven world, technology has created a new dynamic between business and customers, bringing huge benefits for both. But on the flip side, 69% of CEOs say it is harder to gain and keep people’s trust in this environment, and 87% believe risks from use of social media could have a negative impact on the level of trust in their industry. 91% of CEOs also agree data privacy and ethics issues could impact people’s trust in their organizations in the next five years.
20 years ago, trust wasn’t high on the business radar for CEOs; 15 years ago, only 12% of CEOs thought public trust in companies had greatly declined. This year, 58% worry that a lack of trust in business will harm their company’s growth, up from 37% in 2013.
After several high-profile technology and security issues for big companies, CEOs unsurprisingly identify cyber security, data privacy breaches and IT disruptions as the top three technology threats to stakeholder trust.
Skills and jobs
Concern about skills has more than doubled in 20 years (from 31% concerned in 1998 to 77% in 2017) and human capital is a top-three business priority, with diversity and inclusiveness, and workforce mobility amongst the strategies being used to address future skills needs. Skills availability is a concern for over three-quarters (77%) of business leaders, and is highest for CEOs in Africa (80%) and Asia Pacific (82%).
Over half of CEOs (52% vs 48% 2016) expect to increase headcount over next 12 months. While only 16% of business leaders surveyed expect to reduce their overall employee base, CEOs say that 80% of those affected jobs will be impacted in some way by the use of technology or automation. Business leaders in Canada (100%), US (95%), Germany (93%), Australia (92%), and Brazil (91%) see technology having the greatest impact.
Over half of business leaders interviewed (52%) are already exploring the benefits of how humans and machines can work together, and 39% are considering the impact of artificial intelligence on future skills needs.
With the speed of technological change a concern for 70% of CEOs, it’s no surprise that skills in creativity and innovation, leadership and emotional intelligence are identified as the most valuable skills, which are difficult to recruit. Digital and STEM skills are a recruitment issue for over half of business leaders.
"CEOs are concerned that key skill shortages will impair their company’s growth potential, relevance and sustainability. And it's soft skills that they value the most - innovation and relationship skills can't be coded,” Moritz concludes. “So to drive the change CEOs need - thinking carefully and acting accordingly – a balance between technology and irreplaceable skills in their people is key. Managing expectations with stakeholders will help enable the needed trust to survive and thrive. Bottom line: Prioritizing the human element in a more virtual world will be a prerequisite for future success.”