Disrupt andgrowU.S. CEO Outlook 2017IIA Fall Conference

Dee Dee Owens, KPMG LLP Partner Nach Dandige, KPMG LLP Director

October 2017

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Introduction – The U.S. CEO Outlook is an annual report published by KPMG based on

survey results collected from CEOs of U.S. multinational firms

– Captures outlook, investment areas, and concerns of CEOs over the next 3 years

– A year-to-year comparison of the results provides a fascinating insight into the pace of change, impact of innovation, and dynamic nature of issues

– KPMG collaborates with Forbes Insights, a strategic research and thought leadership practice of Forbes Media, to develop the report

– Eleven key industries are represented – Automotive, Investment management, Technology, Banking, Life sciences, Energy/Utilities, Infrastructure, Manufacturing, Telecom, Insurance, Retail/Consumer markets

– 400 U.S. leaders participate in the survey each year. In 2017, 100 CEOs interviewed came from companies with revenues between US $500 million and $999 million, 180 from companies with revenues between US $1 billion and $9.9 billion, and 120 from companies with revenues over $10 billion

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Top headlines– Confidence abounds for U.S. CEOs, see opportunity amidst disruption

– CEOs focused on tackling geopolitical challenges and investing heavily in new technologies in order to remain competitive and grow

– Improving speed-to-market, digitizing the business, becoming more data-driven, and building public trust as their top four strategic priorities

– Significant investments in cyber, digital infrastructure, regulatory compliance and emerging technologies over the next three years

– Implementing technology will require new talent; headcount will grow and organizations will invest in recruitment and workforce training over the next three years

– Customer focus dims a bit with many CEOs struggling with their customer value proposition

– CEOs believe their organizations are placing greater importance on trust, values and culture in order to sustain their long-term future

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U.S. CEOs confident on U.S.and company growth

In the next three years2017 2016

Very confident on growth for country 54% 23%

Very confident on growth for your company 46% 32%

Last year U.S. CEOs viewed India (44%) as top market for growth followed by U.S. (37%) and China (36%).

View U.S. as top market for new growth

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Globalization todayCountry by County confidence in global economic growthover the next three years:

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Investing to growSpeed-to-market and digitizing business seen as key drivers of growth; CEOs plan significant levels of investment in several key areas; amidst disruption, CEOs seeing opportunity to distinguish their firms competitively.

Top five strategic priorities in next three years:

25% greater speed-to-market

22% digitization of the business

21% becoming more data driven

21% building public trust

20% implementing disruptivetechnologies

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Data and analytics

Cognitive technologies

Internet of Things

Investing to grow

Areas of greatest investment in technology expected in next 3 years:

61%

58%

55%

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To disrupt is to exist: Time for a reboot?

72% said rather than waiting to be disrupted by competitors, their organizations are actively disrupting their own sectors

60% see technological disruption as more of an opportunity than threat

CEOs regard themselves as disruptors; last year two thirds of CEOs were concerned their organizations were not disrupting business models in their industry

Opportunity amidst disruption

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Overcoming technology: digital and sensory concerns

57% are concerned that their organization does not have the sensory capabilities and innovative processes to respond to rapid disruption

61% are concerned about integrating cognitive processes and artificial intelligence

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Overcoming technology: digital and sensory concerns

49% are concerned about the integrity of the data on which they base decisions

32% say depth of their customer insight is hindered by lack of quality customer data

45% say they are not leveraging digital as a means to connect to their customers effectively.

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Humans and machines: Changing role of humans in cognitive era

CEOs expect to add headcount in the next three years to deal with emerging cognitive technology

80% are investing in recruitment over the next three years, far surpassing the number of firms investing in digital infrastructure (58%) and in workforce training (57%) over the next three years

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Customer focus dims a bitBecoming more customer focused has slipped significantly in terms of strategic priorities. CEOs are struggling to evaluate ROIs on customer focused programs as well as getting quality customer data. They also have not locked in the value proposition they offer.

A stronger client focus ranked 10th in strategic priorities; in the 2016 study it ranked first

48% said they have a growing responsibility to represent the best interests of their customers

56% said that their organizations can confidently articulate how they create value for customers

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The risky business of cybersecurityMajority of CEOs feel cybersecurity is both a risk and an opportunity to build customer trustand is continued area of investment

76% see investment in cybersecurity as an opportunity to find new revenue streams and innovate, rather than as an overhead cost

40% are prepared for a cyber event; 59% somewhat prepared

Level of investment in next three years: planning for significant investment in cybersecurity (32%) and digital infrastructure (27%)

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New politics, old fights

77% are spending much more time on scenario planning related to geopolitical environment and 77% are recruiting new skills to manage geopolitical environment

30% ‘strongly’ agree (26% agree) that “the uncertainty of the political landscape has had a greater impact on their organization that they have seen in many years”

54% of CEOs are reassessing their global footprint

U.S. CEOs expect the new administration to spur the U.S. economy. However, geopolitical environment continues to be challenging, leading to uncertainty in planning and managing the way forward.

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The future CEO & shifting priorities

81% believe their organization is placing greater importance on trust, values and culture in order to sustain its long-term future

57% say building greater trust among external stakeholders and customers is among top three priorities in organization today

69% say a culture of short-termism has had a negative impact on long-term strategic objectives

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Key takeaways

CEOs are rebooting their organizations and building strategies around managing value chain in an environment of constant disruption

CEOs focused on new digital value creation – becoming a digitized company has evolved from thinking in terms of product to competency

CEOs realize the importance of speed-to-market with impact of cognitive technology and artificial intelligence

Technology drives transformation but succeeding requires putting humans before machines

CEOs shifting from understanding customers to delivering on profitable customer centricity

CEOs see cybersecurity as top risk but also an innovation driver

Despite uncertain political climate, it will not be the deciding factor for growth as technology trumps politics

Trust is the foundation of success. CEOs recognize the value of trust and empathy which encompasses creating value for organization, customers and employees

To find out more:

Findings based on a study of the three-year outlook of 400 U.S. CEOs, with annual revenues greater than US$500 million; more than 25% have greater than US$10bn in revenues.

kpmg.com/us/ceooutlook

#CEOoutlook

kpmg.com/socialmedia kpmg.com/app

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