CEO optimism is about more than the impact of AI, lower taxes, and looser regulation
2024 was quite the year.
In almost every democratic election around the world, voters demanded change. On the campaign trail, President Trump survived two assassination attempts before winning a decisive reelection victory—a comeback unprecedented in American history. The French and German governments both fell in the face of votes of no-confidence, and the Labour Party won in the UK general election, ending 14 years of Conservative rule. In Syria, one of the Middle East's longest-ruling dynasties collapsed seemingly overnight, heralding a potential reshaping of dynamics in that critical region.
Last year, the global cost of extreme weather disasters was estimated at over $450 billion, a record; and the Upsala Conflict Data Program identified 59 active, armed conflicts involving state actors this past year, the highest number since data collection began in 1946.
At the same time, we witnessed the continued march of remarkable new technologies that are creating smarter, more adaptable machines that improve how we live and work; innovations in energy generation and storage that are forging a more sustainable and abundant future; and new life science diagnostics and therapies that are delivering longer and healthier lives.
It is truly a lot to take in, and business leaders are in the crosshairs, challenged to manage through growing volatility and uncertainty.
But if this past year was a challenge, we have not seen anything yet. Looming on the horizon are new trade wars and a potential escalation in tensions between the United States and China. A resolution to the war in Ukraine still appears distant, despite the determination of the incoming U.S. administration to broker a peace. Worries over slowing global economic growth and lingering inflation remain.
In the face of all this anxiety, the degree of optimism with which CEOs are greeting the new year is quite remarkable. Some attribute this optimism to the impact of new technologies, particularly AI, which have moved beyond promise to tangible business impact. That is certainly part of the story. In our annual AlixPartners Disruption Index, more than 80% of CEOs are optimistic about the impact of AI on their business, and two-thirds are applying these technologies primarily to revenue growth, not cost cutting.
Some commentators are attributing this optimism, especially in the United States, to expectations around lower taxes and looser regulation in the next administration. Again, it is hard to disagree with this assessment. In the run up to the U.S. election, CEOs said that the top threat to their business over the next 12 months was regulation and taxes. However, in a survey conducted after the election, concerns over regulation negatively impacting companies' growth strategies fell 9 points.
But there is something more at work here, as well. Following the U.S. election, 55% of executives said they would need to significantly change their business models over the next 12 months. That is up from 37% a year ago and 40% just prior to the election.
This is the opposite of complacency. They see more challenges on the horizon and increasingly recognize the need to change how they have been operating—whether that is their supply chains, operating structures, digital investments, or product and service mixes (among other things).
But at the same time, CEO confidence is up. They say their executive teams are more agile, and their employees are less stuck in their ways. Ninety percent of CEOs say productivity of employees at their company is increasing, and the number of CEOs saying they were worried that their company is not adapting fast enough in the face of disruption fell 20 points to 41%.
Why is this? I think the answer lies in our collective experiences during the crucible of the pandemic. Put to the test in the most extreme circumstances, every company around the world found their vulnerabilities laid bare. Whether you could build critical skills and adapt operating systems at speed became an existential question. Sometimes intransigent workforces aligned on the need to transform established practices. Leaning into digital solutions was no longer a "nice to have."
Successfully navigating these challenges means that organizations are stronger and have the muscle memory of how to implement urgent and critical change. And in the years following the pandemic, supply chain dislocations, worker shortages, and the like, have meant that organizations have had to hone these skills and have become accustomed to the uncertainty and volatility that are hallmarks of our disrupted age.
Not every organization, of course. But a significant and growing number are more agile, resilient, and proactive in the face of disruption.
If that's not a reason for optimism in the year ahead, I don't know what is.
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