Digital transformation and adjustment of supply chains are currently dominating the investment strategies of CEOs in India.
For half of CEOs in India, digital transformation dominates investment decisions, while eight in 10 are currently focusing on adjusting their supply chains, according to the latest EY India CEO Survey 2022.
These changes in the capital strategy of companies by Indian leaders come as businesses begin to recover from pandemic-induced disruptions and subsequently grapple with increasingly challenging geopolitical issues, rising inflation and higher commodity prices.
In the past two years, pandemic-related shutdowns have wreaked havoc on global supply chains, labour and energy costs have risen, as have the costs of raw materials, and freight rates have jumped more than 400% from their 2019 levels.
Half of Indian CEOs acknowledge the pandemic caused short-term disruption to their industry, but most (80%) are taking proactive measures to their global operations and supply chains. For two-thirds, the purpose has been to reduce logistics costs and increase resilience.
“More than ever, CEOs are looking at how these interconnected issues may impact their growth agendas and are building agility and the ability to pivot quickly as circumstances demand into their overall corporate strategy,” says Rajiv Memani, Chairman, EY India.
Technology drives the transformation agenda for Indian CEOs
To ensure agility, leaders are increasing tech expertise, with 49% saying they intend to invest in digital and technological innovations in the near future, as a way of improving scalability and replacing higher-cost labour roles.
They recognise the savings automation and technology can offer businesses, with digital transformation aiding in the pivot of employees to higher-value activities. They also recognise that data and innovation are critical for unlocking new paths to growth with nearly half saying they are using data effectively to develop new products and services and develop innovative delivery systems and channels for interacting with customers.
“To keep pace with market disruption and generate long-term values, CEOs must commit their organisations to prioritising high-value investments in tech, and develop a unified strategy combining business and technology priorities,” Mahesh Makhija, EY India Technology Consulting Leader insists.
Sustainability and M&As priorities in business transformation
Digital transformation isn’t the only priority on the agenda for leaders in India, with sustainability and acquisitions both seen as critical in business transformation.
Across all sectors, there is a strong desire of Indian leaders to accelerate strategies or realign sustainability priorities with nine in 10 considering sustainability as the primary driver for competitive advantage, long-term strategic growth and lowering cost.
Even more (96%) are considering sustainability as a driving factor for their M&A agenda, and are committed to creating KPIs for long-term value creation, acquiring technology and talent.
And 36% cite improving ESG impacts on their company’s activities as the top objective in the year ahead, clearly recognising that Indian businesses with higher ESG investments “have the potential to outperform the wider market”, which is “tremendous opportunity for the planet and for profits”, says Chaitanya Kalia, EY India Climate Change Leader.
The role of M&As in business strategy has increased since the pandemic and remains a key factor in helping leaders drive growth and expansion, and this is especially true in India.
More than one in five Indian CEOs say they will undertake M&A for the acquisition of technology, talent, new production capabilities or innovative startups, significantly higher than their global counterparts, at just 14%. And 22% are planning bolt-on acquisitions or consolidations in the near future to increase market share.
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