Gartner: CEO priorities shifting from cost-cutting to customer retentionby
Top management priorities will shift over the year ahead from the cost-cutting focus of early 2009 towards retaining customers and improving existing relationships, according to Gartner.
But chief executives’ "recession-era mentality" will continue until 2015, with fears of another economic crisis being high on the agenda for at least another 36 months.
Such concerns are also mirrored among the wider public, however, which has been slow to return to traditional spending habits – a difficult situation in economies such as the UK and US, which are very based on consumer spending for growth.
As a result, a key priority for many organisations during 2010 will be to rebuild trust in their brand in order to regain consumer confidence. While many are still in the process of rebuilding such trust in the wake of a number of corruption and fraud scandals over recent times, Gartner says it is optimistic that this year and next will see the start of confidence returning.
This process will be helped by the introduction of new processes and business intelligence technology to increase the transparency of internal operations and ensure more openness in terms of financial activity.
Another key goal, however, will be to understand the long-term implications of the recession in order to navigate more effectively through a changing business environment. Such a situation will lead to increased investment in software such as social media and mobile applications to help organisations better understand customer intentions, more efficiently predict the impact of external business conditions and more effectively connect strategy to desired outcomes.
But Mark Raskino, a vice president and Gartner fellow, warned: "From the CEO’s perspective, growing confidence that is tempered by business caution will result in an aggressiveness to harvest the successes of the past through improved productivity. At the same time, CEOs are taking those returns and investing them in building a future that can deliver high returns."
This means that new initiatives may occur that appear contradictory in nature. On the one hand, CEOs will explore how to increase shareholder value either through introducing new projects in order to generate new revenue streams and build for the future. They may also decide to undertake acquisitions that are likely to be less expensive at a time when share prices are down and capital costs lower.
On the other hand, they are still finishing off work that was started last year around streamlining operations, dumping non-performing or non-strategic assets and other cost-cutting initiatives.
The concern here is that, if costs are not contained, the point at which the business can break-even in profitability terms could increase, which means that the organisation may be more vulnerable to further economic shocks.
This means that top managers are continuing to take a very hard look not only at their own internal cost structures, but also at the cost structures of partners and any new projects are likely to be financed via savings obtained from other parts of the business.