For many CEOs, 2009 was a tough year, where the aim was not just about making profits, but also surviving. For others, the downturn had a minimal effect, with some companies outperforming their rivals. Michael Jones and Steve Coomber look at the leaders set for a positive 2010.
What follows is a selection of CEOs, in no particular order, who have weathered the economic storms of 2009 in reasonable shape. While the impact of the economic downturn will continue into 2010, those who survived or even prospered during the recent crisis, will have good reason to relish the challenge ahead.
1. Rupert Murdoch, CEO, chairman and founder, News Corporation.
2010 challenge: tackling content charging
One of the world’s great media moguls, Murdoch has demonstrated shrewd commercial acumen on his way to assembling an empire that includes media properties such as 20th Century Fox, BSkyB, The Wall St Journal, The Times and The New York Post.
Nonetheless, the internet has proven a tough nut for Murdoch to crack and in 2010 he faces one of his most difficult tests yet, as he attempts to move away from a dependence on advertising towards an online business model reliant on content charging. Can Murdoch succeed where others have failed, persuading people to pay for something they are used to getting for free? The future of traditional news media may be at stake.
2. Steve Jobs, CEO, co-founder, Apple.
2010 challenge: keeping ahead of the pack
Although a bad year for the majority of the corporate world, 2009 turned out well for Steve Jobs and California-based Apple. After a six-month leave of absence, during which he had a liver transplant, Jobs returned to the helm of the company he co-founded as it defied global economic trends by increasing its sales. Inspired by Job’s product and design vision, the company has shifted over 30 million iPhones and announced record breaking profits in October.
If the rumours are true, there is a new Apple product on its way in 2010. As Apple aficionados know, if the past is anything to go by, Jobs is unlikely to disappoint.
3. Peter Voser, CEO, Shell.
2010 challenge: tapping new energy sources
Multinational Royal Dutch Shell is primarily an oil and petrol business, but not for much longer. By 2012 half the company's production will be natural gas. Shell still wants to tap the world's oil reserves, but Voser has seen the future and for the mid-term at least it is natural gas-fired power plants. On average, these plants emit half the CO² of a coal-burning plant to produce the same amount of electricity. And, notes Voser, the ability to power up and down gas-fired power stations relatively quickly makes them ideal partners for Shell's renewable energy investments such as wind farms and solar panels.
4. Ratan Tata, CEO, chairman, Tata Group.
2010 challenge: managing acquisitions
Turning the tables on those business executives in the west who believed that globalisation was really an opportunity for corporate colonialism, Ratan Tata, architecture student, aviator, chief executive and chairman of the Tata Group, is exporting the Tata brand around the world. Tata has already orchestrated a string of global acquisitions, including Anglo-Dutch conglomerate Corus Steel, Daewoo’s truck division, Jaguar Land Rover and Tetley tea. Expect Tata to continue the conglomerate’s phenomenal growth, investing in regions such as the Middle East and South America, and consuming more well known western brands along the way.
5. Indra Nooyi, CEO, chairman, PepsiCo.
2010 challenge: cost control
One of the few women to head up a Fortune Global 500 company, Indra Nooyi has made a big impression since her appointment as PepsiCo CEO in 2006. Having led internal restructuring and reshaping of the management team, Nooyi was instrumental in shifting direction towards healthier products, introducing the firm’s Performance with Purpose strategy, and hooking up with Anheuser-Busch late in 2009 in an innovative effort to reduce procurement costs.
Cost control and tight market focus are likely to figure highly as Nooyi keeps Pepsi bubbling through 2010. For example, the company’s planned acquisition of two domestic bottlers should provide more control over distribution and store positioning, crucial factors in a difficult market.
6. Lloyd Blankfein, CEO, chairman, Goldman Sachs.
2010 challenge: staying in the black
Amid the worst financial crisis since the Wall Street Crash, with banks tainted by toxic assets, and commentators doubting that any investment bank would survive, one firm emerged a clear winner. True, Goldman Sachs, led by CEO Lloyd Blankfein, switched from investment banking to a more traditional bank holding company that can take deposits. But unlike many of its competitors, the bank evaded major losses, instead posting a record $3.44bn second quarter 2009 profit and $3.19bn in the third quarter.
Many argue that Blankfein’s success is down to a more prudent approach to risk management than some of his competitors, but with much of Goldman Sach’s recent profit derived from trading, and potentially huge bonuses likely to provoke criticism, Blankfein will do well to steer the firm through 2010 with the same level of success.
7. Dan Vasella, CEO, chairman, Novartis.
2010 challenge: smart R&D strategy
At Switzerland-based pharmaceutical giant Novartis, CEO Dan Vasella appears to be a man who, when it comes to the core of the business, has patients rather than profits at heart. The strategy at Novartis seems more about finding science-driven cures to some less widespread ailments than throwing huge sums of money at R&D in the hope of hitting the blockbuster drug jackpot.
In a short-term world, Vasella takes a long-term view. His research head is a direct report, allowing Vasella to protect the research arm from short-term pressure. In the meantime, Vasella will be hoping that Novartis does not catch a cold in 2010 because of any unforeseen hitches in the roll-out of the swine flu vaccination programme.
8. Martin Winterkorn, CEO, chairman, Volkswagen.
2010 challenge: new business in a tough market
A fairly rare commodity in the world of auto manufacturers, Volkswagen is a car company that makes a profit. Martin Winterkorn is heading for a hectic 2010. Having successfully engineered a reverse takeover with long-time suitor Porsche, he now has to integrate the business. In addition, Winterkorn is busy driving global expansion, including Russia and China.
There are also plans for its heralded ‘Beetle of the 21st century’, the E-Up!, an electric car concept that promises zero emissions. Expect Winterkorn to accelerate the twin engine VW-Porsche combo past Toyota, currently the world’s number-one carmaker on the grid, waving as he does so.
9. Mark Zukerberg, CEO, founder, Facebook.
2010 challenge: turning users into dollars
For Mark Zukerberg, CEO of social networking phenomenon Facebook, 2009 was a year of mixed fortunes. A site redesign in March attracted a chorus of disapproval, as did an earlier change to the terms of service, which briefly became headline news. On the plus side, Zukerberg appears to have smoothed over these issues.
During 2009 there were some key senior team changes, Facebook hit the 300-million user mark, and the company announced positive free cash flow. Now, Zuckerberg faces significant challenges for 2010, not least monetising the Facebook concept and producing some net income. Otherwise, the clamour from the Facebook doubters may grow louder.
10. Satoru Iwata, CEO, president, Nintendo.
2010 challenge: producing the next 'must-have' console
Video games are big business, and perhaps the biggest story in the industry in recent years is the runaway success of Nintendo’s Wii console. While Sony Ericsson and Microsoft pushed for incremental innovation with their gaming platforms, focusing on faster processing, better graphics and greater online interactivity, Iwata concentrated on a revolutionary motion-sensing games controller, creating a fresh gaming experience.
The move paid off. The Wii smashed through the 50 million units shipped worldwide figure in 2009, making it the fastest-selling games console in history. However, with Sony and Microsoft working on their own interpretation of motion control, Iwata will have to avoid the 'game over' screen.
On the Agenda
If CEOs of major corporations have learnt anything over the last two years, it is that the global economy is even more unpredictable than they imagined. Since 2007, venerated financial institutions have failed, revered economic models such as the efficient market hypothesis have been derailed, and the global financial system has narrowly avoided meltdown.
Countries are weighed down with astronomical amounts of debt. US debt is pushing $12tn and several countries have debt-to-GDP ratios close to or above 100%.
Consumers have discovered something new to do with their money: pay down their debts. In the late 1990s, and for much of the noughties, red was the new black. Freely available credit drove a frenzy of consumer spending and personal indebtedness. Spending on housing in the US and the UK led to a real estate bubble while consumer demand for goods fuelled rapid growth in emerging economies such as China.
Rising asset prices, rapid economic growth and record employment levels have been replaced with falling asset prices, recession and growing unemployment. Consumers now prefer to conserve rather than consume. Banks are restricting lending and consumers have stopped borrowing and buying.
The experience of economic optimists in 2009 has been like that of a castaway in rough seas. Every time they rejoiced in clambering onto the raft, a wave would knock them back into the ocean. Every positive economic metric seemed to be swiftly followed by news that was less encouraging.
Corporate leaders should not despair, though. Better times are ahead. In the same way that fear of missing out and greed got us here in the first place, so it will be that a sober reassessment will lead us along the road of recovery. And 2010 may well see the beginnings of such a shift.
For CEOs, there will certainly be continued challenges, familiar and new. Some challenges will affect all CEOs, some will be market or industry specific, and for many executives, there will be opportunities.
What follows is a selection of those issues likely to test the mettle and occupy the thoughts of the leading CEOs around the world in 2010.
Talent trouble Unemployment may be rising but top talent is highly marketable, even in a downturn. How do you attract and retain talent when the ability to increase compensation may be restricted? Expect to see news of some innovative reward structures emerge.
Supply chain auditing Modern consumers care where their goods come from. Companies will need to be more thorough and transparent about ethically auditing their global supply chains.
Inspired innovation Social networks and other communication advances have facilitated new forms of innovation. Increasingly, the organisations that blend consumer co-creation of products and services with in-house creativity, and that are able to make a move towards mass-customisation, will be the ones that succeed.
Good bank, bad bank Maintaining good banking relationships will be paramount, as financing will still be tight during 2010, especially given the calls for higher capital reserves and as the position regarding toxic assets becomes clearer across the banking industry.
Solvency, regulation, trust and loan defaults will all continue to be issues for many banks, as will increased competition from non-traditional sources and brands such as Tesco and Virgin.
Sector woes Individual sectors will face their own challenges. The media and entertainment industry will continue to grapple with the conundrum of charging for content. It is almost impossible to stop content piracy. It may well be that those companies that work around illegal downloading or the free use of content, rather than attempting to charge for content or focusing all their energies on combating piracy, are more successful in the long term.
Health assessment CEOs will be battling with downward pressure on prices as healthcare systems look to squeeze more care for less money. Firms are likely to shift from a primary focus on the resource-draining blockbuster drug model. Consolidation will be one cure for the sector.
BRIC bats The influence of the BRIC nations (Brazil, Russia, China and India) will grow during 2010. These countries are performing strongly despite the downturn, and along with other emerging economies joining their ranks, will begin to exert a strong influence on intergovernmental and international organisations, including the IMF and the UN.
Sustainable strategies Whether it is carbon capture, renewables or waste recycling, sustainable business practices will be at the fore in 2010. Companies will need to be more upfront about what they are doing about sustainability.
Business models The financial crisis and economic downturn called into question business fundamentals such as the free market economy and the shareholder-driven corporation model. More companies will form alliances with non market-focused organisations and individuals, such as social entrepreneurs, to go beyond corporate social responsibility and make doing social good a more integral part of doing business.
Get the word out Finally, great leadership will be paramount in navigating successfully through 2010. CEOs will need to focus on using new technologies to reach out and disseminate their vision, and providing direction to all of their stakeholders.