Ralf Sauter, Partner at Horváth

The good news: When speaking with board members and executives of large multinational companies, there is no sense of despair or pessimism. Quite the opposite—corporate leaders agree that now is the time to set a clear focus and navigate boldly through uncertainty. 

In light of today’s challenges, top management should anchor their strategic direction on four key pillars: 

In this year’s CxO Priorities Study, we surveyed over 1,000 board members and executives across 15 industries and 33 countries about their current strategic priorities. At the top of the agenda: optimizing costs and profitability. The goal is to maintain competitiveness - especially under mounting cost pressure. At the same time, companies are striving to boost efficiency, not only to improve margins but also to create financial headroom for future-proof investments. These include technologies like AI and automation, as well as R&D and innovation. 

Notably, R&D and innovation have significantly gained momentum, particularly among industrial companies. For the first time, this strategic field was surveyed as a standalone management priority - and it immediately ranked third among manufacturers, right behind cost optimization and digital transformation. 

In our interviews, we asked CxOs how they intend to drive EBIT growth - specifically, top-line expansion. They were asked to allocate 100% of their strategically relevant assets across the Ansoff Matrix. The results reveal: both industrial and service companies are pursuing remarkably similar strategic patterns. 

The majority are focused on market penetration (45%), particularly in their core markets. These companies are strategically strengthening their competitiveness in their core portfolios, emphasizing high-quality offerings that generate value and enhance profitability. Again, the growing importance of R&D and innovation plays a key role here. Developing new products and services ranks second (24%) among strategic approaches. Meanwhile, 20% are actively targeting new markets. Diversification, however, is currently the least pursued strategy (11%). 

Changing tariffs are the macroeconomic factor with the greatest impact on companies this year - especially for manufacturers. Service providers, on the other hand, cite changing interest and inflation rates as the most significant negative influences - though these, too, are closely tied to trade conflicts, uncertainty, and a generally subdued economic outlook. 

These developments are placing considerable pressure on location strategies and global value chains. Yet executives are not overreacting. Instead, stick to their long-term strategic frameworks. Local-for-local strategies and resilience-building were already top priorities last year. Currently, US sites are being incrementally expanded - through new machinery or facility extensions. Depending on how tariff negotiations unfold in the coming weeks and months, this issue could become even more pressing. Among manufacturers, footprint and supply chain optimization has jumped three spots to enter the top five management priorities - driven by its growing prominence in boardroom discussions. 

Regional balance and market proximity are, of course, essential. Shorter supply routes enhance resilience and reduce working capital. However, decentralization must remain within limits. While product portfolios should be tailored to regional markets, this should be done using a modular platform approach. Too many products and variants increase complexity and make centralized control more difficult - yet centralized steering is essential to maintain agility and responsiveness. 

In short: Yes, companies should invest strategically in growing markets and establish flexible, responsive local operations. But processes and IT systems must be standardized and centrally connected to headquarters. 

The fourth strategic pillar critical to long-term success is building future-readiness in a targeted and deliberate way. While this may sound generic, it is actually the opposite. The goal is to rapidly achieve a high level of maturity in technologies that will truly drive the company forward. This means systematically deploying automation and AI where they can deliver the greatest efficiency gains - and, just as importantly, the highest value creation. 

Most companies are focusing their efforts on IT, operations, and sales & marketing. In these areas, they are projecting efficiency improvements of 15-17% over the next three years. Even in management functions, potential savings are estimated at 10-12%. 

However, these targets are highly ambitious given the current level of readiness across many organizations. To date, fewer than one-third of companies have implemented mature AI-based solutions across their business functions. The picture is even more concerning in the area of products and services - only one in four companies currently leverages AI to enhance their portfolio. AI adoption in performance management is also still in its infancy. Two out of five companies have not even begun to explore this potential – a missed opportunity, as AI holds significant potential to boost efficiency and value creation across nearly every business area. 

There is, however, a silver lining: companies are planning to ramp up their AI investments. Manufacturing companies have increased their budgets by more than 20%, while service providers - who are already operating at a higher level of maturity - have raised theirs by an additional 9%. 

Companies that align their strategies with these four pillars will be well-positioned to master necessary transformations, expand their room to maneuver, and lay the groundwork for sustainable growth. However, it’s important to recognize that these strategic shifts often trigger structural changes that must be managed professionally. It’s no coincidence that “reorganization of structures and processes” has climbed from seventh to fifth place in the ranking of top management priorities. 

In contrast, ecological sustainability is no longer viewed as a strategic differentiator. Companies are fulfilling their obligations in this area and doing what supports profitability and value creation. And in today’s environment, this prioritization is exactly what’s required.