Competitiveness is not a new challenge for European business. This is especially true when we compare Europe’s growth since the downturn of 2008 to the aggressive growth of the US and China. As noted by our research, from 2000-2019, Europe achieved a real GDP compound annual growth rate of 1.5 percent. In contrast, North America’s growth rate was 2.0 percent. And China’s GDP grew by 90 percent. The long-term impacts of COVID-19 have become clearer and we now know that the disruption caused by the pandemic is both a threat and an opportunity. In this state of uncertainty, the biggest risk facing European business leaders is the temptation to stay on the defensive for too long.
We believe Europe—and its leading businesses—have unique strengths. It’s time to build on those strengths. While Europe emerges from the disruption of the pandemic, European business has a chance to close that competitiveness gap and recover at pace. Two-thirds of C-level executives surveyed for our study believe European markets will see a rapid V-shaped recovery or a slow-but-steady U-shaped progress. But to make either a reality, bold leaders must invest in innovation, technology and people to reinvent how Europe does business.
Now is the time to focus on renewal and rebirth
Drawing on our global survey of 478 C-level executives and extensive client experience, we identified three critical priorities: Lead the sustainable revolution; Accelerate digital transformation; and Pursue next generation collaboration. Each priority has two areas of vital business change, and we believe focusing on these areas will enable Europe to close the competitiveness gap with North America and Asia Pacific.
A European path for reinvention
It’s critical that European business leaders move from stabilisation and survival to renewed growth and competitiveness. And there is a unique opportunity today to shrug off old limitations and reconsider new ways of operating. European organisations that take the steps to reinvention outlined below will not only outmanoeuvre the uncertainty of COVID-19 disruption, but also have the chance to close the gap between them and their North American and Asia Pacific competitors.
LEAD THE SUSTAINABLE REVOLUTION
Create value for the responsible customer
Purpose-driven brands and companies that commit to issues like environmental protection, social welfare and inclusive governance connect better with customers. Now they must also focus on protecting and supporting the health of their people and consumers and the long term well-being of the planet. The key to purpose is turning empathy into action.
Innovate with an emphasis on ensuring sustainable, safe-to-use products.
Consider new opportunities to develop offerings directly conducive to better health.
Advance digital customer engagement
Consumers have become more digital because of COVD-19. Corporate investment in digital experiences needs to mirror customer expectations—convenience, ease and accuracy are now table stakes. Businesses must deliver end-to-end experiences to achieve the best customer engagement possible.
Shift from transaction-based to relationship-based interactions.
Design human-like digital services powered by AI, data and real-time insights.
ACCELERATE DIGITAL TRANSFORMATION
Invest in transformative technology
Europe has watched the tidal wave of digital technology with some wariness and European companies have invested less in digital than their global competitors. But they must begin to accelerate digital transformation, and specifically, their journey to the cloud. This will make European companies more resilient and better positioned to deploy innovation rapidly.
Rapidly increase the pace and scope of digital transformation both at the core of their business and in their client-facing environment.
Ramp up the implementation of cloud and AI to achieve cost savings, business agility and faster innovation while also reducing their environmental footprint.
Reconfigure operations and processes to enable resilience
Europe’s business leaders have a major opportunity to modernise operations through technology. The digital reinvention of industry—what we call Industry X.0—will be key to this. Predictive modelling and applied intelligence will become vital tools, as will the use of digital twins to enable companies to view their operations end-to-end. It’s time to move from “point” solutions to scaled, intelligent operations. Likewise, rising consumer demand for local brands presents an opportunity for European companies to make their manufacturing and sourcing more domestic where it makes sense.
Reassess the cost-risk trade-offs of the increased regionalisation of production.
Diversify the supplier base.
Apply new technologies to build physical and digital resilience of core functions.
PURSUE NEXT GENERATION COLLABORATION
Offer the workforce new skills and new ways of working
European businesses have always enjoyed a strong social contract with workers. Now there is an opportunity to build around organisational purpose, flexible working arrangements, new people management systems, and new technologies for remote working and skill building. The adoption of new technology by the workforce will be crucial to maintain productivity, ensure growth and foster innovation. Half of European C-level leaders say new technology will accelerate the creation of a “smarter” workforce.
Make remote work effective for individuals, teams and the entire organisation.
Invest to ensure safety protocols and equipment are robust at on-site locations.
Increase the use of new tech, such as extended reality, to build skills remotely.
Participate in ecosystems to drive organic growth
Contractual partnerships and platform partnerships are flexible alternatives to mergers and acquisitions for European companies. Working with partners can help companies grow by accessing customers, capabilities, talent and ideas needed to unlock new markets and respond to competitive threats.
Use open platforms to bring together ecosystems of consumers, suppliers and business partners.
Build on advanced technologies to innovate within an ecosystem for new customer value.