When we began the research about how COVID-19 was going to affect European business (PDF), it was just after Easter and I was at home 200km from Paris in the countryside. Like many of us during that time (and still), I had questions about how this whole thing was going to affect the economy.
My team and I started with thousands of questions and a few intuitions that helped direct our search. We wanted to gather the views of Europe’s top business leaders on what will happen in three, six, 12 months — to get beyond the recovery scenario and dig into research that showed what the future would look like.
We knew every crisis is an opportunity, but what could European businesses learn from this crisis?
The trouble with tech in Europe
Previous research had shown us that European businesses have long struggled with competitiveness. It’s easy to identify powerful European global brands in every industry, from automotive and telecom to pharmaceuticals, consumer goods, and retail. Taken as a whole, however, Europe has lagged behind North America and Asia-Pacific for the past couple of decades on many key economic indicators — lower growth, lower productivity and lower innovation spend, to name a few
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Leaders should balance bold moves against a clear assessment of risk — including the risk of over-caution.
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Following the 2008 financial crisis, the gap widened even further. European companies missed the tech opportunity: Europe not only has fewer tech companies, but non-tech players spend significantly less on IT in Europe than in North America.
All of this was before COVID-19 upended the global economy and the lives of more or less everyone on the planet. Will the pandemic widen this gap a little more or will the recovery period present an opportunity for European businesses?
Despite all the challenges, our survey of 500 C-levels across Europe, North America and Asia-Pacific show that many believe Europe’s competitiveness will improve coming out of the crisis. In comparison with pre-crisis data, the business leaders we surveyed in Europe believe the competitiveness gap can be closed in a post-pandemic world, in relation to both the U.S. and China.
Is such optimism warranted? It may depend on how well companies can weigh the risks, translate hope into bold action, and outmaneuver uncertainty.
Can European businesses shrug off old limitations?
Leaders should balance bold moves against a clear assessment of risk — including the risk of over-caution. And today European leaders seem more reticent than their peers when it comes to launching initiatives to seize future growth, investing in innovation and teaming with their ecosystem partners to rebound quicker.
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There’s a unique opportunity today to shrug off old limitations and reconsider ways of operating that not long ago seemed immutable.
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What’s critical now is for Europe’s business leaders to move from the “now” of company stabilization and survival to the “next” of renewed growth and competitiveness. There’s a unique opportunity today shrug off old limitations and to reconsider ways of operating that not long ago seemed immutable.
The bold moves European companies should make
Our research highlights three areas where European companies need to accelerate, building on their unique strengths or closing the gap with competitors:
- Accelerate the pace and scope of digital transformation: Companies that have been the most resilient during the pandemic have the most-advanced digital capabilities. European executives now clearly see the need to increase the pace of digital change. Nearly two-thirds (63%) said their companies would accelerate their digital transformation, including their use of the cloud.
- Create experiences for increasingly responsible consumers: Buying habits during the COVID-19 lockdown ― with consumers making more-responsible purchases and massively shifting to online channels ― will remain in the post-pandemic world. Nearly two-thirds (62%) of European business leaders, in a group of consumer-related industries, see opportunities to build on buying habits that are increasingly driven by social and environmental criteria.
- Pursue next-generation collaboration inside and outside the company: Internally, the social contract with employees needs to be rethought, built around organizational purpose, flexible working arrangements, new people management systems, and new technologies for remote work and skill-building. Externally, a wave of mega-mergers may not happen but could be replaced with open platforms to bring together ecosystems of consumers, suppliers and business partners more than consolidating acquisitions
Choosing a new path forward
The topic of our COVID-19 research was fascinating and, initially, it was a daunting one. We don’t have a crystal ball. We didn’t know what might happen and we probably still don’t know for sure. But from our first conversations with European business leaders, they were fairly optimistic. And optimism is a self-fulfilling prophecy. If you think you aren’t going to recover, you aren’t going to recover. If you think you will, your chances are higher.