Europe’s Future Success Requires Reinvention
The world is going through a massive transformation. According to our Global Disruption Index based on socioeconomic, geopolitical, climate, consumer and technology factors, the world saw a 200% disruption increase from 2017 to 2022. In contrast, the Index rose by only 4% from 2011 to 2016.
In Europe, the pandemic, geopolitics, energy crisis and the cost-of-living have impacted the continent over the last three years. While the landscape has been challenging, it also presents a unique opportunity for European companies to reinvent themselves.
In this increasingly volatile world, we need to find new growth opportunities. In short, we can’t just rely on resilience, future success requires reinvention now.
For the most part, European companies have successfully weathered one of the most challenging macro-environments yet. Navigating not only supply chain disruptions, rising inflation and climate risk, but also an energy crisis more pronounced than that of their US and Asia counterparts.
According to Accenture research, while 65% of European business leaders agree they are facing the most challenging operating environment ever, an even larger proportion (77%) are confident about their organizations’ capacity to accelerate growth in an economic downturn.
Europe is resilient but lagging behind in technology
The resilience business leaders have demonstrated could explain their confidence in navigating current headwinds, but why is reinvention necessary now? According to the European Commission’s Digital Economy and Society Index (DESI), 4 out of 10 adults and every third person who works in Europe lack basic digital skills.
Additionally, Accenture’s financial analysis of nearly 3,000 large companies across the three regions paints a clear picture. While European companies report strong profitability, they are slower to grow revenue than those in North America and Asia Pacific.
Interestingly, the strength in profitability suggests a tendency to squeeze value from existing operations versus investing in new ones. Our financial analysis underlines this; European executives reported just 16.9% of global revenue being invested in transformation initiatives. In fact, over the past five years, these companies fell $388 billion short of matching North America’s R&D investment pace.
As European business leaders steer their determined enterprises onwards—the greatest challenge Europe faces is one of long-term competitiveness. Indeed, European businesses are not only growing revenue slower than their peers in North America and Asia Pacific, but also falling behind in technology.
Europe’s long-term competitiveness at a crossroad
In this context there are of course positives and areas where Europe are now exceeding in. The past two years have seen European executives accelerate the implementation of Cloud Services, Security, AI and Automation—surpassing progress made globally and in the US. And when it comes to embedding sustainability practices and providing better employee experiences, they remain ahead of the curve.
Sustainability and talent in particular offer an opportunity for European businesses to double up on their strengths.
What is at stake for European companies is their competitiveness over the long term. The increasingly volatile macroeconomic environment, combined with the pace of technological innovation and the need to accelerate the energy transition, requires companies to engage in a deliberate strategy to continuously reinvent their business.
It is through a Total Enterprise Reinvention that European companies can increase competitiveness and thrive over the long term.
Total Enterprise Reinvention is powered by advancements in technologies such as AI and cloud computing. Today just 8% of companies surveyed are ‘Reinventors,’ setting a new performance frontier for themselves and, in most cases, their industries. Their transformation is centered around a strong digital core and new ways of working that help optimize operations and drive growth.
Four actions for a successful reinvention
While European businesses have built extraordinary resilience in recent years, they must now reinvent themselves, addressing the unique challenges they face and leveraging their strengths in sustainability and talent.
When speaking to clients, I regularly highlight four key areas that European businesses must embrace for a successful reinvention: creating a digital core that enable the reinvention, aligning to new customer needs, fast-tracking the energy transition and placing people front and center of the enterprise reinvention.
By creating a digital core that enables business model reinvention and breakthrough innovations, it will allow European businesses to use the cloud, data and AI to drive a compressed and scaled transformation. Ultimately, this can also lead to a platform for reinvention in which initiatives fund themselves through the value they create.
When you look at what clients need, the race to net zero is on the agenda of all major European companies. Accelerating cross-industry decarbonization partnerships and adopting early-stage solutions to navigate the energy crisis and improve emissions and future competitiveness should be at the heart of European business reinvention.
Our research ahead of COP27 showed that unless companies accelerate decarbonization, 93% of the world’s largest companies will miss their net zero targets. European businesses need to play to their strengths and advocate for strong industry-government cooperation to center the European economy around net zero principles.
The climate crisis is about our planet and making the world a better place for future generations. It is ultimately down to this generation to act now. And placing people in the core of your enterprise reinvention, empowering them with next-generation skills through the power of technology will not only foster an inclusive culture it will allow this generation to reach their full potential.
As part of our own reinvention at Accenture, we are driving change through technology, data, and boundaryless enterprise function collaboration to create a world-class people experience. By investing in our people, ensuring they are net better off and feel a sense of belonging while enabling them with technology and providing the skills to succeed, we are unlocking their potential. And that becomes an enabler for the business strategy.
To empower our people and deepen our industry knowledge, we introduced TQ—technology quotient—training for every person at Accenture. We did this because we believe that in order to deliver on the human ingenuity part of our purpose, we all need to understand the technology.
This investment in our people allows us to reskill our people with next-generation skills at the same time as matching them to our clients’ needs. The TQ topics range from cloud and AI to extended reality and quantum computing, placing us in a unique position to respond to our clients’ most complicated and expert-level requests.
The results so far have been frankly outstanding, people want to learn and be empowered, so empower them through your own reinvention. Last fiscal year, 597,000 of our people participated in TQ with over 40 million training hours delivered. This is one action we are taking to unlock the potential of our people.
So, as we continue to navigate through this volatile landscape with resilience, let’s start to look forward at how we can embrace change instead of just absorbing the now. Because the time is now for companies to adopt a Total Enterprise Reinvention strategy and unlock the potential of your people and future generations through the power of technology.
Total Enterprise Reinvention isn’t just a must, it’s what is needed to enable Europe’s future success.
