DAVOS, Switzerland–(BUSINESS THREAD)–While 65% of European business leaders agree that they face the most challenging operating environment in history, an even greater proportion (77%) are confident in their organizations’ ability to accelerate growth in an economic downturn, according to a new report from Accenture (NYSE: ACN ).
According to the “Accelerating Europe’s Path to Reinvention” report, rising energy costs are the main challenge affecting European business margins, cited by 19% of respondents, followed by supply chain disruptions of supply (14%).
Despite these challenges, 81% of European business leaders believe that their organizations are well positioned to capture future growth after overcoming the pandemic.
Released at the World Economic Forum’s annual meeting in Davos, the report looks at the most pressing issues facing European businesses, their strengths and weaknesses, and how they can reinvent themselves to continually adapt to a volatile world , while increasing competitiveness, accelerating growth and improving profitability.
“The resilience that business leaders have shown could explain their confidence in facing the current headwinds, including an energy crisis that is particularly affecting Europe,” said Jean-Marc Ollagnier, CEO of Accenture for in Europe “However, what is at stake for European companies is their long-term competitiveness. The increasingly volatile macroeconomic environment, combined with the pace of technological innovation and the need to accelerate the energy transition, forces companies to engage in a deliberate strategy to continuously reinvent their business. It is through total business reinvention that European companies can increase competitiveness and thrive in the long term.”
European growth is lagging behind its peers, with a deficit in investment in technology
The report, which looks at the financial performance of nearly 3,000 companies worldwide, found that while European companies show strong profitability, they grow revenue more slowly compared to their North American peers and Asia Pacific.
To better understand where European companies stand, the report also examines their performance compared to peers in North America and Asia Pacific in six areas: talent, technology, supply chain and operations, sales and customers, liquidity and costs and sustainability.
According to the analysis, European companies are outperforming their peers in sustainability, talent and liquidity and cost management. However, they are far behind in sales growth and in using technology to drive top line growth.
European companies are also less likely to innovate using emerging technologies, move to a technology-driven business model, and have digitally savvy leadership compared to North American and Asia Pacific companies.
“The strong profitability and lower growth pattern of European companies suggests that they are more likely to extract value from existing business streams than from new ones,” said Michael Brueckner, Accenture’s chief strategy officer for Europe. “While optimizing costs and maximizing current profitability is essential, it must also be done to generate liquidity to invest for the future. They should also capitalize on their strengths in sustainability and ability to deliver employee experience, while pursuing technology-driven growth opportunities.”
Unprecedented times call for an unprecedented response
According to the report, while European companies have built extraordinary resilience in recent years, they must now reinvent themselves to meet the unique challenges they face.
The report suggests strategic steps that European companies should take to begin their reinvention, focusing on their strengths in sustainability and talent, while addressing their deficits in technology and customer needs. These steps include:
- Build your digital core quickly to enable business model reinvention: Drive continuous, compressed and scaled transformation, including by establishing a digital foundation with cloud, data and AI to scale new processes, innovations and solutions across the enterprise. This is an ongoing effort to build a platform for reinvention through transformational programs that are funded through the value they create.
- Accelerate the energy transition: Working across ecosystems to focus the European economy around net zero and circular principles for global competitiveness. Advocate for strong industry and government cooperation, policies and incentives to level the global playing field and accelerate implementation. Accelerate cross-sector decarbonisation partnerships and encourage large-scale adoption of early-stage solutions. Improve energy efficiency, not just to navigate the energy crisis, but as a long-term solution to reduce emissions and costs.
- Align with the new needs of the client: See customers in the context of their full lives, using human and machine intelligence to understand them and their motivations in a holistic and dynamic way. Address their changing needs by replacing one-size-fits-all offerings with more personalized products and services, expanded partnerships, and rethinking talent, technology, and processes to drive value and loyalty.
- Turn talent strategy into business strategy: Put people at the center of business reinvention and establish HR managers as catalysts for change. Ensure strong connections and collaboration across the C-suite and join everyone on the journey of reinvention, creating new ways of working. Access and build talent in innovative ways, using technology and data to gain a deep and granular understanding of current and next-generation skills needs. Instill a culture of inclusion throughout the organization, so that people at all levels can contribute to their highest potential, supported by a strong sense of belonging and purpose.
“Today, most companies are reinventing parts of their organization,” added Ollagnier. “But to succeed in a business environment that is currently being redefined, they will have to change everything from their operating models to new ways of working. These unprecedented times require an unprecedented response from European companies. This will require a bold and visionary approach to transformation that abandons best practices to reach a new performance frontier. It is a key moment for a stronger Europe.”
You can explore the report Accelerating Europe’s path to reinvention in Accenture Foresight, our new thought leadership app, which provides a personalized feed of all our reports, case studies, blogs, interactive data charts, podcasts and more. Download the app at http://www.accenture.com/foresight.
About the research
Accenture’s Accelerating Europe’s Path to Reinvention report is based on survey responses from 2,000 business leaders in Europe (1,450), the United States (300) and China (250), covering 12 industries. The survey was conducted from October 24, 2022 to November 30, 2022. The report also includes analysis of company financial performance and business strengths of 2,854 companies worldwide, including 1,344 European companies . We analyzed the strengths and weaknesses of the business in six areas that have demonstrated impact on profitable growth: Liquidity and costs; Sales and customers; Talent; Supply chain and operations; Sustainability; and Technology
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