The Work Ahead: Europe’s Digital Imperative.

The Digital Message received loud and clear.



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Author Avatar by Euan Davis
Europe’s Digital Imperative

Im Fokus: Unlocking the Value of Code

Despite bold quantitative easing and record-low interest rates, anemic demand continues to hobble gross domestic product (GDP) growth throughout the European Union. In several EU countries, more than a quarter of the population has been unemployed for close to a decade, and political discontent is on the rise. Europe needs a new North Star – a goal around which country, corporations and citizens can coalesce to reignite the growth that will propel Europe into the middle of the 21st century. By harnessing the power of digital, European businesses can create a foundation for meeting that goal, that new North Star. Injecting “digital” into every aspect of work, life, culture and society can force an uptick in employment and productivity, while building greater social cohesion across the continent.

The digital technologies emerging now are not simply the latest offerings from the whiz kids over in Silicon Valley; they are the seeds of an entirely new economy – a digital economy – that will erupt into a changed landscape of innovation. This new economy – powered by platforms, data, algorithms, “bots” and connected “things” – introduces the possibility of generating massive amounts of cash from ideas that represent the future.

Digital is the opportunity in front of Europe today and will be so for decades to come. Europe’s business and political leaders must seize this once-in a generation opportunity to re-engineer and revitalise Europe’s role in an increasingly hyper connected global marketplace. This is the digital imperative. If Europe succeeds with this imperative, it will marry its historical strengths – culture, education, ingenuity – with the mores of the digital world to create a “hybrid economy,” enabling it to re-assert its rightful place in the world. If it fails, Europe will fall further adrift from the entrepreneurial power of the U.S. and be eclipsed by the rising economies of Asia Pacific. The stakes could not – literally – be higher. To understand the changing nature of work, the changing nature of commerce and the changing characteristics of what constitutes success in this new world, Cognizant’s Center for the Future of Work – in conjunction with the renowned economist Nouriel Roubini – surveyed top executives at leading companies around the world to gain insights into how the future of work is coming to life. This report – the latest instalment in The Work Ahead series – focuses exclusively on the responses from European respondents.

THE DIGITAL MESSAGE RECEIVED LOUD AND CLEAR: UNLOCKING THE VALUE OF CODE

Europe is under pressure. Squeezed between a smart-based U.S. economy, and a fast-growing China that is rapidly expanding its research and development capabilities, Europe needs a plan. The impact of new technologies on all aspects of business and society – what we are now calling digital – is so large that the economic windfall could power the region for decades to come. New technologies are now emerging in rapid-fire – virtual reality, drones, 3-D printing, blockchain to name a few – and are landing thick and fast. Never has our technological future seemed this close. At their root, these technologies enable the “new:” New business models, revenue streams, types of customer relationships and cost structures are coalescing to radically change the nature of work.

THE ECONOMICS OF DIGITS

The 2,000 companies from across the globe that participated in our study had combined total revenue of about $7.3 trillion in 2015. The 800 European organisations represented 50% of the worldwide total, or $3.63 trillion (€4.24 trillion). European businesses clearly see value from the digital tide now swelling: New technologies are pouring into work, impacting revenue and cost.

Approximately 5% of respondent organisations’ revenue was driven by digital tools and technologies in 2015 – so too was an increase in costs. The net effect – the difference between spending and return on digital – was 4.6%. While that percentage may sound small, it translates into roughly $150 billion worth of value for European companies – a figure that represents nearly three years of total spending by the EU on its rancorous Common Agricultural Policy.

START FINDING THE CASH TO FUEL YOUR DIGITAL JOURNEY

Clearly, digital means business – certainly, on the revenue side. On the cost side of the ledger, European executives across industries say digital is costing their companies around 2.4% of revenue. Decision makers are investing in digital in hopes of growing revenue and, in just a few cases, cutting costs down the road. Between now and 2018, the cost picture flattens.

Decision-makers are investing in digital in hopes of growing revenue and, in just a few cases, cutting costs down the road.

There’s a wide degree of variability across industries in Europe, but in aggregate, costs are expected to remain flat through 2018 and increase by only 1.3%, globally. This apparent rounding error on the cost impact of digital is one of the most important findings of the study because it points to a widely-overlooked opportunity: The productivity drivers from software-as-a-service, process automation toolsets or blockchain have the potential to create significant savings. These savings will act as additional fuel that powers digital investments.

SEE VALUE IN THE VIRTUAL

We meet with hundreds of business and technology leaders every year across Europe. At this point, virtually everyone has heard about digital and is investing in channelling the forces outlined above – many perhaps, have even become numb to the term. But our latest study and analysis illuminate digital’s future for your company and for the European region. We can see the beginnings of what works. If you are not using technology to reduce costs, automate aggressively in the back office or sift for gold in the data streams running through your business processes, then the digital switch will be very hard. Software should be turning the economics of the back office on its head. Channelling the savings back into the business to boost digital innovation is a short-term goal.

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