The continent’s track record of innovation and collaborative research, and its zeal to transform traditional industries, augur well for the future.
Most of Europe’s business sectors have been hurt by the 2020 downturn.
Besides pharma, Europe’s telecommunications sector has a strong track record of innovation, and this sector was one of the few not to suffer a downturn in 2020. In automotive, as elsewhere in manufacturing, Europe has made a good start with Industry 4.0 and the Internet of Things (IoT), which provides some compensation for not having its own platform champions. Automotive suppliers are fast becoming software-driven technology companies; indeed, it’s striking to me how leading businesses in that sector now boast more software engineers than some of the major software giants themselves. Europe is building on its strong heritage of inventors, scientists and engineers, a trend also conspicuous in the fact that 70 to 80% of all global patents in IoT have been registered in the EU.
Innovation also distinguishes the service sector. Europe has an enviable position in luxury goods, with more than 80% of global luxury brands owned by companies in the region. We don’t yet know how the retail sector will evolve after the crisis, but many of the sector’s global leaders with their new “flagship” stores in big cities and innovative online channels are well positioned to prosper in whatever hybrid shopping model emerges.
Many European companies have undergone deep transformations in recent decades, developing capabilities that will be needed in “backbone” industries such as oil and gas, energy and utilities, steel, and chemicals. In automotive, a global industry with one-third of its activities in China, we can be optimistic about the “transformative” role continental Europe can play in ESG. European automobile companies face an enormous challenge to provide leading products and services in the field of electric and autonomous vehicles. But I know from conversations with some of their senior executives that the industry is deeply committed to the EU’s “green deal”—to be the first region in the world to achieve climate neutrality by 2050. The transformation in automotive, it’s worth remembering, is still at an early stage, and the strength of European car brands will be an important asset in future battles with US manufacturers like Tesla (still a relatively small company) and new Chinese competitors.
Underpinning all this is Europe’s proud and distinctive European educational heritage. According to the most recent Times Higher Education World University Rankings, more than 40% of the world’s best universities are based in Europe. Moreover, no other group of countries collaborates across national borders in research to the same extent as the EU, which doubled the proportion of its annual budget devoted to its framework programme for research and innovation to €74.8bn in the years 2014–20.
It’s my hope that we can soon put behind us the terrible headlines of 2020, and look forward to a year of recovery and opportunity in 2021. Away from the limelight, the pressures of the pandemic have already speeded up change from the C-suite to the shop floor; combined with the continent’s deep reservoir of brains and skills, this makes me optimistic about the way ahead.
As the manufacturing CEO and I traded thoughts about the path forward for Europe, I was struck by the energy and passion he brought to his role. His anxiety was balanced by a belief that there are myriad opportunities for his company to innovate and grow. He is deeply committed to the success of his enterprise, not just for its own sake but for its people, who dug deep and sacrificed much during 2020, and whose capabilities he admires and views as a foundation for the future. That commitment is making him look outwards, not inwards, as he plots the next steps. If Europe as a whole does the same, its best days lie ahead.
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