As the pace of change accelerates, middle-market business leaders recognize they need to spend more time on strategy and less time running current operations. More than four in ten (41%) say a wider and deeper pool of managers who can take on operational responsibilities would most free them to do this, in line with their peers in the rest of the world (40%).
Looking to long-term megatrends, demographic shifts, as last year, is the dominant disruptive force impacting European business (35%) as for peers in the rest of the world. Europe in general is facing the challenge of an ageing population exacerbated by low birth rates (particularly acute in Germany). But this year, just over one in five company leaders in Europe see industry convergence as the key megatrend, reflecting both the blurring of sector boundaries and the birth of new subsectors driven by digitization. These shifts are not necessarily challenges – indeed for the agile, they offer new opportunities.
Finland's Tuomas Riski, co-founder and CEO of Norsepower, is one company leader benefitting from convergence. "We are at the forefront of convergence because we are the first to combine wind power and shipping," he says. "Our technology is essentially underpinned by an Internet of Things (IoT) system, which enables us to track the performance and run maintenance on our rotor sails remotely. Digitization is therefore a big enabler for our business."
Government policy as a driver of innovation, rather than an obstacle to it, emerges strongly this year. Over one in four (27%) of Europe's entrepreneurs place it joint first with profitability, up 8 percentage points on 2017.
"We see how government regulations on reducing carbon emissions have accelerated the development of electric vehicles and other smart transport solutions," says Baldwin. "The mayor of Paris, alongside those of Madrid, Athens and Mexico City, has announced a ban on diesel vehicles in the city center by 2025. These policies drive market change."
Europe's company leaders, broadly reflecting global peers, adopt a twin strategy for increasing innovation in their companies, both harnessing their own staff's creativity (30%) and using customer data to drive innovation (29%).
AI has emerged from the margins of science fiction into the boardrooms of the world in a huge leap. While last year 70% of European leaders said they would never adopt robotic process automation (RPA), today an even greater percentage (75%) say they are adopting AI within just two years. In fact 97% of all Europe's company leaders have plans to adopt AI within five years, putting the region ahead in embracing cognitive technologies and machine learning.
AI has the power to transform every business process from the back office to the customer experience, and while companies are at different stages none doubts its critical role in the near term.
"Bitcoin's underlying technology – distributed ledger technology – could potentially offer some use and benefit in our business," says Ingrid Faber, CEO of Europe's leading integrated pooler and producer of wood pallets, Pooling Partners. "I'm not talking about investing in Bitcoins, rather what the technology could mean for our business and operations."
For TomTom, the Netherlands-based global leader in satellite navigation services, the opportunities are all in cloud-based services and IoT applications. "We see connected cars, software-based safety systems in cars and self-driving technologies as major future growth areas for us," says CEO and Co-founder, Harold Goddjin.
Technology is also singled out as a driver of improved productivity by one in four respondents, up 5 percentage points on 2017, and second only to economies of scale (29%).
However, companies may be underestimating the need to mitigate cyber threats, as they grow their digital footprints. Just 7% of Europe's middle-market leaders are investing in technology to reduce risks and 5% see rate cyber threats as the key challenge to growth.
"Company leaders need to develop strong digital security strategies hand-in-hand with their AI adoption plans," says Baldwin.