How advanced are European companies in leveraging digital transformation?

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To be honest, there is no end to digital transformations. We should think of transformations in the age of digital and AI not as individual projects to be completed, but as a continuous evolution of the business model, leveraging technology and taking the employees along.

Personally, I have a positive view of Europe. Here at McKinsey, we measure the digital quotient, which compares the progress companies are making along the digital journey. And actually, Europe’s score is on par with the global average. However, the European result is very much driven by a few large and successful companies. As a result, we are missing the digitization of the broad middle. This is a challenge for us in Europe, but it can also be an opportunity to lift our ambitions and drive further growth.

How can smaller companies and start-ups benefit from digital transformation?

Overall, the same recipe around digital and AI also applies to start-ups and scale-ups, which we at McKinsey are increasingly working with now. One additional thought is to start thinking about international expansion more purposefully. Compared to North America and some of the big Asian markets like China and India, the individual markets in Europe are relatively small. But if you consider the advantages of the European single market, we recommend going abroad once maturity has been reached, the scale is solid, and the talent bench is strong enough—which can become a competitive advantage when expanding into North America. It’s an “and,” not an “or”.

Why should business leaders prioritize digital transformation?

I believe investing in digital transformations is an imperative. Of course, one needs to ensure short-term resilience. However, as the age of digital ushers in a sort of a winner-take-all model, where a few companies are gaining the most in terms of growth, profitability, and value creation, we recommend moving early in order to become one of those winners.

Are there any signs that digital momentum has slowed in recent years?

There is a certain fatigue that sets in when it comes to digital and AI transformations. And I think one of the key reasons is the fact that not all players have earned the digital dividend, despite spending lots of time and money thinking about and investing in digitization. In many cases, they end up with a collection of lighthouse efforts instead of a full-scale orchestrated transformation combining strategy, building up enablers, and taking the employees along. That’s what we could call “rewiring a company.”

How can Europe lift its digital transformation ambitions?

I’m all in for lifting Europe’s ambitions. While it might be easy to cite some of Europe’s detractors in a conversation, I believe our overall talent base and the investments many companies have already taken in digital infrastructure—which now need to be fully connected—is a positive. I think we also see a strengthening of the start-ups and scale-ups who represent Europe’s future shapers. So it’s up to us to roll up our sleeves with the spirit of lifting Europe’s ambitions.

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