The confluence of several disruptive factors – geopolitical conflict, rising inflation, economic uncertainty, increased regulatory pressure, and last, but by no means least, the impact of new technologies – will undoubtedly test leaders to the limit in the year to come.
Speaking with business leaders across the region, several common themes have emerged. From the urgent need to build greater resilience and reduce risk, to leveraging the power of AI and improving sustainability efforts while ensuring that investments drive value both now, and in the future – these are the interconnected trends that European business leaders will confront in 2024:
Trend 1: De-risking the enterprise
In an environment defined by volatility and geopolitical uncertainty, business leaders face increased risk across their operations. This is driving an acute need for operational and technological interventions to reduce risk and bring stability to the enterprise, while still safeguarding agility.
Europe’s regulatory landscape is becoming increasingly complex as policymakers try to keep pace with the disruptive impact of technology. The new Artificial Intelligence Act, for example, will establish strict rules and standards around the development and application of AI in business contexts. This includes guardrails for general purpose AI; a total ban on AI as it relates to citizens’ rights and democratic processes; and the right for consumers to launch complaints and demand meaningful explanations regarding decisions based on AI systems.
In addition, a wave of new regulations in trade and customs throughout the region will add compliance pressure on companies already reeling from ongoing challenges related to various elements of their supply chains. From 1 January this year, companies wishing to do business in Europe are subject to the EU Emissions Trading System that aims to establish Europe as the first climate-neutral continent; a truly admirable objective.
All this complexity requires extensive investment in sophisticated digital tools to provide greater visibility over the climate impact of the end-to-end supply chain, which brings me to my next point:
Trend 2: Supply chain resilience is not the same as agility
As if the continued ripple effects of the pandemic on global supply chains didn’t pose enough of a challenge over the last couple of years, business leaders have also had to contend with the ongoing geopolitical conflict. Be it re-routing of ships to avoid the Suez Canal, high-tech component shortages, or commodity price volatility on everything from food to energy – these factors, among others, create immense supply chain instability.
In response, forward-looking companies are seeking greater agility to respond to supply chain threats. A recent S&P Global report highlights the importance of technology in maximizing organizations’ chances at success with maintaining stable supply chains.
One of the key objectives of digital transformation within supply chains is the ability to improve end-to-end visibility. However, a KPMG study found that 43% of global organizations have limited to no visibility over the performance of their tier one suppliers – an astounding statistic.
Greater visibility over supply chain processes clearly also supports wider sustainability efforts. The same KPMG study found that only 5% of supply chain emissions stem from direct manufacturing; emissions from the broader supply chain are five to ten times greater.
Digital platforms can significantly improve enterprises’ ability to collect emission data and set appropriate targets for key suppliers to collectively drive improved sustainability outcomes throughout the supply chain.
In addition, organizations will increasingly leverage the power of AI to improve supply chain management, logistics, and procurement. In fact, half of supply chain organizations are expected to invest in applications that support AI and advanced analytics capabilities in the year ahead.
Trend 3: Unlocking AI’s true business value
On the topic of AI, the year ahead will undoubtedly see more companies leverage Generative AI and AI for business to drive innovation, efficiency, and productivity.
Unsurprisingly, Gartner has predicted that Trust, Risk and Security Management in AI Models will be one of the leading tech themes for the year ahead, built on advances in model monitoring, AI application security, and privacy.
However, European businesses may be more hesitant to unleash AI on their operations. A recent PwC study found that business leaders in EMEA are far less convinced that their customers prefer to interact with AI models than their North American peers.
And considering the EU legislation already mentioned, European companies looking to incorporate AI in their business models or operating environments will need to build their use case with both compliance and privacy front and centre.
However, companies can unquestionably accelerate the value from their AI deployments by leveraging AI that is purpose built for business. Large cloud and software providers, like SAP, have invested significantly in building responsible AI into their core products. This means that customers can immediately benefit and unlock business value from their software investments.
2024 will be a pivotal year for many business leaders across EMEA – while daunting in many respects, also an incredibly exciting time to lead.