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Europe Must Invest in Technology, Talent, and Trust to Realise the Potential of Generative AI

May 31, 2024

By Jean-Marc Ollagnier, Jack Azagury and Dominic King

Could generative AI breathe new life into the old continent? Europe’s technology deficit with North America is well-documented; last year our research explored how the region’s lower technology maturity poses a threat to business reinvention efforts.^[^i]The advent of generative AI, however, presents a chance to catch up, by boosting the creativity and efficiency of Europe’s large cohort of knowledge workers. We estimate that generative AI could raise the forecast rate of economic expansion across the region by 0.6 percentage points per annum over the next 15 years.^[^ii]

Europe’s technology industry is dwarfed by that of the US, which is home to nearly five (4.5) times as many of the world’s 100 largest technology companies.^[^iii] What is more concerning is that companies headquartered in Europe tend to be less tech-savvy than their peers across the Atlantic. Accenture’s latest Resiliency Indexiv finds that European companies rank 30 percentage points below their North American competitors on technology maturity—a composite measure of investment in applications, infrastructure and cybersecurity.^[^v]

European executives recognise that these technology shortfalls are affecting performance: more than one in five say enterprise systems deficiencies have a large negative impact on competitiveness. This compares with one in eight executives globally.^[^vi]

New tech, new value

How can generative AI help to close the gap? We estimate that globally, generative AI has the potential to impact 36% of working hours either through automation or augmentation. Given Europe’s relatively high proportion of knowledge- and language task-based workers, 44% of hours could be transformed here.^[^vii]

This, in turn, would free up workers to focus on higher value-add activities. Indeed, by adopting generative AI responsibly and at scale, organizations could boost economic output across the 10 European countriesviii we studied by €2.3 trillion by 2038. This would raise the forecast rate of regional economic expansion by more than half—a major boon in today’s low-growth environment.^[^ix]

The pivotal question is, are European companies primed to seize this opportunity?

The early signs are promising. The proportion of “Reinventors” in Europe – companies ahead of the pack in using new technologies and new ways of working to reach a new performance frontier – doubled to 11 per cent over the past 12 months.^[x] Moreover, 84 per cent of European executives (vs 80 per cent of those in other regions) say that generative AI is key to their reinvention strategy. And 72 per cent (vs 59 per cent) expect it to significantly improve performance.^[xi]

Thus, Europe sits at a competitive crossroads. Will it become a “maker” of the rules, governing everything from people to responsibility, and shape this new AI-powered business environment to its advantage? Or will it be simply a “taker”, following the lead of China and the US? That will depend on how companies address the five imperatives we explore below.

1. Lead with value

We are still in our infancy in terms of recognising and realising the potential of generative AI. Companies, therefore, need to adopt a value-led approach that fully accounts for the risks and returns when determining which business capabilities to reinvent through generative AI investments. This should include both “no regrets” investments (that offer efficiency and productivity improvements) and strategic bets (that promise a distinct, even industry-shaping, competitive advantage).

The region can also leverage its diversity of cultures and languages to build models that are less prone to cultural and linguistic bias.

Early applications have focused on narrow use cases in functional processes that sit across industries. The top three components of the business to which European organisations plan to make fundamental changes using generative AI over the next three years are IT (74 per cent), marketing (47 per cent), and finance (43 per cent). The companies that gain a competitive edge will increasingly pivot from these “no regrets” applications to addressing critical areas of their industry’s value chain.

In doing so, the continent can play to its strengths in areas such as engineering and manufacturing in industrials, and capital project management in the renewables sector. The region can also leverage its diversity of cultures and languages to build models that are less prone to cultural and linguistic bias. For example, the multilingual model built by French start-up Mistral AI, which recently secured investment from Microsoft, is better able to overcome the English-language bias apparent in many of the models developed by US competitors.^[xii]

2. Develop an AI-enabled, secure digital core

Companies with legacy systems and siloed data will struggle to realise the potential of foundation models, large deep-learning models that can be adapted to support multiple purposes. This is a particular concern in Europe, given that its businesses spend less in key IT areas such as cloud, mobility, data, and AI compared with their North American counterparts.^[xiii]

To move faster from piloting to scaling initiatives, European companies need to build a strong data and AI “backbone” into their digital core, a secure, cloud-based technology capability that both creates and empowers reinvention. They need to develop both a robust architecture for integrating diverse foundation models, and new capabilities to handle unstructured and synthetic data.

Building data products (high-quality, ready-to-use data formatted so that people and systems across an organisation can easily access it) and developing data pipelines are essential for assimilating the diverse data sources required for generative AI. Half of European companies recognise that they will need to make significant changes to their data strategy as a result.

Business leaders should also challenge their teams to use generative AI as an accelerator. Among European executives, 74% expect it to fundamentally reinvent their IT function (vs 60 per cent of peers globally). A case in point is Unilever’s global AI lab “Horizon3 Labs”.^[xiv] Here, the consumer goods multinational is working with Accenture, drawing on assets from our AI Navigator and proprietary model “switchboard”, which allows users to select a combination of models to address the unique business context.^[xv] The collaboration aims to surface new applications to enhance productivity, drive efficiencies, and accelerate disruptive and AI-powered innovations at scale.

3. Reinvent talent and ways of working

Generative AI is set to trigger the most significant shift in work since the agricultural and industrial revolutions. Anders Romare, Chief Digital and Information Officer at Novo Nordisk, captures the magnitude of the opportunity succinctly: “The data we generate from clinical trials is just enormous: it’s starting to be beyond the human capability to actually sort and understand and digest.” He says that generative AI can help aggregate and summarise the vast information to deliver a much “higher quality output”.^[xvi]

Generative AI is set to trigger the most significant shift in work since the agricultural and industrial revolutions.

But if organisations adopt generative AI hastily – primarily to cut costs – it is likely to significantly reduce the potential economic gains outlined above. Companies must not overlook the need to reskill or upskill employees at scale. The full potential of generative AI will only be realised through a people-centric approach, in which employers focus on how to apply the technology to boost employee productivity and well-being.^[xvii]

In this context, Europe can capitalise on existing strengths. Companies across the region enjoy.^[xviii] As AI expands into more areas, individuals will need to reskill and upskill more often. European companies’ leading capabilities in people enablement could therefore be a source of significant competitive advantage.

4. Close the gap on responsible AI

To win people’s trust, the unparalleled potential of generative AI must be counterbalanced with an unwavering commitment to responsible innovation. Current limitations, such as “hallucinations”, IP infringement, and data explainability, are holding some companies back from investment. Employees, too, are apprehensive; they are three times as fearful as their bosses on the accuracy of tool output, and more than twice as likely to worry about job displacement.^[xix] Such concerns mean that 77 per cent of European business leaders are approaching associated investments with more caution, compared with 59 per cent of peers in North America.^[xx]

Europe can capitalise on existing strengths. Companies across the region enjoy.

European companies must move swiftly to earn trust, for example by ensuring that algorithms and underlying data are as unbiased and as representative as possible. The incoming EU AI Act helps by providing a clear, consistent responsibility framework.^[xxi] The Act will support standardisation of responsible AI efforts across Europe, which will translate into easier collaboration and faster development times between companies, as well as enhanced experiences for customers. For example, Vodafone’s generative AI chatbot, now in pilot, improves user experience through an AI safety framework that protects customers.^[xxii]

5. Drive continuous reinvention

Just as species continuously adapt to survive, so too must business leaders. Reinvention is not a one-and-done endeavour. Most European executives (59 per cent) say they are at least somewhat effective in executing new strategies and performance goals continuously, but only 22 per cent say they are doing so “very effectively”. The companies that build the organisational capability to continuously reinvent, and take advantage of new technologies such as generative AI to do so, will be those best positioned to succeed.

In recent years, European companies have rapidly transformed to meet challenges ranging from the pandemic and supply chain disruption to the energy crisis and high inflation. Generative AI has the potential to bolster reinvention efforts and open new performance frontiers, but only if companies double down on technology, talent, and trust. It’s an opportunity that Europe must seize.

The authors would like to thank Mike Moore, Ana Ruiz Hernanz, and Jakub Wiatrak for their contributions to this article.

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About the Authors

Jean Marc Ollagnier