In order to conquer obstacles, businesses must employ new strategies to ensure they thrive out of recession and improve upon the practices that saw them survive. What is clear is that businesses must take valuable lessons from the experiences of the last two years and use these to build better, stronger models for the future. It might be assumed that the largest European economies would provide the greatest lessons and the clearest strategies for ‘future proofing’ business. But a closer inspection of the European marketplace revealed in a recent report from HSBC, shows that this is not necessarily the case.
Report authors, The Future Laboratory, investigate the performance of Europe’s nations. Using a combination of data and analysis from the World Economic Forum, the International Institute for Management Development in Switzerland and the Economist Intelligence Unit, consultations with academics and economists, plus interviews with business experts across Europe to develop Future Proofing Europe: New Models for Business Success.
The report found that, while traditional economic powerhouses like France and Germany have managed themselves out of recession, countries such as Poland, Turkey and the Czech Republic have innovated, consolidated and adapted over the last two years which has enabled them to thrive to some degree while other nations floundered. We chose to term these market ‘Super States’ to reflect the position they occupy in the European marketplace. We are quickly learning that reactive, repetitive and inflexible ways of thinking have caused many businesses to falter in the face of adversity. Indeed, there is mounting evidence that fresh, ingenious and imaginative business models are those emerging first from the recession.
The five ‘Super States’ highlighted above are championing business ideals that other nations can learn from and adapt, to help drive the economic recovery forward and future-proof themselves against further recessions. The Czech Republic, France, Germany, Poland and Turkey – have all survived and thrived during this economic downturn from a social, cultural, political and economic perspective. The lessons learnt lay the foundation for businesses in other European countries to adapt their strategies accordingly, and ‘future proof’ their business against future recessions.
The Czech Republic: prudent, innovation-led and technology focused
The Czech Republic entered the economic downturn with a low budget deficit compared to other European countries. The government is also taking steps to ensure that the fiscal situation does not continue to exceed what is needed to drive a lean and optimum economy forward. This is reflected in the confidence felt by businesses which were surveyed for the Future Proofing Europe: New Models for Business Success report. Only 12 percent of businesses say they need to learn from the current recession, while over two thirds (69 percent) believe business will perform more strongly over the next five years. Sound infrastructure and favourable business environment is spurring on businesses to place innovation at the heart of their corporate ethos. Specifically, 50 percent of those businesses we surveyed say organisations that flourish in the Czech Republic are innovative, while almost half (42 percent) say this is already a key component of their own approach to business.
The Czech Republic also invests heavily in Information and Communication Technologies (ICT) compared to the European Union (EU) average. And one of the most influential trends affecting Czech businesses is their ‘connectivity’, i.e. being connected to the internet at all times – also seen as a key component of growth in the country too. Four in ten businesses that flourish will prioritise technological investment, while half will succeed through taking advantage of the internet. This technology-driven mindset is resulting in the forging of closer links, particularly between technology businesses and universities, with several organisations benefiting from close cooperation with universities in Prague and beyond.
Businesses have also devised a smart blend of low labour costs and a well-educated labour force. As a result many companies are keeping hold of talent by taking an employee driven focus to make the most of this human capital.
France: pragmatic, insightful and cohesive
The French economy owes its resilience, in part, to heavy state involvement. Before the financial crash, the ‘French-style’ of pragmatic interventionism came in for fierce criticism for failing to generate enough growth or jobs. But the model was in fact successful, helping to drive the country out of recession ahead of many of its European neighbours in Q2 of 2009.
Its focus on innovation, as in the Czech Republic is key, albeit taking a very different format. Innovation in France is largely centralised with state-owned public research centres driving output. This approach has led to some bold strategic investments which have placed the country at the forefront of Europe. This includes the country’s high speed train network, strong nuclear industry, and world leading aeronautics. There are also a number of upcoming investments planned in the ‘clean technology’ and ‘low carbon’ sectors, all of which will open avenues for business.
The report reveals that two thirds of businesses which flourish in France are innovative, whether this is state-driven or not. Over the next decade – this state-driven innovation culture will increasingly support businesses to invent and grow themselves. This approach to innovation will also further promote mutually beneficial relationships between state, academia, and business; a ‘trialogue’. There is a clear emphasis that French businesses plan to work with the government, universities, foreign investors and even competitors to ensure that they flourish.
France’s economic growth rate has also been strongly affected by higher levels of social trust – namely a closer link between communities and businesses. In fact French businesses generally tend to describe themselves as socially driven first and foremost ahead of attributes such as forward thinking or flexibility.
Germany: internationally renowned, adaptive and industrious
While Germany’s export-driven economy was hit badly, it used its global network of alliances and its elite pedigree as a European engineering and manufacturing powerhouse to resuscitate itself and its economy. Indeed the country’s exports increased by 5.4 percent in the third quarter of 2009. As the world begins to consume once more, it will be the high quality manufacturing might of Germany that will cater to people’s needs.
But people are key for Germany too; businesses which will flourish will also need to train employees and foster new entrepreneurialism. Germany’s long-term success will also stem from the diversification of its local small businesses to enable them to foster global consumer bases. In the past, 67 percent of businesses were focused domestically, now it is just 30 percent, lowering again to 18 percent in the future.
Crucially, sophisticated technologies are enabling them to foster global aspirations, through simpler trading systems to supply chains. This need will be met by new ‘business orchestrator’ companies located near the key economic centres. Germany also acted fast to adapt its approach to business in crisis, and guide its economy through the worst.
The recession provided an opportunity for businesses to hone skills in efficiency and flexibility. Specifically, 37 percent of businesses in Germany feel the downturn has forced them to think of new, more effective ways of doing business, and overwhelmingly, businesses to continue to be adaptive and flexible if they are going to be successful in the coming decade.
Poland: resilient, positive and imaginative
Poland’s resilience has been down to a robust domestic market and limited exposure to world trade. Poland’s legacy of sound economic policies also helped to soften the blow of the country’s relatively mild recession. Something that I have witnessed myself when visiting customers is the optimism in and around the Polish market – only one in ten businesses have adapted how they operate in light of the recession and two thirds of businesses have seen a stagnation or improvement in their profit margins as result of the down turn.
Positivity and confidence are at the centre of this country’s survival and future business success. Not since the revolution of 1989, and Poland’s entry into the EU in 2004, have Polish people felt so optimistic about the direction their country is taking, businesses are expected to perform more strongly in the next five years. This creates a clear space for entrepreneurialism and innovation – Polish businesses describe themselves as forward thinking and creative and the market is full of potential. Polish businesses are increasingly innovative and entrepreneurial, which will enable business to flourish both in Poland and internationally over the coming decade.
Turkey: shrewd, devoted and technology-led
With assurance and aid from the banks, Turkish businesses rode through the recession with a more solid and sensible attitude than many. By balancing financial support with self-made financial investment many Turkish businesses avoided faltering, unlike companies from some other ascending markets. Again, the outlook remains positive, and the majority of businesses believe they will perform more strongly over the coming five years. Turkish businesses are now taking advantage of the global stage that awaits them. One positive of the downturn in Turkey is that it has forced companies to focus on new export markets, and many entrepreneurs are taking action accordingly.
Historically, Turkish exports have stayed predominantly in Europe, but with demand falling, businesses have, and will continue to turn to China, India and the Middle East. However, the HSBC report reiterates the importance of global operations; those with a global customer base will flourish, and for many, globalisation is the most important trend affecting the way a business operates. Turkish businesses have seized on technology and are aware of the efficiencies that investment in ICT can bring.
So what does this mean for the rest of Europe?
Over the coming decade, France, Germany, Spain, Italy and UK will continue to dominate the European economic landscape. However, the business models and financial insights coming from nations like Turkey, Poland and the Czech Republic will shape how European companies can adopt a newer, leaner and wiser view of what business success means.
Indeed, one thing the recent recession has taught business is that Europe’s corporate culture must come above the needs and wishes of other international states. European business success occurred during this recession predominantly where a nation had a low budget deficit, and was not pulled under by a faltering Anglo-American economy. Poland, the Czech Republic, France and Turkey succeeded through both this set up and a robust governmental system to stabilise their corporate cultures, while Germany bolstered and centralised its engineering elitism to make sure descending markets did not jeopardise its global export network.
The message for future European businesses is that interconnectivity (with the likes of China, India, Japan and America) means that change spreads fast. For the future of ‘Greater Europe’ it is important, then, to understand its unified position in an ever-growing global network; to understand it, map it, pace it, and to be able to envisage the consequences of even the smallest and most seemingly inconsequential decision each individual member state makes.
The role of these five European Super States will be to make sure that other countries within Greater Europe (mature and emerging) remember the lessons learnt and future proof their own corporate cultures, and financial models, over the coming decade. Prudence, proactivity and cohesion will be essential to the future of European business success.