Aligned operating model key for EU competitiveness

24 March 2015

Competitiveness continues to be a difficulty for many European companies. In a recent study from A.T. Kearney the perceived state of competitiveness is surveyed, finding that a company’s competitiveness is directly affected by its approach to transforming its operating model and balancing key capabilities.

The financial crises and its aftermath left many European companies vulnerable to international competition. Companies in Europe now need to deal not only with a depressed economic environment but must in a stressed position transform themselves to again be globally competitive. To identify how the companies are doing, the A.T. Kearney asked 831 business leaders spread across European countries and industries, about their competitive situation and how they expected it to develop. The study then asked about the companies’ approaches to five key building blocks for their operating models, as well as three key elements of corporate fitness.*

AT Kearney - Signature

The study finds that in general there is a positive outlook around the confidence of businesses to “weather the economic doldrums and compete with other regions,” with 55% of surveyed executives indicating their belief in the improved competitiveness of all European companies. The positive sentiment was particularly strong in UK companies, followed by Iberia and then Germany; France and Italy had the most pessimistic expectations.

While the consulting firm finds good news, the survey results also highlight that businesses in Europe continue to miss out on opportunities in developing strong core competiveness. The study finds that for companies to be succesful, an aligned operating model and a balanced approach to capitalising key capabilities are key. 

Fit Transformation framework

The firm finds that of the five building blocks in an operating mode, the surveyed companies tended to focus on the first three “hard” capabilities while the “soft” aspects of a company – its capabilities and culture – were marginalised. According to the authors of the study, this lack of focus in soft capabilities has a detrimental effect on how the companies rated their own competitiveness. “75% of companies that addressed four or five of the blocks had a positive outlook on their competitiveness, whereas less than 20% of the companies that had addressed no building block had a positive outlook,” explains Hagen Goetz Hastenteufel, Head of A.T. Kearney’s Organisation & Transformation Practice in Europe and lead author of the study.

Further results from the survey indicate that companies that are well versed in the three elements of “corporate fitness” tend to also score higher in perceived competitiveness and positivity about future success. However, from the participants in the study, only 10% had addressed all three in a balanced way.

Hagen Goetz Hastenteufel, A.T. Kearney

According the consultancy, the study “demonstrates that a company’s competitiveness is directly affected by its approach to transforming its operating model and balancing the strength of its capabilities, its market responsiveness, and its cost advantages.” With larger companies creating new functions that streamline the process of transformation, with implementers like ‘Head of Transformation’, companies that, according to the research “perceive themselves as more competitive.”

Hastenteufel concludes: “Nearly all companies understand the need to initiate transformation activities, but many companies have opportunities to do so more holistically. Success depends on aligning all of the building blocks of your operating model, and also balancing strength, agility, and cost with the mixture appropriate to your situation. The study shows that succeeding at this balance and alignment will determine the future of European competitiveness.”

* Both building blocks and elements of corporate fitness are taken from the A.T. Kearney ‘Fit Transformation’ framework, which helps companies identify internal success factors for competitive positioning. The building blocks include technology, processes, organisation & governance, resource configuration, and capabilities & culture. The elements of corporate fitness include deep capabilities (“strong”), market responsiveness (“agile”), and structural cost advantages (“lean”).