Europe’s share of the global market in critical technologies is alarmingly small. Without swift action, we risk losing jobs and innovation capacity. However, with the right measures, we can rapidly unlock Europe’s economic potential

We have witnessed this worrying trend for a long time, but the current situation serves as a wake-up call for many. The report’s title, ‘From ideas to action,’ emphasizes the urgent need to transition from words to action. Now is the time to demonstrate resolve and make the right priorities. Our report offers clear solutions to enhance productivity and competitiveness in Europe – and in Finland – for the future

It is important to remember that the industry is diverse and there are winners, for example the demand for outdoor clothing is strong thanks to the outdoor trend. Niche players with a strong brand and an attractive customer offering still have the opportunity to succeed. That is why brand marketing will become even more important this year. In addition, investments in generative AI in marketing, planning and product development will increase

Companies in the fashion industry must work together to solve these problems and create clear standards that help consumers make more informed purchasing decisions

Disruptions in supply chains affect all parties, though on a different scale. It is a problem that requires joint solutions. It is clear that those actors who invest in transparency and strategic partnerships are more successful

If Europe fails to improve its competitiveness, we estimate that about €500 billion to €1 trillion of value added could be at stake annually by 2030. For perspective, this is three to six times the incremental annual investment needed to achieve net zero. Strengthening Europe's competitiveness is crucial for fostering future economic growth

Now is the time for Europe’s policy makers and business leaders to collaborate and craft a bold, integrated agenda built around ambitious goals to accelerate competitiveness and growth in Europe

We are already seeing how companies around the world are adopting generative AI to gain a competitive advantage, and Finland can be a pioneer in this development. Finland is a digitally strong country, and our population largely performs complex tasks that technology can automate

Generative AI can contribute to the automation of our society, which we estimate will happen ten years earlier than expected. The technology offers huge opportunities for companies and can become a key tool in solving several social challenges, such as the aging of the population and the transition towards a more sustainable society

Our forecasts suggest that warming can be expected to be between 1.6°C and 2.9°C. This signals an urgent need for increased global action

How the demand for gas and fossil fuels develops depends on how quickly we electrify and switch to renewable electricity. Electrification specifically will play a key role in reducing emissions

Banking in Finland is currently more profitable than it has been in a long time. However, the market situation becomes more challenging for banks as interest rates level off and financing costs rise. Even though the profitability of Finnish banks is currently good, given the rising costs, economic uncertainty and new competitors, it is important that banks continue to invest in innovative strategies and make extensive use of technology

More than 70 percent of the growth in the financial sector between 2015 and 2022 took place mainly outside the balance sheets of traditional banks. Insurance companies, pension funds, state investment funds, private equity investors and asset managers, among others, have taken a large part of the growth. This change is not a new phenomenon, but in our view it is gaining strength. In the long run, the return on equity of global banks may shrink and the positive development seen now may remain short-lived

Whenever we talk about banks, we talk about risks. Banks must improve their ability to react to changing risks, such as the adequacy of technological know-how, and invest in risk management in their business operations. In order to improve efficiency and develop services and products, banks should adopt solutions based on artificial intelligence and consider how to expand their use

The real impact could be even greater if the technology was integrated into software such as word processing programs or chatbots, which would free up working time for other tasks. The development of generative AI opens a new era of technological innovation – it will be a tool for increasing productivity and accelerating global economic growth.

Generative AI will change the future of work – work tasks will be re-imagined and industries transformed in a matter of months rather than years. Technology allows companies and employees a new kind of agility and productivity boost, which our economy desperately needs.

Knowledge workers spend a lot of time working on tasks that generative AI can automate and significantly impact on. These tasks can include actions related to decision-making, cooperation, planning, data processing and analysis, among others. Finland, with its highly educated population, holds great potential for the impact of generative AI.

Finland has promising growth prospects within AI. According to our estimate, the Nordic countries are expected to be pioneers in automation alongside other economies such as the United States and Germany. Finland is at the top of the European DESI index*, which shows a strong digital foundation in our society. We have robust technological expertise and the ability to utilize AI effectively and safely as part of the wider business. Typical challenges for Finnish technology and business are related to scaling constraints, like scarcity of labor and resources. Generative AI can offer a concrete solution to these bottlenecks and thus accelerate growth significantly.

Europe faces tech talent and competitiveness, and women can help European tech to solve its talent challenge. To do so, Europe’s tech companies must diversify their talent pool by investing in and attracting historically underutilized talent, notably women. We can strengthen our competitive advantage by diversifying Europe's tech jobs.

For the first time we have been able to take an in-depth look at the full pipeline from education and workforce. Already in education we see something striking: we find a major drop-off point at the end of secondary education. In Finland, very few women choose to study STEM (science, technology, engineering, mathematics), where the share of women is 27% and thus below the EU average.

With these high-demand roles growing rapidly, we estimate the share of women in tech declining to only 21% in 2027 – European companies must act now.

For the first time, we were able to quantitatively size the impact of initiatives to get more women into tech, and truly get an understanding of how we can reach this scenario. To increase the number of women in tech by up to 3.9 million and reach an acceptable gender split in European tech by 2027, we identified four measures that can have a significant impact.

Even though Finland does well in some metrics, like in the number of fintechs per capita, the country still has a lot of potential going forward

Catching up with European leaders would offer significant untapped potential. If the lagging and average ecosystems in Europe were to match the leading countries, the number of fintech jobs in Europe, for example, would almost triple to 364,000

The rapid surge in the amount of fintechs has been a true blessing for the financial sector. The companies and banks that work with them benefit from their customer centricity. Simultaneously, as competitors, fintechs challenge established players and create pressure for innovation

We should seize the fintech opportunity in Finland and not waste it. It is essential for us to invest more in talent development and innovation, as well as ensure there are no obstacles for companies to get funding. Finland has now the chance to set the stage for becoming a true leader in the fintech ecosystem in Europe

Many consumers in Finland feel the pressure in their wallets and want to either save or buy fashion with discount. At the same time, sales of luxury goods are expected to grow by 5-10 percent worldwide in 2023. The assumption is based on the fact that consumers who have been least affected by the economic crisis will continue to shop as usual, especially luxury goods

In some places, it is more difficult for individual consumers to understand which products are really sustainable, because we don't have legislation or a system that would guide the consumer with their purchase decision. For example, new legislation is expected in France, which will require brands to add carbon labels to clothing and textiles. This of course, should also be okay for the companies, given they take their sustainability work seriously

While fundraising has taken a backseat, it is not far off from historical averages that predated the extreme bull market that has been dominating globally for the past few years. Simultaneously, dry powder is at an all-time-high, giving investors the opportunity to invest big, while current market conditions keep them thoughtful.

This new reality matters even more to the Nordic ecosystem, which continues to hold enormous promise. As a new generation of early-stage entrepreneurs launch ventures in fields ranging from SaaS to sustainable transport, having enough ambition is what separates those who flourish from those who struggle. Startups should have their head in the clouds, feet on the ground and eyes on the target.

The fastest-growing scaleups begin geographic expansion over two years later than their slower-growing peers. 20 percent mentioned that rapid expansion was their biggest mistake. Product expansion instead provides a clear path to value creation, in part because it can drive all three strategic imperatives of scale-stage companies.

Starting with an accessible, familiar market nearby reduces the degree of difficulty. As one founder told us, expanding to unfamiliar markets is “95 percent like starting a new company, since there are almost no synergies

Acquisitions for territorial expansion are over five times more likely to fail than acquisitions for Product, People or IP.

The scale stage is not like the seed stage, and the leadership team that was successful in the former may not be in the latter. Those that successfully create a scaleup from nothing may not have the full skillset or mentality required to grow a scaleup into an enterprise.

The common thread among all startups is that leaders must be ready to embrace the challenge, understand the tradeoffs of different options and be brave enough when planning the path forward. Europe has a lot of potential startups that can make a meaningful difference – we need to do our best to help them to be successful. If Europe is to take the lead, we need to continuously challenge ourselves to up our game within Europe, yet extending to a global scale.

In Europe, the number of billion-valuation companies, so-called unicorns, increased the most in 2021 since 2014, when 98 new unicorns were also created. In 2021, Europe also attracted a record amount of venture capital funding ($110 billion), exceeding China’s tally. Nevertheless, Europe’s capital investment is still nearly three times lower than that of the United States.

Europe is now in an energy crisis that has been in the making for decades. We must work hard now to not face a similar situation in technology one to two decades from now. Fortunately, there is a great momentum among European leaders to take decisive action, let’s extend it from energy to technological capabilities

We need to get the ambition level right. In Finland, for example, we have new, highly innovative, breakthrough technologies under development and world-class competencies and capabilities, which is why we must have enough ambition not only to follow, but also to lead technological development worldwide

Finland and the Nordics have the potential to become a Silicon Valley in sustainability. We are pioneers in sustainability research, while at the same time we have good access to investment capital and have effective cooperation between the private and public sectors. This gives us an edge over other markets when the global economy adapts to meet the climate goals

There are two things that are required for us to succeed in creating a “Sustainability Valley” in the Nordics. Firstly, established companies must dare to invest more in green growth, similarly as Neste has created its renewable fuel business, for example. Secondly, green technology start-ups need to start building their business globally from day one, so that they can scale fast enough and get the attention and support from international investors

The grain deficit could reach up to 60 million tons by the end of 2023 – this corresponds to the annual nutritional intake of up to 250 million people, or 3 percent of the global population. This year's logistical problems have resulted in up to 18 million to 22 million fewer metric tons of grain being exported from Ukraine and Russia. If the war continues, exports may shrink even further in 2023.

According to our research, the worst outcomes could be avoided, for example, by unblocking and de-risking Black Sea logistic routes, reducing trade restrictions, utilizing existing grain reserves, and providing financial aid to the most impacted areas and populations.

An important first step is to invest in textile collection. At present, one-third of all used clothing is gathered, and the majority is exported for second-hand sales outside of Europe. To produce a sufficient amount of recycled textile threads for new clothes, the collection would need to increase to 50–80 percent.

Investment in fiber-to-fiber recycling is worthwhile not only on sustainability grounds, since new valuable raw materials can be created during recycling, which would enable more apparel production in Europe. This would lead to additional value creation.

I am committed to lead and shape the future of McKinsey in the region and to continue to support the development and positive impact for both our people and our clients. Change is happening at an accelerating pace and we all need to be involved in building opportunities for a better society, both for people and for the environment. We will continue on our growth path and focus on collaborating with bold leaders across all sectors to build distinctive, lasting, and substantial improvements for our clients and the region.

Together with our dedicated people and clients it has been a true privilege to lead McKinsey in Finland. We have experienced a great transformation of the office and expanded our positive impact to a totally new level. I am pleased that Kari is taking over and continues to work with our clients across all sectors, from small start-ups to large corporations, with our full slate of capabilities.