AI implementation as the highest management priority is intended to solve cost pressure and personnel challenges
SG&A gets down to business: headquarter functions are streamlined, middle management is reduced, and administrative activities are reorganized
Strategic development is moving into the background
Lack of innovation and the “AI Layoff Trap” as underestimated risks, especially for companies with low AI maturity
Stuttgart, August 4th 2026
The results of a current Horváth study based on interviews with more than 1,000 top executives of large European companies show a clear shift in priorities: Digitalization, particularly through the use of Artificial Intelligence, is moving to the top of the agenda and now ranks ahead of traditional topics such as cost optimization and clearly ahead of the shortage of skilled workers, which is noticeably losing importance. This shift marks a turning point: Companies see their competitiveness as being determined less by a lack of resources and more by productivity, technology use, and structural efficiency.
The results also point to a fundamental change in the logic of growth. Although many companies continue to expect increasing revenues, the development of additional capacities or workforces plays a significantly smaller role than in previous years. In the future, growth is to be achieved primarily through productivity increases, automation, and the targeted use of new technologies.
“The service sector in particular has consistently driven this shift over the past years. It is particularly affected by demographic change, and the further digitalization of processes is without alternative for it,” says Heiko Fink, Executive Board Member and Head of the Study at management consultancy Horváth.
For industrial companies, on the other hand, cost optimization is at the top of the current agenda, just ahead of digitalization. The shortage of skilled workers has slipped from sixth to eighth place in the ranking. “Now that current AI implementation plans have been adopted, manufacturing companies no longer see missing personnel as a problem. The issue here is not that an insufficient number of skilled workers is available, but that they are too expensive regionally, particularly in Germany,” says Fink.
SG&A Gets Down to Business
A key starting point, not only for manufacturers but also for service providers, is the consistent reduction of SG&A structures: headquarter functions are streamlined, middle management is reduced, and administrative activities are reorganized. “The trend toward shared-service structures is being consistently pursued, with back-office functions systematically relocated to low-cost regions. The significance of the corporate headquarters in the new local-for-local production world is being renegotiated and redefined within companies. The supply chain is being reinterpreted, no longer primarily as a physical supply chain, but as a global organization of performance and process structures. Companies are redesigning their operating models accordingly and relocating functions in order to be closer to markets and to catch up locally in technology and production speed, for example in China, particularly in robotics and dark factories,” says Horváth Board Member Heiko Fink.
At the same time, many companies are realigning their value creation structures. Production, research and development activities, as well as other corporate functions, are increasingly being located closer to important sales markets. As a result, the principle of “local for local” continues to gain importance. The goal is to optimize cost structures, reduce risks in global supply chains, and better capitalize on growth opportunities locally.
The cost reduction programs are correspondingly ambitious. Manufacturing companies are planning savings averaging 5.5 percent of their revenue, while service companies are planning around 3.2 percent. While industry is primarily aiming for savings in SG&A costs, material costs, and indirect production costs, personnel costs are the main focus in the service sector.
AI Investments Are Increasing – But Expectations and Pace of Progress Are Diverging
Investments in Artificial Intelligence are increasing in 14 of the 16 industries examined, most strongly in the service sector. Banks and financial service providers as well as professional services firms have increased their AI budgets for the next twelve months by approximately 7.5 percent. The public sector and logistics companies are also investing heavily. On the industrial side, it is primarily the automotive sector and the construction industry that are increasing budgets (+3.5 %; +3.6 %); however, manufacturing companies invest significantly smaller shares of revenue in AI transformation compared to service providers.
Among manufacturers, many organizations are currently only in a medium maturity phase (“Structured Approach” or “Implementation”), meaning that AI is being broadly piloted and used in selected use cases, but consistent integration into end-to-end processes or the operating model remains rare. At the same time, the majority of companies continue to be in early to medium stages of AI maturity. Implementation is most advanced in operational and administrative processes. AI applications are much less frequently already fully integrated into end-to-end processes or into products and services.
Nevertheless, expectations, including those of supervisory boards and investors, are high: Companies are calculating with productivity increases in the double-digit percentage range (10-15 %), particularly in overhead functions, sales, and operational processes. The key challenge is seen less in the technology itself and more in the data foundation, scalability, and missing skills within the organization.
Across all industries, data quality and data availability have established themselves as the biggest hurdles to AI transformation. The integration of AI into existing processes as well as missing competencies and qualifications within organizations are also challenging. Companies expect productivity increases of an average of ten to fifteen percent through AI over the next three years. The greatest effects are expected in the areas of IT and digitalization, finance & controlling, and operational processes.
“Manufacturing companies in particular must be careful not to fall into the ‘AI Layoff Trap.’ Companies use AI as a justification for rapid workforce reductions in order to reduce costs in the short term and realize efficiency potential. However, compared to service providers, industry has so far invested relatively little in AI. Yet the greatest growth potential lies precisely in its application in production, namely Industrial AI,” says Fink.
Improvements on the Product Portfolio Are Being Neglected
The study also reveals another structural risk: While efficiency programs and organizational adjustments are being consistently driven forward, the strategic development of business models and product portfolios is often lagging behind. “It is necessary to optimize the entire value creation footprint, further develop proprietary technologies in a competitive manner, and redefine one’s position within the competitive environment,” says the expert.
In the ranking as well, classic future-oriented topics remain relatively far down the agenda. The realignment of business models ranks only tenth among management priorities across industries, while innovation and research rank sixth. Sustainability has again recorded a significant loss of importance compared to the previous year.
The study also shows that companies are increasingly making investment decisions based on a combination of cost structure, geopolitical risks, and growth prospects. As a result, investments and shares of value creation are increasingly shifting to regions such as North America, India, and China. Europe, and Germany in particular, are therefore under increased pressure to further improve their competitiveness.
“We are currently not observing classic deindustrialization, but rather a strategic redistribution of value creation. Companies are following markets, cost structures, and growth prospects. Anyone who interprets this development merely as relocation of sites is missing the point,” says Horváth Board Member Heiko Fink. “This makes it all the more important to rethink Germany’s competitiveness consistently and with a realistic view of global conditions. At the same time, companies must not lose sight of the targeted further development of their business models and offerings despite their focus on efficiency.”
The study further shows a continuing regional realignment of corporate activities. Many companies are planning additional investments and workforce expansion by 2030, particularly in India, North America, and China. At the same time, respondents expect a decline in employment and value creation in Germany as well as in Western and Southern Europe. This affects not only production sites, but increasingly also functions such as Research & Development and Procurement.
About the Study
For the 7th annual “Horváth CxO Priorities Study,” more than 1,000 board members and managing directors of large companies from 16 industries and 32 countries were surveyed on current management trends and business outlooks. 83 percent of the companies surveyed generate annual revenues of more than EUR 100 million. Manufacturing companies make up the majority of the surveyed firms. The survey was completed at the end of the second quarter of 2026.
The study report can be downloaded here: https://www.horvath-partners.com/en/media-center/studies/7th-annual-horvath-cxo-priorities-study?hcc=corp
