The answer in many cases, lies not in external market conditions, but in the very tools businesses rely on daily. Despite rising expectations for flexibility, collaboration and efficiency, many organisations are still tethered to legacy systems that no longer support the evolving needs of today’s workforce. And while some are accelerating by embracing digital transformation, others are falling behind, creating a widening productivity gap.

To truly address the productivity puzzle, European businesses must look inward at systems, technologies and workflows that shape work. It’s no longer enough to make surface-level changes or incremental upgrades. Real gains come from reimagining workplaces to empower individuals, remove friction and enable people to succeed on their own terms.

Rethinking Europe's productivity leaders

The economies traditionally seen as Europe’s productivity leaders, such as Germany and The Netherlands, are no longer holding that position. In fact, according to our latest research, Spain is quickly becoming one of Europe’s most productive economies among office workers. An impressive 92% of Spanish employees report high productivity, which has translated into a 3.2% GDP boost in the last year alone. This shift challenges long-standing assumptions that productivity is automatically strongest in high-tech manufacturing countries, or those with a large professional services sector.

In contrast, in the UK, France and Germany, productivity is lagging and our research shows why: many employees in these countries are struggling with outdated tools. In the UK and Ireland, just one in four (28%) workers say they have what they need to collaborate effectively. In France and Germany, a quarter (22% and 27% respectively) of business leaders cited outdated technology as a leading barrier to employee productivity.

To put it plainly, businesses are being held back by inflexible and outdated tools, creating a disconnect between ambition and outcomes. It’s not a lack of effort, but rather a failure to adapt tools and environments in ways that truly support employees and allow them to find fulfilment through work.

The rising expectations of a modern workforce

The expectations of the modern workforce are shifting too. Employees increasingly value speed, flexibility and seamless communication. Previous research revealed that having better technology would encourage employees to stay in their current roles longer. This reflects a growing demand for smarter, human centric solutions that support autonomy and success.

Employees want technology that adapts to them, including intuitive collaboration platforms, intelligent automation that frees up time for more high-value tasks, and digital tools that simplify the day-to-day. Yet, many organisations are still falling short. According to KPMG, only 54% of European employees say their employer has adopted new technologies over the past three years. This shortfall impacts more than just day productivity – it dampens engagement, morale and overall employee experience.

Creating a high-quality workplace experience is central to unlocking people’s full potential. When organisations work alongside workplace innovation partners to design environments centred on how people do and want to work, they can unlock new levels of engagement and effectiveness. Whether it’s through dynamic meeting room configurations, environmental sensors or unified collaboration platforms – tailoring spaces and tools to employee needs helps them thrive.

The case for deep digital transformation

Unfortunately, for many businesses, the default response to these challenges has been superficial upgrades, such as providing new laptops or introducing collaboration apps. But while these changes may provide short-term relief, they rarely address the root causes of workplace inefficiency.

What’s needed is more fundamental: a strategic transformation of work environments that aligns tools and systems with how people operate and collaborate in real life. By streamlining workflows, supporting hybrid models and integrating process automation, organisations send a clear message – that employee wellbeing and effectiveness are valued and prioritised.

The hidden cost of outdated systems and its effect on employees is left unrealised. When friction in processes holds people back, it drags everything with it, from output and morale to innovation and customer experience. And the longer businesses wait to modernise, the wider the divide grows between those moving forward and those standing still.

This is not just a technology challenge – it’s a leadership imperative. True transformation requires a shift in mindset. Leaders must go beyond approving tools; they need to create a culture where innovation is expected, and employee experience is prioritised. The most resilient and forward-looking organisations are the ones embedding digital empowerment into their business models, and equipping people with tools that help them work smarter, not harder. By removing friction, supporting autonomy and ensuring the right tools are in place, companies create the conditions to let their people succeed.

The future Is human-centric, tech-enabled work

As we look ahead, one thing is clear: productivity and technology are now inextricably linked. European businesses won’t solve the productivity puzzle through marginal gains or piecemeal upgrades. Instead, success will come from investing in more comprehensive workplace innovation that enhances employee experience and fosters fulfilment in work.

The question leaders must ask isn’t whether leaders can afford to modernise, but whether they can afford not to. Closing the productivity gap starts with investing in the technology, leadership and mindset needed to better support people – helping them do their best work and succeed, now and in the future.