Good Morning Brussels: Waking up European Innovation

Europe faces many innovation challenges. Venture capital is not easy to come by and credit is expensive and difficult to get. When compared with the US where risk-taking is part of the culture, Europe has a more conservative culture that is driven by fear of failure.

So, why is it so hard to get a start-up off the ground in Europe? Why is it so hard for Europeans to be entrepreneurial? How can easing administrative burdens encourage innovation and entrepreneurship in Europe?

If we compare the tools and the strengths of the most successful digital entrepreneurs in the world today, most of them come from the United States. We all buy books on Amazon, trade on eBay, share pictures on Flickr or Tumblr, we chat on Messenger, we socialise on Facebook, we Google, we Youtube and much more. All these things are done using American technological innovations and platforms.

So, what does the US have that we don’t have here in Europe? They have a uniquely successful technology hub, Silicon Valley, that has not been emulated in Europe. They attract top talent and pay highly competitive wages. Plus, there is a singular American dream to be the best and most innovative. This dream is supported by the highest political office, the President. In his victory speech after the election last year, Barack Obama reminded Americans that everything is possible and he called on Americans to put the United States back on top. Have we ever heard such an elegant call to action inviting Europeans to build the big dream from President Barroso or President Van Rompuy

The other challenge remains the European Single Market. In the United States they can reach a scale 250 to 300 million people and thus make their platforms profitable. With this fast pace of scaling possible in the US market, a natural next step is expansion. Entrepreneurs in the US look to expand across the Atlantic through the UK, to a logical first port, and then into the Continent. By comparison, local initiatives quietly simmer in Europe and rarely reach scale, let alone entertain notions of expansion. Unless these Start-ups move their businesses offshore early on they can’t access what they need for growth.

The European Single market is a nice concept, but language is a huge barrier to its successful completion. This is particularly challenging for Start-ups where platforms change daily. To make a company viable across Europe, every change creates significant additional costs and requires a massive investment of time because it needs to be in at least 24 languages. Then there’s cross-border marketing. The markets of Europe are vastly different. In Europe companies roll-out in country by country – first Germany and then France etc. This generates a massive time lag in scaling potential – not to mention the high costs of marketing, which means less money for investment in innovation.

Europe is overly bureaucratic. For example, a Greek company recently wanted to set up an eCommerce business to sell Greek food abroad, but it was impossible to get the Greek banks to give them facilities to accept payments online. This demonstrates that Europe just is not ready for innovative businesses, we’re just not used to it – we don’t have the infrastructure in place to facilitate it. In the end the Greek company used Paypal to facilitate its cross border payment facilities.

Legal costs are an additional impediment. This is due to the fact that laws are transposed differently in member states. The reality is that even if Europe has one law, companies still need to operate according national laws. When we add to this the general distrust amongst European consumers about eRetail, the soil appears to be nearly barren when it comes to potential for innovation.

But that is not to say that there is no potential to create successful model for innovation and entrepreneurship. We can we create a single platform in Europe that builds on the ingredients of scale, identification of talent and harnessing funds from the public-private partnerships. And, while language diversity is something that is holding us back, it can also become an advantage by putting together the finest minds. For example German ingenuity and Greek creativity could create surprising results given the right environment to share ideas and knowledge.

The European Commission’s DG Enterprise and Industry is investigating how to tap European innovation. Their newly launched programme called, Doing Business in the digital age: the impact of new ICT developments in the global business landscape, brings together industry to help figure out how to shape the EU vision and strategy. Together we are focussing identifying all the hurdles to innovation and entrepreneurship and finding ways to remove them.

From my point of view there is a very simple recipe for success. We should focus on identifying one or two European champions and develop this talent. What Europe needs is entrepreneurs like the founders of Spotify and Skype – and the right levers to keep this talent in Europe. We don’t need many champions, just one or two to lead a new generation of young and brilliant entrepreneurs. Success will come from commitment to and investment in young talent.

2020 must be our target. We must deliver all the ingredients of the Digital Agenda for Europe by 2020. Europe should be brave and we must be vocal. We must grow world-leading talent. This will automatically spark the European dream. This European dream will go beyond cultural borders. We could have a Greek or a Danish digital champion who is supported through a centralised incubation system. This will start the ball rolling and others will quickly follow.

This is not an impossible dream. Like great sports winners, where one gold comes others soon follow. If we invest now by 2020 there will not only be eBay and Amazon but we will have some new European platforms. If we don’t move now the risk is that China will beat Europe to the punch. Today, the Chinese dragon is only feeding his appetite on his content and population. There is little desire to expand Baidu, Tudou, Sina or QQ, but it’s still early days.

Meanwhile, Russian digital businesses have long arms. Yandex has just started their expansion. They have four thousand engineers and entrepreneurs eager to learn and they are funding an expansion into Turkey – an 80 million market – with a view of going head-to-head with Google. If they succeed then they might well enter into Europe.

This is a reality check for Europe. If the Chinese dragon starts to expand, Uncle Sam is already dominant globally, and the Russian Roubles all do the same and Europe doesn’t start to get organised, what place will we have in the digital economy of tomorrow?

Europe has already suffered severe losses in the hardware segment of the ICT sector. If we lose the internet battle our future does not look bright. This is more than a wake up call. We have to act. We have all the ingredients, everything is here: employment, talented people, a population that is heavily engaged online. Citizens are ready to start contributing to the online economy. But we need a common vision for Europe. We just need one or two objectives – let’s develop one or two European entrepreneurs into major global players.

We must create a platform, a digital EU incubator, and invite the twenty seven member states to bring three of their most innovative start ups or companies into the champions league. This incubator is a place where substantial public-private funds are invested and where mentors with a track record can provide the necessary know-how and framework for success and development for scale.

If we build an incubation super-platform, the chosen few will be supported by all means necessary to achieve world-wide reach. Only a couple will succeed but we have to accept that some failure is part of deal. If we pump everything we can into creating European digital champions in the next eight years others will surely follow.

Penned by Alan Heureux, President of IAB Europe

Good Morning Brussels is the sound of the European digital advertising industry in Brussels. This is the first in a series of posts by captains of the European online digital industry looking at how to overcome Europe’s innovation challenges.

One Response to Good Morning Brussels: Waking up European Innovation »»

  1. Comment by Christophe Leclercq, Fondateur EurActiv | 2013/04/09 at 10:53:40

    Alain, even the business press is struggling these days and needs to innovate.
    See article here from a recent EBP meeting:

    And the media is an important part of IAB’s constituency. We hope to discuss more at the upcoming Innovate Media Lab., while it’s already online and not in crisis, also has its own innovation efforts.

    notably regarding:
    - EU Community: more efficient policy-making with social media, public-private partnership
    - European Parliament elections
    and CrossLingual policy sections in 15 languages
    - ‘Future of Europe’, with think tanks and stakeholder workshops in several capitals.

    Questions welcome

Trackbacks & Pingbacks »»

  1. [...] This is driven by a fear of failure and is an issue that Alan Heureux, President of IAB Europe, has recently raised. This, in turn, means that venture capitalists are unwilling to provide the third party support [...]

Leave a Reply »»

To prove you're a person (not a spam script), type the security word shown in the picture.
Anti-Spam Image