European Innovation

I had a rather unique experience a few days ago. I was invited to attend and speak at the Informal Competitiveness Council convened by Belgian Economy Minister Vincent Van Quickenborne. For those of you who don’t know Minister Van Quickenborne, he is not your usual politician. Technology-savvy, innovative and risk-taking, he truly stands out from your run-of-the-mill political leader. In fact, he’s a breath of fresh air in the stale and orchestrated European corridors of power. So it was not a surprise that the entire event was designed to be different and to shake things up. Taking place in a very cool venue, Area 42, and underpinned by a programme aimed to take ministers and their civil servants outside their usual comfort zone, it was one of the more daring attempts I have seen to do innovation, rather than only talk about. Alas, it was not an unmitigated success. Not because of the Minister but because of procedures and mentalities that are frankly irreconcilable with innovation and openness – what a sad statement on the very “Competitiveness Council” that is entrusted with driving forward innovation at the European level. While the morning plenary sessions did a good job of shedding light on some of the underlying issues, the breakout session I took part in on innovation was simply disappointing. Thinking that member states representatives would come with innovative proposals and new ideas, all I heard was the usual, prayer-like regurgitation of statements like “Europe does not spend enough on R&D”, “We need more clusters”, “We don’t produce as many patents as Japan or the United States.” Given the state of an economy crawling out of recession and in need for a major re-calibration towards new sources of growth, I was simply speechless by the unimaginative interventions.

Some of the points I raised but which seemed too ambitious, new or – perhaps – innovative for my audience:

Disruptive innovations are highly unlikely to come out of well-established and entrenched companies because they benefit from the status quo, not to mention an underlying innovation system that channels most of the R&D money to large corporations. In my opinion, Skype could have never grown out of a telecoms incumbent. Same for cloud computing, which didn’t originate in any of the big IT companies.
We have to stop equating R&D with innovation. I mentioned the case of a large European company that is one of the world’s top 10 R&D spenders but that for years has lost important market share in the most value-added segment of its industry to competitors who outperform it despite spending less on research. If you can get more innovation with less R&D spending, more power to you, I say. In addition, in the service sector, which after all accounts for more than 70% of GDP, R&D is not a major driver for innovation but other factors are, such as speed of getting the service to market, first-mover advantage, change in processes or business models.
Competition is the key driver of innovation, not R&D. The reason why we have a world-class manufacturing sector that competes very well globally despite our high wages, is because of the intense competition in this area. It’s not a coincidence that the only part of the internal market that truly functions – and where competition is intense – is in products. We don’t have it in services, the digital economy or energy, explaining why we have slow innovation, high prices and little consumer choice. Nothing would stimulate innovation in Europe more than completing the internal market.
Management is a major factor in driving forward innovation and productivity. And here, the sad fact is that the transaction cost of organisational change in Europe is still prohibitively high. This means that organisations are slow to respond to changes in markets, consumer demand, etc. In addition, many European companies dismiss the importance of the consumer and user as a driving force for innovation. A thriving company that meets consumer demands and therefore experiences growth is a much better gauge for innovation than a company that cashes in on government R&D subsidies.
Most discussions on innovation purposefully exclude the 40-50%+ of the economy that is comprised of the public sector. Given that almost all of the future grand challenges – ageing, migration, mobility, climate change, education, skills, etc – fall squarely in the responsibility of the public sector, I would argue that we need to urgently think about how to re-invent the state to ensure that it’s fit to meet these future challenges.

What was striking to me is that none of the economies one would associate with innovation leadership, i.e. Denmark, Sweden, Netherlands, Germany, were present at this particular break-out session dedicated to innovation (ministers and delegations could choose from four breakout sessions). In my opinion, they are too advanced in their thinking to expect to learn anything new in these kinds of sessions. Good for them. The other thing I noticed was the heavy presence of representatives of the new member states. I honestly think it is irresponsible to make these countries believe that the holy grail to develop their economies and become more innovative is to follow the usual Brussels blueprint of more R&D spending, more researchers, more patents. I was almost sorry for a representative of Romania who insisted that the official notes include a reference to the fact that he disputed that Romania was the worst performer in patent registration, according to the World Economic Forum’s Global Competitiveness Index (which was presented earlier in the day). Romania may have many problems but I dare say that the low rate of patent registrations is not the most pressing one.

I thought it was very sad that a session on innovation did not dare to be more innovative in its assessment on what needs to be done to get Europe back on track. What I can say is that it wasn’t Minister Van Quickenborne’s fault, he really tried and deserves some credit for organising this unusual gathering. The other thing I realised is how important think tanks are: we are not beholden to a member state and we have a mandate to think out of the box and challenge common wisdom and the status quo. Given the orchestrated nature of these kinds of gatherings and the stilted “dialogue” consisting of pre-fabricated positions, I believe that’s a real benefit. After all, how to expect disruptive innovation to take place if one cannot even disrupt his or her own thoughts, assumptions and attitudes?

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  1. What a refreshing surprise to read about some one that works within Brussels that believes in initiative and thinking out of the stale EU mentality box.When ever I visit the ‘Europa’ website it is full of tireless EU state control initiatives which is killing any competition that is left in Europe?
    Though for you it must be like trying to push a very large rock up a mountain trying to change the Eurocrat mentality,but good luck,and keep pushing Ann Mettler.

  2. Well said Ann, indeed, I would add to your great post, that R&D and patents as framed today, are more a consequence of market protection rather than true innovation. It’s clear from your comments and observations where and who will not be leading todays efforts for tomorrow’s competitiveness – a terrible check with reality.

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