Tuesday

22nd Jan 2019

Opinion

Innovative lessons across the Atlantic

  • Creativity and diversity prove that Europe is home to innovators – it just needs to give them the right atmosphere to grow and prosper. (Photo: epSos.de)

Attending an international conference several years ago, I listened as two European government ministers detailed competing strategies for Europe’s economic success — globalism versus protectionism.

One spoke about adopting America’s focus on creativity and computer skills, and even mandating English and IT competency for high school graduation.

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The other insisted the key to building home-grown tech businesses was to sue foreign companies that became too successful.

Today, it seems the protectionist strategy is gaining the upper hand.

The European Commission is considering new regulatory restrictions on the Internet, aimed largely at American Internet companies.

This month the commission unveiled plans to enact a “single digital market strategy,” devised with the positive aspiration to jump-start the digital economy in Europe.

However, some in Europe are looking to this strategy as a way to limit largely US Internet “platforms.”

European Internet success histories

This strategy has ramifications not only for what the French are calling “GAFA” (Google, Amazon, Facebook and Apple), but also innovative tech startups who could be considered to have platforms like Uber, TripAdvisor, Pandora, Yelp, Twitter and many others that consumers worldwide rely on and appreciate.

It also has ramifications for Europe’s understandable efforts to jump start its Internet sector.

Facially, this is absurd.

No one is forced to use these platforms or sites, and they succeed only as long as they serve real consumer needs. And because the barriers to market entry are low, new companies are able to jump in easily and quickly to fulfill unmet needs or to create new services.

For example, in 2011, three college students recognised the need for a more private social messaging platform and founded Snapchat.

Today, the company has more than 100 million active monthly users around the world — and a valuation north of $10 billion.

Europe has its own Internet success stories like Skype, created by three Estonians in 2003 and sold to Microsoft in 2011 for $8.5 billion.

Swedish streaming music service Spotify has 60 million active users and is available in 58 countries.

And Withings’ line of health and wellness-related smart devices is positioning the French company as an important player in internet connected devices. Proposals that punish internationally successful companies would also jeopardize the ability of European innovators to compete.

As head of the Consumer Electronics Association (CEA)®, which owns and produces the International CES®, I’ve had the privilege to witness firsthand how the world’s most successful companies innovate and thrive.

Innovation is cultural

Here’s what I have learned: Innovation is cultural.

In the United States, starting a business and failing is a badge of experience, not a mark of dishonour. For every successful “unicorn” Internet company, thousands fail or barely stay in business.

Innovation is aided by rewards. While few innovators are motivated solely by potential payouts, it’s easier to attract and motivate top talent if those employees are able to share in a company’s financial success.

Europeans discourage this by strenuously taxing those who are successful. Like it or not, the promise of making big money if you provide a service consumers love inspires many people to keep working toward creating the next great product or service.

Innovation requires a flexible workforce.

The recent debate in France about banning emails after hours may have been just a bad idea, but even serious consideration of that notion is symptomatic of a culture that doesn’t value hard work.

Restricting an employee's freedom to demonstrate extra effort by working after normal business hours would make it more difficult for French companies to be first to market or create a great service that consumers love.

Of more serious consequence are European laws that make it difficult and expensive to shift workers to jobs that may better suit them, or terminate employees who are not performing or hold jobs in which they aren’t succeeding.

Creative and competitive companies need the flexibility to change direction on a dime, and European labour laws are a huge barrier to the competitiveness of European companies.

Innovation benefits from a supportive government

In addition to labour laws, a culture of innovation requires a welcoming atmosphere for new, game-changing business models.

That means easy access to capital and encouraging angel investors to take risks on new companies. Universities and entrepreneurs should be able to work together, and the formation of new businesses should be simple and easy.

“Entrepreneur” is a French word – but so is “bureaucracy.”

The EC’s position stands in stark contrast to European innovation and the new ways of thinking we see every year through Europe’s growing presence on the show floor at CES.

This year, more than 100 companies from France, and another 90 companies from the UK and Germany, exhibited cutting-edge technology at CES, from commercial drones to driverless cars to the latest in wearables.

This creativity and diversity prove that Europe is home to innovators – it just needs to give them the right atmosphere to grow and prosper.

The European proposal to target and inhibit successful Internet companies is the worst possible strategy to encourage domestic European innovation.

It will infuriate EU consumers and make Europe look stodgy, weak and incapable of encouraging merit-based innovation. The EC must pull this proposal and focus instead on remedying its own impediments to innovation.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the US trade association representing more than 2,000 consumer electronics companies. He writes here in his own capacity. Connect with him on Twitter: @GaryShapiro

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