How innovation can heal all Europe’s wounds

If innovation in Europe isn’t promoted to the top of the agenda, we will soon disappear into insignificance. Nokia and Loewe are prime examples of once powerful companies within the information and communication technology sector who missed the boat and have degenerated into remnants for US and Asian investors. There is only one route out of this dilemma: The establishment of a European autonomy using standardisation and innovation.

Recently a German musician and journalist wanted to travel to the southern US states, appear in a few concerts in small cafés and visit an aunt in Alabama for the first time. But he never got that far. At Minneapolis airport he was intercepted, interrogated and sent back to Europe. The border officials knew his stage name, his planned concert dates – all content from his email correspondence. When inquiring about the information source, a terse “America knows everything” was the response.

In the name of combatting terrorism, the NSA watches everything, and where better to do that than via the IT giants of the US. The American supremacy in the information and communication technology sector have let things come this far. Now it’s high time that Europe makes up ground in terms of innovation and claims back its autonomy. Because as long as we continue to weaken, large US and now Asian investors will continue to assimilate European positions and therefore damage local values and destroy jobs – an economic downturn for which the financial crisis is falsely made responsible.

Loewe and Nokia: Two European tragedies

The communication and information sector is subject to high innovation pressure. Nokia provided a dramatic demonstration of this: Up to five years ago the Finnish company was regarded as a giant of the mobile phone industry with over 40% market share, missed the newest developments and can now only scramble together 14% of the total market and a measly 3.1% of the smartphones market. In this miserable state Microsoft, manufacturer of the Nokia operating system, bought the mobile line of business for 5.4 billion euros.

A further example for the consequences of a lack of foresight: In 2012 Loewe recorded a loss of 45 million euros from a turnover of 250 million euros. The Bavarian manufacturer of perfectly formed televisions is now insolvent and looking for investors. Customers simply no longer value design as highly as the management. At the moment all that counts is the screen resolution and Samsung is a step ahead.

The Korean company is already juggling with over 50% of the global market in the TV sector and is rapidly overtaking its major competitors in the smartphones sector. How do Samsung do it? Innovation counts for everything. As soon as the next generation of LED technology is announced all investments are stopped for the further development of the current technology and pumped exclusively into new innovations.

Europe simply doesn’t understand

“Europe simply doesn’t understand the strategic significance of software,” stated Burton Lee at the recent 5th European Innovation Summit. The Stanford professor for European Company Management and Innovation only accepts Finland and Great Britain along with companies such as SAP, Skype and Spotify as legitimate exceptions. A weak list in the face of the dense list of companies in California’s Silicon Valley.

European industry and politics continues to prefer tangible technology, in other words hardware, according to Lee’s thesis. In companies the IT department is often hidden in the cellar or outsourced. The presence of IT representatives at a strategic level is rare. This is fatal when you consider that companies and institutions are increasingly dependent on this area. In the US IT board directors are now common practice.

There’s not one tablet PC “Made in Europe”, no European operating system – these failures of the past ten years cause costs in the form of massive productivity losses. Lee estimates that up to 100,000 jobs could have been created. And at the same time it gives us hope: If South Korean information and communication technology can gallop away towards the top of the global market within 5 years, theoretically Europe can do it to.

The way out of the valley of death

We urgently need to find a European way of collaboration and standardisation. In my opinion, EADS/Airbus and Galileo represent successful examples of European economic autonomy. Standardisations, originally “Made in Europe” and today in global usage were also there for mobile communications GSM in its time. This approach has preserved itself from both an economic and security perspective. Nokia, for example, focused on GSM at the right time and therefore achieved an enormous surge in growth.

An important step for strengthening European autonomy is the promotion of research, such as the “Horizon 2020” which is sponsored with 70 billion euros. But only a clear reduction of bureaucratic barriers and better access to risk capital will make the market introduction of innovations realistic. For this a growth market is needed in the vein of the Frankfurt “New Market”, which has unfortunately petered out. The idea of the market segment “New Market” was right because it enabled small and medium sized innovative companies to gain access to capital. In particular companies from the sectors environmental technology, telecommunication, biotechnology and multimedia could gain themselves risk capital. The success of a number of companies would not have been possible without this market segment between 1997 and 2003.

In my opinion the saving of information and communication technology lies in cloud computing. And these “United Clouds of Europe” are many things but definitely not an illusionary dream: Those that can remember the battle of the giants between the European joint venture Airbus and Boeing knows what a concentration of European strengths can achieve.