Four ways Europe can become a global innovation leader

ansip 2019

Andrus Ansip Vice-President of the EC addresses the Plenary of the European Parliament on the beginning of the Romanian Presidency of the Council of the EU. © European Union , 2019 / Photo: Etienne Ansotte.

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Martina Larkin, Head of Regional Strategies – Europe and Eurasia, Member of the Executive Committee, World Economic Forum Geneva & Jacques Bughin, Director, Brussels office, McKinsey & Company & Jan Mischke, Senior Fellow, McKinsey Global Institute


At a time when economic growth in Europe is showing signs of faltering, digitalization and artificial intelligence (AI) technologies have the potential to deliver a breakthrough in productivity. If European companies were to develop and diffuse AI according to the continent’s current assets and relative position in digital techology in the world, a forthcoming report by McKinsey & Company estimates that Europe could add €2.7 trillion to its economic output by 2030.

Closing the gap with the US in the adoption of AI could add another €900 billion to Europe’s GDP by 2030, bringing the total to about €3.6 trillion. In a world where digitalization leads to hyper-competition and superstar companies, there is no time to lose. Yet for now, Europe is lagging behind both the US and China. The best way to catch up will be to scale up by building a new European model for innovation.

Recent research by the McKinsey Global Institute found that Europe is only capturing two-thirds of the digital potential of the US, a gap that has remained constant since 2016 primarily because of a lower level of technology diffusion and use of digital technology. Europe’s total research and development (R&D) spending has stagnated at around 2% of GDP despite major stimuli provided by the EU’s public funding programmes. The same holds for private Information and Communications Technology (ICT) investment.

For example, Europe attracted only 11% of venture capital and corporate investment in AI in 2016, compared to 50% in the US, with the balance of 39% going mostly to China. Since then, the balance may have been shifting yet more towards China, with Europe stagnating. While it is commonly said that Europe is lacking investment funding in early cycles of technology deployment, it also must cope with fragmentation and underdeveloped technology ecosystems more broadly, including in digital platforms, in data availability and access, and in the integration of digital innovation in engineering technologies across industries.

Europe also has many strengths to build on. Its start-up scene is increasingly vibrant; the number of technology IPOs with a market capitalization below $1 billion increased by 120% during the past five years. Europe is possibly the largest digital single market in terms of value, and it is the largest one in terms of the number of researchers. While Europe does not lead in integrating new technologies, it remains close to the US. It does lead in smart robotics and in technologies that will begin to define new and complex manufacturing supply and production chains.

How can Europe catch up and even regain a lead? Certainly, Europe can leverage the mobility of its AI talent as some cities in Europe including Berlin, Paris and Amsterdam emerge as AI hubs. Similarly, it can build upon the European Union’s ambitious Horizon 2020 programme and numerous national attempts to kickstart digital innovation or technology-specific strategies in countries such as Germany, France and the United Kingdom. We see four ways for Europe to construct a new innovation model and address its lack of scale in digitalization and AI:

1. Leverage industrial assets: Funding digital platforms and technologies for strategic European industries

Europe’s large base of established companies and a network of successful SMEs resembles a sleeping giant that needs to wake up to the full force of digitalization. Europe underperforms in diffusion and the use of digital, performing at a level that is at about two-thirds that of the US.

Europe can build on its existing assets and fund national industrial strategies to digitalize and integrate at scale, for example through digital platforms that enable more cross-sector and cross-company collaboration. The focus could be on core industries with high potential, including basic and advanced manufacturing, pharmaceuticals, healthcare and wholesale trade.

2. Change data dynamics: Leading on governance for data access and trust

European companies have built comparatively small repositories of data, platforms and customer networks than their non-European counterparts. As large global platforms are now beginning to integrate stakeholders and data across industrial boundaries, value chains and geographies, the resulting dynamic could leave European companies at a competitive disadvantage.

Europe could open its large vaults of government-owned non-personal and anonymized data for research, while creating new governance rules that give citizens more control over their data – even as more companies gain access to them. Transparency and cybersecurity have become key concerns for citizens. Europe can foster secure platforms that make transparent which data are shared and when, and that allow citizens to change access rights for data sets.

3. Boost talent: Competing with digital skills and diversity

The world’s superstar internet giants like Google (Alphabet), Amazon, Facebook, Microsoft, Netflix and Apple are able to foster innovative creation and adoption through intangibles such as knowledge, skills and entrepreneurial culture, along with data, platforms and capital for R&D and mergers and acquisistions (M&A) at unprecedented scale. Together, they have made more than 60 acquisitions in Europe between 2011 and 2017, with 10 alone in 2017. They are able to pay significantly higher salaries than the market average, for example 1.5 times the market average for software engineers in London. Some companies are using M&A to recruit top talent for sums that typically work out to $5 million to $10 million per person.

Europe could continue to build on its strong education systems, while also attracting international talent through its comparative advantages in diversity and quality of life and by improving remuneration options. To tap existing talent pools, Europe could encourage female talent in technology and entrepreneurship and leverage new technologies to upskill and reskill its population

4. Create demand at scale: Leveraging public-sector leadership in procurement and standardisation

Europe’s large public sector is often regarded as an inhibitor rather than a driver of innovation. However, it can play a primary role in the adoption of innovative technologies: European public procurement for public services and products amounts to 14% of its GDP annually, equal to about €2 trillion. Government procurement can create large and stable demand long before a commercial market is possible, encouraging innovative companies to bid on requests for proposals and heavily investing in digital technologies such as cloud computing and blockchain to scale up demand.

Europe should maximize public procurement as an innovation driver, establish common digital government standards for public services, and thus enable more innovation in government technology.

A new model of innovation for Europe – moving from words to action

These four pathways should come in addition to tackling the fundamental building blocks of Europe`s innovation ecosystem. Together, they form a new European model of innovation.

The time is ripe for a new model for innovation: a new European Commission will set a new agenda for a European Union that may look very different than before. To move from words to action, three concrete initiatives could be launched in 2019:

– A Women Entrepreneurship Network to increase the diversity of talent through coaching and mentoring

– A Centre for the Fourth Industrial Revolution for Europe to drive public-sector digitalization, standardisation and data access

– A European sovereign wealth fund for innovation to scale investments.

In the meantime, please join the discussion on shaping Europe’s role in global innovation online under the hashtag #InnovateEurope.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Syrian crisis is ‘clearest example’ of foreign investment in terrorism, Deputy Prime Minister says at UN

Can agroforestry save India’s rivers and the farms that depend on them?

UN Security Council ‘utterly failed’ Syrian detainees; a victim voices her plea to ‘end impunity and stop this horror’

Why sustainable packaging is good for profits as well as the planet

Cohesion Policy: EU invests €880 million to improve Poland’s railway system

Ethical education as an obligatory course in medical curriculum

UN human rights chief denounces grave ‘assaults’ on fundamental rights of Palestinian people

Is this 3D-printed building the future home for astronauts on Mars?

Terrorism and migrants: the two awful nightmares for Europe and Germany in 2016

UN space-based tool opens new horizons to track land-use on Earth’s surface

UN chief praises Japanese climate resilience, as Typhoon Hagibis cleanup begins

This AI outperformed 20 corporate lawyers at legal work

Refugees now make up 1% of the world’s population

It’s getting harder to move data abroad. Here’s why it matters and what we can do

A Sting Exclusive: “Our ambition is by 2020 Indonesia to become an emerging power of World’s Maritime Access”, reveals the Chargé d’Affaires at the Embassy of Indonesia in Brussels, treating WEF, ASEAN and EU-Indonesia relations on the eve of the World Economic Forum East Asia 2015 in Jakarta

Vegans in France are using extreme tactics to stop people eating meat

ECB is about to lend trillions to banks

These are the world’s most future-proof cities

Sudan: UN chief deplores excessive force used against pro-democracy protesters, calls on military and civilian leaders to ‘stay the course’ in negotiations

UN ‘determined to lead by example’ on disability rights: Guterres

Germany and France only care about keeping their borrowing cheap

EU Parliament semi worried over democratic deficit

Is co-living an answer to the affordable housing crisis?

Will Eurozone be able to repay its debts? Is a bubble forming there?

ILO warns of widespread insecurity in the global labour market

EU car manufacturers worry about an FTA with Japan

WEF Davos 2016 LIVE: Banking moguls continue brandishing financial Armageddon to intimidate us all but in Davos they worry about the very distant future

UN chief welcomes start of Church-mediated national dialogue in Nicaragua

World Food Programme accesses Yemeni frontline district for first time since conflict began

Humanitarian Aid: additional €50 million to tackle drought in the Horn of Africa

Microplastics have been found in Rocky Mountain rainwater

Citizens to be the cornerstone of the Conference on the Future of Europe

Is sub-Saharan Africa ready for the electric vehicle revolution?

Syria: Thousands of children ‘hemmed in’ by ‘brutal and gratuitous’ spike in violence

Changing the EU copyright law won’t bring us much closer to Digital Single Market

5 futuristic ways to fight cyber attacks

IMF to teach Germany a Greek lesson

Here’s what keeps CEOs awake at night (and why it might be bad news for your next job)

EU: Huge surplus in the trade of services with the rest of the world

Europe’s dirty air kills 400,000 people every year

Here’s a reason to feel cheerful – the world is full of Good Samaritans

UN Member States overwhelmingly support end of US embargo against Cuba

Mergers: Commission approves acquisition of L3 Technologies by Harris Corporation, subject to conditions

4 things President Trump could learn from Jimmy Carter

Reconciliation helps ‘repair fractures’, enable lasting peace, Security Council hears

EU Visa Policy: Commission welcomes agreement to strengthen EU visa rules

Guinea-Bissau: Upcoming elections vital to prevent ‘relapse’ into instability, says UN envoy

230 Junior Entrepreneurs and over 70 guests attended the International Congress on “Entrepreneurial Skills for Youth”

Manufacturers Get Smarter for Industry 4.0

Iraq protests: UN calls for national talks to break ‘vicious cycle’ of violence

The clothes of the future could be made from pineapples and bananas

Obese people more likely to smoke, says new gene research: WHO

This is why AI has a gender problem

UN chief hails victory of ‘political will’ in historic Republic of North Macedonia accord

Can self-charging batteries keep us connected for ever? A young scientist explains

Climate change and health: creating global awareness and using earth resources wisely

UN envoy says he ‘is ready to go to Idlib’ to help ensure civilian safety amid rising fears of government offensive

UN rights chief welcomes new text to protect rights of peasants and other rural workers

Anti-terror measures against youngsters’ online posts ‘linked to spike in child detention globally’

Tax evasion and fraud threaten the European project

More Stings?

Comments

  1. Victor says:

    EU basic or constitutional law and EU unified governmental public services AIplatform, the applications for the EU governmental public services should be the priority. Changes of the present education model and build a EU cyberlearning centre with the EU reform of most simplified qualifications for work.

    EU can take the reform of most simplified qualifications to form least qualifications in the form of e-qualification required by EU or constitutional law within EU via EU E-qualification E-platform. Some of the e-qualifications can be memberships of lawful EU societies or associations, and no other qualified certificates will be requested for positions funded by EU budgets except for necessary requirement of the EU e-qualifications.

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s