How Europe Can Lead Digital Innovation Globally

Despite having mostly developed economies and access to modern technologies, Europe, surprisingly is not one of the world leaders when it comes to Digital Innovation. Let us have a look at the Top 10 Forbes Most Innovative Companies in the world in 2018:

#1 ServiceNow

#2 Workday

#3 Salesforce.com

#4 Tesla

#5 Amazon.com

#6 Netflix

#7 Incyte

#8 Hindustan Unilever

#9 Naver

#10 Facebook

We can see that there is innovation happening across sectors – from Software Services, Internet, Pharma & Life Sciences, FMCG, e-Commerce and Automotive. 8 out of 10 are US-based companies, and 2 from Asia – not a single European company! In fact, even the Top 50 positions are dominated by USA followed by Asian countries like South Korea, Japan and China, with just 3 European companies in the entire list.

So why is Europe lagging behind in digital innovation?

Let us analyse some of the problems that hold back Europe:

Lack of early adopters: Typically, newer companies are more open to adopting latest technology trends to create services and products highly focused on customer’s needs. A lot of global disruptive innovators have arrived in the last decade, which is a fact of concern for the large Enterprises specially in Europe, who stay away from drifting too far from their traditional approaches and services which have been working successfully and profitably for them over the years.

Aversion to taking risks: European firms shy away from pivoting – which means they rarely believe in the approach of trial and error or experimenting with new strategies in innovation as they have little faith in the scope for revival.

Stringent Bankruptcy Laws: European Bankruptcy Laws are largely responsible for the general attitude of companies preferring to play safe. 50% of Europeans say they would avoid investing in a business due to the fear of failure. In case of a failure, companies usually go into liquidation instead of having the option to restructure their debts.

Low investment in digital initiatives and technologies: As compared to US, Europe is hardly tapping its digital potential. With its R&D spend just about 2% of its GDP, it is just not leveraging EU’s public funding programme initiatives. Investment in the Private ICT Sector too are at alarmingly low rates.

So what can Europe do to change this?

Some of the areas that could be considered to implement solutions are:

Taking risks: European companies should be more open to trial and error and experimenting with new strategies and technologies. Industry giants all over the world are adopting to the risk-taking trend. Beta versions and initial responses can be easily gauged, thanks to big data & analytics of consumer behaviour and response. There is a direct connect to the customer than ever before, and every misstep or failure can be fixed in a comparatively shorter span of time without much damage.

Leveraging new, growing technologies: Technologies like AI, ML, IoT and Blockchain would be growing tremendously in the coming years. Many major cities are emerging hubs in these areas and can definitely help in climbing up the Digital Innovation ladder. Considering the huge scarcity of qualified resources in the IT sector in Europe, an option could be considering countries like India and South Korea, which have a huge pool of technical expertise and resources in futuristic technologies. Partnering with the right firms, with full GDPR compliance can result in high quality outputs for one’s business without huge expenditures on experimental ventures or strategies.

Capitalizing on the emerging start-up scene: According to a report by the World Economic Forum, the start-ups are growing by 2.6% every year. Europe must seize this opportunity to grow here by scaling up its R&D investments, encourage cross collaboration and incubation projects between Start-ups / SMEs and large companies.

Empowering the education system: Europe should empower its already strong education systems and encourage innovation from grassroot levels. Colleges and Universities should be given more options to experiment and larger grants for innovative entrepreneurship should be an important initiative to consider.

Maximize public procurement to drive innovation: Europe’s public sector and government firms can play a huge role in the growth of innovation. Government procurement should be more open and must encourage innovative companies to bid on requests for proposals more actively.

If Europe implements a highly structured innovation model and focuses on creating cross-sector innovation strategies and platforms for high potential industries, like healthcare & life sciences, pharma, automotive, manufacturing and retail, it can surely rise to become a Global Digital Innovation Leader in the coming 5 years.