Growing Beyond Innovation seminar: an open conversation · Growing Beyond Innovation seminar: an...

Growing Beyond Innovation seminar: an open conversation

Tuesday, 23 April 2013 The Centre for European Policy Studies Brussels

Published in collaboration with The Centre for European Policy Studies

Growing Beyond

ContentsPanel 3

Innovation and growth 6

Top-down or bottom-up? 6

A delicate balance 7

Building excellence 8

Innovation beyond technology 10

Establishing fundamentals 11

3Growing Beyond Innovation seminar

Panel

Maria da Graça Carvalho

Member of the European Parliament and former Minister for Innovation, Portugal

Andrea Renda

Senior Research Fellow, CEPS

Robert-Jan Smits

Director General for Research and Innovation, European Commission

Alessandro Cenderello

Managing Partner for the EU Institutions, EY

Lutz Mehlhorn

Managing Director, mehlhorn.concept and former Vice-President New Business at UW Henkel

Alberto Zilio

Director Public Affairs Europe, AT&T

Daria Tataj

Member of the Governing Board and Executive Committee, European Institute of Innovation and Technology

Staffan Jerneck (Chair)

Former Director of Corporate Relations, CEPS

4 Growing Beyond Innovation seminar

Moving Europe forward: innovating for a prosperous future is the third annual report on innovation in the European Union (EU) produced in collaboration by EY and the Centre for European Policy Studies (CEPS). The report combines a detailed survey of 680 business leaders with a more conventional analysis of the available data. This unique approach produces invaluable insight into Europe’s innovation climate. Today, these reports provide a useful picture of current conditions in Europe and, in


a few years, they will allow us to track how EU policies have affected business leaders’ perceptions over time, as Andrea Renda, the report’s chief author, explained at the 2013 Growing Beyond Innovation seminar.

Hosted by EY and CEPS at the CEPS headquarters in Brussels, the seminar gathered experts on innovation from the worlds of business, academia and public policy — many of whom had contributed to the report. The event was a great opportunity

for the author and contributors to present the report and for an in-depth discussion of key points, implications and recommendations for government, industry and entrepreneurs. The session covered a lot of ground, touching on

policies, Knowledge and Innovation Communities (KICs), Horizon 2020 priorities, and innovation in practice.


Innovation and growthAlessandro Cenderello, Managing Partner for the EU Institutions, EY, in Brussels, was careful to outline the global context of innovation in the EU in his address to open the seminar. He drew attention to the most recent EY Eurozone Forecast, which anticipates that the Eurozone economy as a whole will shrink by 0.5% in 2013 and grow by only around 1.4% in the three years that follow. As Cenderello put it, “Europe will muddle through, but at too slow a pace.”

By contrast, many rapid-growth markets (RGMs) are continuing

by as much as 6% in the next year. Moreover, many RGMs are world leaders in innovation, Cenderello said. In the near future, some RGMs are likely to “leapfrog” mature markets in terms of innovation. The development of mobile banking, which has been led by Africa, and is now spreading to the West, is a good example.

Cenderello said. Innovation is a complex process, involving collaboration between businesses, academia, research institutions and governments. But nevertheless, Cenderello explained, it is a crucial part of enabling job creation and growth and ultimately getting Europe back on track — a point that was echoed by all of the speakers at the session. And this point is being made not just in reports such as Moving Europe forward, but also in the marketplace by EY clients around the world. As such, it is crucial for the EU to support innovation and facilitate entrepreneurship in the most effective ways possible, Cenderello noted. The

needed. Product innovations are likely to be digital and workforce capability improvements are most likely to be knowledge based.

Top-down or bottom-up?Exactly how governments, and the EU in particular, can best support innovation was a recurrent topic for the rest of the seminar. In his presentation, the report’s author, Andrea Renda, Senior Research Fellow at CEPS, argued that the best approach for governments and the EU is to guarantee the provision of strong fundamentals for innovation and entrepreneurship. On the other hand, a thorny issue for policy-makers is balancing “top-down” and “bottom-up” approaches to fostering innovation — another key note of the seminar.

Renda explained that a top-down approach to innovation has been very successful in many other countries. In the US, for instance,

American” and “rebuild America” have been successful not just in supporting innovation, but also in translating this into growth. In addition, Renda mentioned the protectionist policies in vogue in Latin America and, closer to home, the new infrastructure banks being set up in the UK, Germany, Italy and other European nations.

But a top-down approach is not always the most effective way to promote excellence in innovation. As Moving Europe forward makes clear, and as the panel noted several times, there is a balance to be struck between bottom-up and top-down approaches. Of course, there must be an overall direction from policy leaders; however, the best innovation often comes from agile and responsive small and medium-sized enterprises (SMEs) and entrepreneurs.

“ One key to turning around the situation

strong ways of supporting innovation in the market.” Alessandro Cenderello, Managing Partner for the EU Institutions, EY


An approach to innovation that is “bottom-up and layered” is the recommendation of the report, Renda explained. Public and private intervention into the innovation arena should focus on providing infrastructure that facilitates an environment where innovation can take place. This should involve programs to facilitate entrepreneurship, frameworks to aid knowledge transfer between big and small companies and “open innovation,” as well as selected public-private partnerships to address “grand societal

preserved, but policy-makers retain a very broad steering and facilitative role.

The need to foster partnerships was a recurrent theme of the seminar. For instance, part of the work of the EU should be to enable collaborative work between smaller and larger companies, Renda said. Big companies are well placed to act as “innovation intermediaries,” able to locate and facilitate the innovative work of smaller companies.

Renda concluded his comments by highlighting some of the key messages that came from the business leaders surveyed for the report. He said that overall, it was pleasing to see that throughout Europe the perception of the EU’s innovation policy has improved, even though there is some regional and national variation. Respondents did want to see access to EU funds made easier and a majority felt that US innovation policy was more effective than the EU’s. Seventy-four percent of smaller-business leaders interviewed were supportive of the EU using local intermediaries, rather than going straight to SMEs. The survey did highlight some perception problems: only a disappointing 25% of respondents were familiar with the KICs, for example.

A delicate balanceThe survey also made it clear how important business leaders think that links between industry and academia are in enabling innovation. This was something that Maria da Graça Carvalho, a member of the European Parliament and formerly Portugal’s Minister for Innovation, was very keen to pick up on. She emphasized the fact that successful innovation depends on all of the right elements being in place at the same time.

Carvalho explained that she sees three core factors that are crucial for effective innovation. Firstly, there needs to be excellence in education. She noted that almost all of the countries or regions with a top innovation record also have great universities — although, of course, not all innovation originates in academia. Secondly, Carvalho said that there needs to be excellence in science. Finally, echoing Renda, she emphasized the need to have the right framework for innovation in place. This requires propitious macroeconomic conditions, well-oiled and appropriately

immigration rules, and an “absorption capacity” in wider society that means great ideas are converted into marketable products and services.

Carvalho warned that if even one of these factors is lacking, innovation capacity will be limited — even if everything else is functioning well. She gave Portugal, her own country, as a prime example. The country has been investing in innovation and education and, as a result, has high numbers of students staying in education to postgraduate and doctoral levels. However, poor macroeconomic conditions and a fragile private sector mean that the infrastructure is not there to receive these highly educated potential innovators. Many of them end up taking their talents outside Europe.

“ Part of the work of the EU should be to enable collaborative work between smaller and larger companies. Big companies are well placed to act as ‘innovation intermediaries,’ able to locate and facilitate the innovative work of smaller companies.” Andrea Renda, Senior Research Fellow, CEPS


Building excellenceClearly, facilitating excellence in education and research is a key part of promoting innovation. As Robert-Jan Smits, Director General for Research and Innovation at the European Commission, went on to explain, excellence is also the most important factor for the EU in selecting which innovation projects to support. And this focus has unanimous support from the EU, European Commission, European Parliament and Member States. Smits also emphasized that achieving excellence will be the only way that Europe can set itself apart from the rest of the world.

Picking up on a point made by Carvalho, Smits highlighted the need to have patience with new EU initiatives, such as the European Institute of Innovation and Technology (EIT), which are still relatively young. This aside, one key positive emerging from the report for Smits was the vast increase in the level of awareness of EU innovation policies demonstrated by the survey. In addition, the report found widespread belief that EU innovation policy had

European Union into an “Innovation Union” — has been largely successful. Echoing many of the priorities outlined by others at the seminar, the Innovation Union will prioritize improving the public procurement process, accelerating standardization and promoting a better interface between academia and industry.

Smits also went into some detail on the Horizon 2020 initiative, a cornerstone of European innovation policy. This program will attempt to avoid a heavy-handed top-down approach, in favor of a lighter touch that gives guidance and direction and encourages strategic thinking. Most importantly perhaps, Horizon 2020 is not sector-based in its approach to innovation. Rather, it will attempt to orientate innovation in the EU toward “grand societal challenges,” such as climate change and ageing populations. Smits is also very keen to see the EU try to involve the private sector more successfully. To achieve this, the EU needs to cut down on red tape and bureaucracy and focus on topics and programs that are well adjusted to the interests of industry. A key part of achieving these goals is the Smart Specialization initiative, which encourages Member States to develop strategies, rather than take ad hoc approaches, when they are deploying their structural funds for innovation.

As part of the Horizon 2020 initiative, the EU is also very keen to foster international cooperation. “We do not want to have a fortress Europe when it comes to innovation. We are open for business with the rest of the world,” Smits explained. Currently, only around 6% of participants in EU programs come from outside Europe; Smits hopes that this can be at least doubled. To foster innovation within the EU, it is just as important to build relationships with those outside the continent as Member States.

Ultimately, Smits is optimistic that the various interconnected policies, programs and initiatives being pursued at European government level will help to enhance “knowledge transfer” in Europe. Smits hopes that investment in knowledge and skills will

we’ve always been good at turning euros into knowledge, but not very good at turning knowledge back into euros,” Smits said.

Moving Europe forward calls for Europe to make more money available for innovation. However, after the February EU budget, it is clear that innovation and education are not going to receive the kind of money initially expected. However, Smits remains remarkably positive. At least, he says, there is an increase in the budget for innovation. And more importantly, at the EU’s highest level he sees recognition of how central innovation is to growth and recovery from the crisis.

Alberto Zilio, AT&T


Innovating for the next generation: the European Institute of Innovation and Technology (EIT) Daria Tataj: Member of the Governing Board and Executive Committee, European Institute of Innovation and Technology

The EIT was set up in 2008, with a relatively small budget and a big mission: to radically change how innovation is being funded and managed in Europe. The main role of the

Knowledge and Innovation Communities (KICs). Currently, there are three KICs in operation — Climate-KIC, EIT ICT Labs and KIC InnoEnergy — and according to a European Commission proposal being negotiated in the European Parliament and Council, within seven years there will be six more.

Initially, we thought that KICs should integrate what we call the “knowledge triangle” — that is, higher education, business and research. However, we quickly realized that our triangle was missing something: entrepreneurship. If you think of successful European brands, such as Lafarge and Siemens, you realize that they are named after the great entrepreneurs who founded them. And a true belief in the value of entrepreneurship is a core element of our management of the KICs.

• Governance: KICs set up their own governance structure right from the start. This means that they are quick and effective in making decisions.

• Operational model: in order to help overcome fragmentation, KICs are designed as integrated transnational networks or ecosystems. Within these networks, knowledge, people

people in local areas, as well as the right type of knowledge and funding.

• Business model: the EIT does not just fund the KICs but rather invests in their future impact. Also, we provide 25% of a KIC’s total budget that is matched by an additional 75% representing the KIC partners’ commitment to the KIC’s ambitions and success.

• We are committed to entrepreneurship within and beyond the KICs. Europe needs to embrace a true entrepreneurial culture. This is essential for capturing the value of research and innovation, for setting up new ventures and for the market deployment of innovations in potential high-growth sectors. We are doing just this by integrating education and entrepreneurship with research and innovation and by employing a results-oriented approach and a business logic.

In essence, the work that we do is a combination of the top-down and bottom-up approaches. The EIT governs the KICs, but at the same time the KICs have autonomy and are, for instance, able to

Ultimately, the EIT is about growth and jobs through entrepreneurship — meaning entrepreneurial people and entrepreneurial ventures. Indeed, the EIT and our KICs are driven by a pursuit of excellence in all of their activities. They have been set up to create the necessary critical mass so they achieve systemic impact and can foster the creation of new businesses and jobs and promote new skills and entrepreneurial talent in the economy.

“ We do not want to have a fortress Europe when it comes to innovation. We are open for business with the rest of the world.” Robert-Jan Smits, Director General for Research and Innovation, European Commission


Innovation beyond technologyOne point made by Smits, and touched on several times at the seminar, was that “innovation” is not always and necessarily synonymous with “technological innovation.” This was something that Lutz Mehlhorn, Managing Director of mehlhorn.concept and former Vice-President New Business at UW Henkel, was also keen to emphasize. He reminded the audience that about 25% of innovation involves non-technical products and services. In addition, he noted that although we often think of innovation

business-to-business markets.

Innovation is about more than just product development, Mehlhorn said. For instance, creative thinking is central to the development of new business models. But whatever kind of innovation is needed,

for example, he is currently involved in establishing a long-term partnership with Zeppelin University in Friedrichshafen, to build a platform for business-model innovation. Mehlhorn also said that partnership should extend beyond just links between academia and industry; he encouraged companies to explore open innovation and collaboration on single projects.

Daria Tataj and Alberto Zilio also made illuminating presentations to the seminar, offering detailed insights into the work of the EIT and innovation in practice at AT&T respectively. Their viewpoints are recorded in the boxes on p.9 and p.10.

“ About 25% of innovation involves non-technical products and services.” Lutz Mehlhorn, Managing Director of mehlhorn.concept and former Vice-President New Business at UW Henkel, Germany

Alberto Zilio, Director Public Affairs Europe, AT&T

Today, we are living in a mobile world. For AT&T, the next level of innovation will be based on high-speed wireless and wired networks, mobile networks and faster connectivity.

To foster innovation at AT&T, we are trying to open up our whole innovation ecosystem, rather than close it down. To make this happen we are doing several things. For a start, we are pursuing capital investment and long-term investment in networks. We are also trying to establish a mindset that is committed to accelerating innovation and change.

We have also developed “three pillars” of innovation:

• AT&T Labs: This laboratory was founded in 1925. Today we have 1500 engineers working there. They are charged with envisaging the world of the future and looking at long-term innovation.

• AT&T Foundry: Where the lab looks at the more distant future, the Foundry looks at innovation on the scale of weeks and days. Here we work with capital ventures, start-ups and developers on short-term innovation. An

growth to the local community.

• Innovation pipeline: This is an internal crowd-sourcing tool that encourages AT&T employees to contribute their own ideas and propose projects. These can then be prototyped and even put into the market.

Driving successful innovation at AT&T


Establishing fundamentalsAlthough time was tight after the presentations, a large number of audience members had questions for the panel — in fact there were more questions than time allowed for. Questions and comments drew on many of the topics covered by discussion, including balancing bottom-up and top-down policies, translating innovation into jobs and supporting different areas of innovation in different ways.

The panel’s responses to audience comments were diverse. An emerging theme was the need to think more broadly about what innovation means. Zilio said that government and industry should look outside Europe’s borders for partnerships and inspiration highlighting transatlantic relations as key. Meanwhile, Tataj picked up on Mehlhorn’s point about diversity, saying that, beyond technology, social, cultural and cost innovation are also essential.

In particular, the panel’s responses came back to the issue of top-down and bottom-up policies. Smits was emphatic in saying that Brussels should not coordinate everything with a top-down agenda and that he does not see high-level coordination and bottom-up approaches as mutually contradictory. From an industry perspective, Mehlhorn was keen to add that he thought innovation policy should follow demand and that, rather than trying to steer it, the EU should focus on promoting a positive environment for innovation.

Renda, whose comments closed the discussion, reiterated that EU policy should be top-down in so far as it ensures that the necessary infrastructure and “fundamentals” of innovation are in place. Conversely, he said, governments should avoid putting up hurdles that hinder partnership and interaction between companies. In addition, although it is certainly true that directly

other EU policies and agendas need to be aligned so that there is a

In his closing remarks, chair Staffan Jerneck offered “global contexts” and “excellence” as two key terms to sum up the discussion. This seemed an accurate and succinct coda to a thought-provoking seminar.

Growing Beyond

In these challenging economic times, opportunities still exist for growth. In Growing Beyond, we’re exploring how companies can best exploit these opportunities — by

and taking new approaches to talent. You’ll gain practical insights into what you need to do to grow. Join the debate at www.ey.com/growingbeyond.

About CEPSFounded in Brussels in 1983, the Centre for European Policy Studies (CEPS) is widely recognized as the most experienced and authoritative think tank operating in the European Union today. CEPS acts as a leading forum for debate on EU affairs, distinguished by its strong in-house research capacity, complemented by an extensive network of partner institutes throughout the world. For the past six years, CEPS has ranked among the world’s top 10 think tanks (outside the US).

CEPS, Centre for European Policy StudiesPlace du Congrès 1B-1000 Brussels, BelgiumPhone + 32 2 229 39 11Fax + 32 2 219 41 51www.ceps.eu (http://www.ceps.eu)

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