The future of business in Europe

Extremely interesting session this morning where I had both a speaker and a rapporteur role for the Plenary session on Friday "Building europe for Business".

Here are some first quick notes I took, I am trying to write some of what we discussed, not my personal ideas even though they are quite similar to the below ideas.

Some issues

-The EU may miss its objective of being one of the most competitive and dynamic part of the world by 2010
-The 15 current members joined by the 10 new ones in a few days are behind the US in terms of R&D and innovation, creating an information society and encouraging entrepreneurship in Europe

Some good news

-Nordic EU members are actually ahead of the USA in many different aspects of their development
-Europe at large is ahead in sustainable development, social protection and Telecom
-The 10 accessing countries are used to change, and change fast "We should see enlargment as a vitamin injection to our EU affairs" Leif Pagrotsky, Minister for Trade and Industry of Sweden

We live an historic moment with the 10 countries joining the EU, 74 million more people will join but only contributing to the GDP by 5% and with a labor cost of only 1/5th of the 15 other members and other key advantages, the opportunities of growth for these countries (which is above other members' growth) and for EU as a whole are incredible.

Some first solutions

Decrease EU and Countries Regulations, Bureaucracy and Taxation,
-adapt the Entrepreneur friendly fiscal framework of the accessing countries to the 15 members as much as possible, not the opposite which would mean transposing the slow moving, business-enemy environment of some of the 15 to the 10. In Austria, for every Euro net to bring home for a person out of their job, the cost is 4 euros for the company.
-make it easy to create a company, make a European company structure a reality, get results in European patent and branding.

Entrepreneurship
-gather best local european experiences in terms of entrepreneurship and best business practices in the EU and share them
-give access to people superior education, integrate much more entrepreneurship and business awareness lessons to educational programs, teach entrepreneurship to schools
-improve the image of Entrepreneurship in Europe by better explaining the key role they play (like contribution to jobs creation and growth). People, media and politicians should better understand Entrepreneurs. Compared to the USA, their image is totally different. If they fail, they are considered as losers. If they succeed, they do not get the same respect for what they have done, the jobs they created and the value they added to Society by taking risks as in the USA where many of them are even considered as heroes
-acceptance of risks. Risk should become more desirable economically and socially, Europe is too much living in comfort to a point that its growth, innovation and entrepreneurship are in danger
-the 10 countries that join the EU have a different agenda than the others. Poland has about 20% unemployment, the only option is "hunger to succeed" and entrepreneurs are becoming very active because "this is the only way to go". We should communicate and transfer some of that hunger to succeed, take risks and build businesses to "Old Europe" that is seen as "being comfortable" with high social protection and low working hours (France's 35 hours a week were mentioned many times by Participants for example)". "Being comfortable is impossible and illusive". There was a general consensus around the fact that we should take more risks and get out a bit of our current protection to innovate and create, or the EU will just lose ground against the US of course but more important against countries like China and India. The ideal if leisure and less working time (France's 35 hours a week law) are not sustainable to make the EU competitive. Too much of a comfortable life makes people too risk averse (young people in France taking advantages of the welfare state to take one year off their jobs and take holidays happened frequently when the Internet bubble burst).
-promote the role of early stage investments in young companies, the role of business angels, help young companies get initial financing

Gather best practices and create centers of excellence
-create centers of excellence, and especially create a Silicon Valley of Europe. There must be centers of excellence fostering innovation and entrepreneurship. To get to that result, mobility of EU citizens should be improved by promoting it, making it easy for people to move from one country to another (ensuring portability of pensions for example, ease the way people can get hired anywhere in Europe and what companies have to do to hire EU citizens).

Some examples of Europeans successes that may be made centers of Excellence:

-Telecom in Nordic Region,
-London as a Global Financial hub contributes in an increase of 31 B euros in European GDP
-Retail and distribution expertise in the UK (Tesco), France (Promodes, Auchan), Belgium (Delhaize), Ikea (Sweden) and El Corte Ingles (Spain)
-Fast paced Ireland transformation
-Nano technology R&D (Germany, Hungary) - just heard it, need to get more details-
-Pau Broadband country that has 100Mbps of bandwidth to every home with fiber connections,
-Italy and France for Design and Fashion, Luxury Sector, egovernment in Estonia.

Education
-Education and training need reform. European students are some of the best educated in the world, but face obstacles in becoming "stars" or innovators. Lifelong education is the way forward and should be supported by government and companies. Accessibility is a key issue.
-make businesses contribute more to society by building strong links with Universities and finance them, one of the key reason of success of Silicon Valley. Many companies there were created by students in Stanford and Berkeley, not only Google.
-increase competition between Universities (for example have the students rank their teachers)

Information Society
-focus on egovernance and make it a top agenda for Governments, focusing on how to implement by also gathering the best practices (there is big diversity in implementation in the EU, you can get a new passport in Poland on the Internet in three days where it may take three weeks with a lot of administrative work in other countries for example).
--Technology and Internet access should be available to everyone, everywhere.

The E-Estonia case:
-paperless internet platform used by Ministers that saves 200 000 EUR per year in paper and copying costs
-e-voting option for 2005
-"I decide today" e-society: Ministries upload all their draft bills and amendments allowing people to review, comment and suggest amendments. 5% of all ideas are used as amendments to bills.
-Ecitizen: 60% of the population are everyday Internet users, 71% of home computers connected to the Internet with a majority with broadband access. Guaranteed Internet access to each of Estonian citizens, 51 free Public Internet Access per 100 000 people in 2003 and 200 areas with high-speed wireless.

-Europe must invest more in R&D and innovation. This will stem today's brain drain. Also, better coordination is needed between business, the market, universities and research institutes. 3000 French scientists went on strike in France recently.

The room concluded also by the fact that this challenge cannot be taken by only one group in society, it is a multi-stakeholders challenge involving Governments, Business, Research, Education and other groups. Building a business-friendly Europe depends less on the "what" than the "how". Equally important is measurability of success. Said clearly: "You cannot manage what you cannot measure".

What do you think are other solutions for building a more business friendly Europe ? There is of course much we could not cover in only a hour and a half.

Help me get more ideas and concrete actions to the Plenary session on Friday !

The official summary of the session is

Posted by Loïc Le Meur on April 28, 2004 at 01:25 PM in Europe, The future of business in Europe | Permalink

Comments

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[jm]

culture is an asset for europe: multiplicity, solid root, living,... culture means tourism but it can also means content and business...
key is for europe to think european, move old organization to adapting process (using new tools internet based)...

[Rodrigo Sepulveda]

Loic, following your request for tomorrow's Plenary: other examples I can think of about building successful foundations for business in Europe:

- one key differenciation factor for companies is human talent. Silicon Valley was successful for a number of reasons, but the presence of both Berkeley and Stanford was key. A whole eco-system developped out of both universities: companies were created by students (Google is a very in-the-news example, but so where so many others); other companies were then created to support the first companies, etc.
- access to local capital was also key.

The US has for a very long time attracted students from around the world there, building on their knowledge.

The UK launched a very interesting initiative a couple of years ago. You can actually get UK citizenship (hence work permits) in a matter of months (it took a friend of mine from INSEAD only 8 weeks) if you qualify with high-education degrees. This program has a name I can't recall at the moment. What it basically does, is compete for intellect with the US, and attract human capital to Europe. Other countries should consider this approach as well (the FT today had an article on US colleges lobbying the US government to ease visa processes for potential students from Asia and Europe, because numbers went drastically down post 9/11. Europe should compete here).
Students and recent graduates can then join new companies; mobility of labour was a key success factor for the Valley.

- another example is providing the right legal infrastructure for individuals willing to set up new companies in Europe. A first step towards this in France was set last year with the 'loi Dutreil'. Anyway can now start a company with no capital (not a good idea, but at least it clears a hurdle), through a specialized point of contact (CFE = Centre de Formalités des Entreprises), usually local Chambers of Commerce. A number of initiatives have also risen in France which coach aspiring entrepreneurs in formalizing their ideas into busines plans. The governement has even created the APCE = Agence pour la Creation d'Entreprise.
(the US has had Delaware as a competing tool to attract businesses). I believe it is now also very easy to cut through the red-tape in the UK.

- Another founding block is the fiscal framework. Entrepreneurs think twice of course on the location of their companies, when they weight tax systems for capital-gains. Belgium has had a long-standing competitive advantage for this.

- access to capital is also key and events such as Tornado Insider's conferences, ETRE events, Capital-IT events have helped entrepreneurs and investors find one another. The Tech Tour organisation (based out of Geneva) is helping again foster these encounters.

- finally, sharing of ideas is key. The Internet represents a wealth of information, but it is difficult to find the right information. Current technologies such as blogging, wiki writing and social networking allow people to share information and to find contacts more easily. Hence any initiative promoting Internet penetration (both by subsidizing PCs such as Vodafone is doing again; enhancing speed of broadband such as the Pau Broadband country project, City Carriers in Germany, FastWeb in Milano; facilitating the use of the tools), publication and structuring of information (blogs, wikis, forums, mailing lists) will help promote business in Europe.

In a nutshell: human skills, legal and tax framework, access to capital, information sharing and structuring.

[Loic]

Thank you all for your comments, sorry I cannot answer them right now, I keep blogging :=) Please continue sending us good thoughts, I'll take these to the Plenary on Friday !

[Oliver Thylmann]

Much in this I share, especially the entrepreneur view in Europe and especially Germany (because I know it here). I think the respect is ok, but the really important thing that must change is that failing in business is a source of learning and not a source of never-again-get-a-job. This is just a feeling that many entrepreneurs have.

The problem also comes from the fact that we often have very simple CVs. You start in school, check out working as an intern maybe, possibly go to university, finish fast, have some work in between, get a job. If you deverge from that too much, you might already get into trouble. Being a freelancer for a year after school. Trying out helping monchs in Tibet for 6 months, a half finished studies with side projects in different fields that financed it, will likely make you a freelancer forever.

If we want diversity, we have to foster it.

On the other hand, as for R&D, it seems that in terms of Nano type of research, we are really doing well. It seems that this is the first time that the US is not leading in front of Germany and Japan in a technological field in terms of research. They will have the try-and-try-again entrepreneurs though when the technology is market ready. (Source: MIT Technology Review Germany)

Please carry on now :)

[Rodrigo Sepulveda]

Congrats Loic on bringing blogging to the WEF.
It is a very interesting initiative, expanding the community involved in sharing thoughts: both by reporting live discussions from the Forum, and incorporating live reactions / comments / suggestions from the blog contributors.

A quick note on technology creating new opportunities for European businesses: because of the lack of previous infrastructure, some of the new members of the EU are leapfrogging the "older" countries and installing brand new state-of-the-art infrastructures: such is the cas of Slovenia in telecoms for instance.

On your European Silicon Valley idea: although they have been examples to emulate the Bay Area elsewhere, there is an interesting project going on in the south of France: the Pau Brandband Country project is bringing 100Mb/s to each home using fiber.
The focus of the team there is to rebuild an economic region around technology, fancily calling it the new "Nano Valley" (with reference to nano-technologies).
Some city-carriers in Germany have developed a similar technological approach, although privately funded, but I am not sure they have plans for an overall economical picture. This could be an approach to support R&D and innovation.

Finally, maybe our biggest challenge as Europeans, is to be able to communicate with each other, and to dig into each other's culture and documentation.
You mentionned it yourself: we can't all read 10 differente languages, and a lot of relevant knowledge-sharing is lost because of that.
Technology should certainly enable Europeans to communicate better (automatic translations, etc.).

Have a great conference !

[Olivier Travers]

By "social protection" they must mean state-sponsored welfare. Unemployment is higher in the EU mainly because of inane counter-productive laws, and that alone is a big source of "social aggression" in Europe. Do the 20+% of people below the age of 30 who are unemployed in Germany, Italy or France feel great about their place in society? Moreover, private charity is a lot bigger in the US and often steps in where the public sector doesn't, both at home and abroad. European politicians tend to conveniently overlook this and end up comparing apples and oranges. I challenge European countries to calculate and publish data about poverty levels (on a purchasing-power parity, don't cheat with the strong Euro), using the same rules as the US Census Bureau, the electorate would be in for a rude awakening.

Europe is watering down its great historic, cultural and geographic assets into too much regulation and taxation. A concrete step that many European countries must take as soon as possible is to stop awarding benefits that they can't possibly fund, even with taxes higher than about everywhere else in the world. This is not "social protection", this is funding the lifestyle of some people (the retired or unemployed) by others (younger, working people). In France for instance national debt has more than trebled from 20% to 60+% of GNP. This is simply a burden transfer to younger generations and is clearly unsustainable. Europe will have the right to brag about its supposedly higher level of "social protection" when it will be able to balance the books. Until then, this is simply a huge money transfer that no one should be proud of (if you do that in the private sector, that's called a pyramid scheme and it's considered an illegal scam for good reason!), and the so-called safety net is going to break because of way too much strain (again, see state and health system accounts).

Another concrete step is to stop trying to micromanage the economy and society, as we've seen the disastrous results this leads to. As the Austrian school of economics has finely explained, how could centralized states know better what fine-grained decisions to take than the people at the heart of the action? Only people managing their businesses know whether they need to hire or fire workers, laws against firing only lead to more unemployment (the unemployment rate in France at the best of times during the last 20 years has been higher than the American one at the worst of times -- not to speak of the much lower activity rate in Europe that doesn't show up in unemployment stats).

Stop trying to steer consumption one way or another with extremely complex and unpredictable tax codes, and instead give people room to breathe. Some new EU countries from Central Europe are adopting low, flat tax rates, this is a welcome change the older members might well want to ponder (I'm not holding my breath though).

In short, Europe as a whole might want to try the sort of classical liberal recipes that has taken countries like Ireland from the bottom of the heap to the top (crossing Continental socialist economies on their way down).

[Heiko Hebig]

Maybe this is news to some EU figureheads, but imho the road to success can only be paved by reducing regulation to the max.