Sustainable growth in the future will be driven by research, technology and innovation. At the 2019 European Business Summit in Brussels, business leaders joined policy makers at a special roundtable looking at how Europe responds to the challenge.

Europe is a science powerhouse: it produces top inventors and talent, and has overtaken the United States as the world leader in quality of scientific research.

But despite a succession of policy strategies and targets, Europe has failed to exploit this potential, and turn it into a reliable engine for economic growth. Although there are shining examples of outstanding innovative companies, there is no European digital platform to rival Google, Amazon, Tencent or Alibaba. Put simply, too few bright ideas are being turned into profitable enterprises.

With Asia rising rapidly and markets increasingly concentrated in the hands of a few winners, Europe is now in danger of being left behind.

So what are the barriers facing young innovators who want to develop world-leading positions in sectors such as clean technology, biotech, new materials and digital services? And what must policy makers and the business community do to improve Europe’s innovation ecosystems?

Funding gap

One issue is money.

Innovation is a high risk business, that increasingly requires patient investors willing to wait a long time before their investment brings them any rewards. Even when start-ups are successful in raising enough money to get off the ground, they often face further obstacles scaling up their operations.

The European Union acknowledges there is a problem. But Keith Sequeira, Senior Adviser to the European Commissioner for Research, Science and Innovation, insists that the political will is now there to fix it. Over the last two years the European Commission has invested heavily in initiatives to attract private venture capital, as well as directly funding hundreds of SMEs.

More than money

But experience has shown that simply handing over money and expecting success doesn’t work.

Innovators often need advice in areas ranging from finance to product development, sales, marketing and distribution. They also benefit from access to networks of potential partners, suppliers, customers and talent pools.

Sometimes, the most basic question hasn’t been asked: is the innovation a solution to a problem that actually exists?

The organizations best placed to give practical support are existing companies, successful in their own markets. And this kind of partnership can be a win-win.

Partnership and autonomy

Norwegian energy multinational Equinor has adopted advances in engineering and data to make their business more sustainable. As Åshild Hanne Larsen, CIO & SVP of Corporate IT points out, success has relied on combining ingenuity within the company with new ideas from outside.

Åshild Hanne Larsen, CIO & SVP of Corporate IT at Equinor speaking at the European Business Summit

The collaborative approach benefits both sides. By providing mentors who can work with start-ups and entrepreneurs, Equinor reaps the rewards of entirely new ways of thinking about old problems. This doesn’t just result in better technology, but better skills within the company itself. Mentors often learn as much from the innovators they work with as the other way around.

AB InBev, the world’s largest brewer, takes a similar approach. Richard White, Vice President of Procurement and Sustainability Europe, highlights the delicate balancing act between guiding innovators through the steps to make their end product a reality, and giving them enough autonomy to remain independent. Ultimately this may require a leap of faith on the part of the corporate partner: there is a chance that the innovator may become a rival.

Protecting your investment

It is a risk that needs to be taken, however. A truly competitive market will force large incumbent firms to make space for disruptors and innovators. If European companies don’t innovate, those gaps will be filled by others.

Already the fate of many promising European start-ups is to end up as the crown jewel of an American or Chinese conglomerate, rather than growing to be a major player in their own right. But the panel in Brussels agree that protectionism is not the answer.

Instead, Europe needs to become a place where entrepreneurs have more attractive options than selling to an international giant. And for that, there needs to be a genuine single market.

Roundtable session at the European Business Summit

Market size matters

Although the European Union is often touted as the world’s biggest single market, in terms of innovation it is still fragmented and divided.

One of the reasons so many entrepreneurs seek American or Chinese investment is because those markets offer greater opportunity. For Europe to do the same, the single market must expand beyond products and services, to finance, skills, talent and regulations.

Although there is still a long way to go, the European Union is adopting an “innovation principle” for legislation: laws and regulations should be designed with the future in mind, so that they can accommodate new technologies.

Open and diverse

Any organization committed to creativity must embrace diversity to harness as many different ideas as possible. Diversity is also the key to addressing the STEM skills gap, bringing more people from all backgrounds into career paths that support innovation.

Openness is also increasingly being seen as crucial for innovation. Companies are seeing the value in sharing knowledge and data that may have once been jealously guarded. Equinor has made vast amounts of data from its North Sea exploration publicly available to aid research and development, and sponsors hackathons to encourage outsiders to crack particular technical problems. AB InBev even offers a proprietary brewing process to small brewers for free as part of its commitment to sustainability and global citizenship.

European champions

The nature of innovation is changing. While the last decade was dominated by digital-only phenomena, the next will increasingly see the digital revolution integrated into the physical world. If the structural and regulatory challenges can be overcome, there is a huge opportunity for European companies to combine traditional strengths with innovative ideas to create a new generation of European champions.