Why collaboration is key to growth in Europe

“Think globally, act locally:” it’s a century-old idea. But in today’s global economy, the more relevant catch-phrase may be: “compete globally, collaborate locally.”

Indeed, many innovations in Europe today come from start-ups that work with established companies; from visionary Daan Roosegaarde working with construction firm Heijmans to develop ‘glow-in-the-dark’ roads, to Lufthansa opening a start-up office in Berlin to collaborate with tech entrepreneurs.

There has been a lot of discussion about how innovation can drive growth and competitiveness across Europe. And as good as this sounds, jumpstarting Europe’s growth at the macro or regional level will produce uneven results at best. This is for several reasons.

First, Europe is a place with a rich variety of cultures and fragmented markets. Eight of the world’s 10 most innovative countries are European according to the Global Innovation Index 2015, but within Europe, some countries are further down in the ranking. They are lacking resources to innovate, and have difficulty supporting their local cutting-edge innovators. Poland, for example, is 46th (out of 141) and Turkey ranks 58th. Past the start-up phase, one-third of scale-ups are acquired by domestic companies and 14% of scale-ups are acquired by companies headquartered in other EU member states, and merged into their operations. Forty-seven percent of European exits are purchased by US based firms (according to Startup Europe Partnership Monitor).

Second, what constitutes groundbreaking invention is changing. Large, established companies are the tortoises here, with their preference for incremental, careful progress. But it’s the hares – the start-ups – that are disrupting entire industries. They are particularly good at digitally transforming services or processes, sparking explosive growth in sectors such as transportation, hospitality, and music.

Take Uber, Airbnb, and Spotify, which have risen to billion-dollar valuations in the last decade. As they replace incumbent technologies, they can look like threats to big corporations with ambitions of their own. Yet, start-ups have pressures, too. Hungry to grow, they may envy established firms’ geographic and marketing reach, human resources, and experience. And they guard the intellectual property and agility that rocketed them to the top.

And then there is the importance of looking at Europe as an ecosystem of policy-makers, funders, researchers, and businesses. Each party has its own role in beefing up competitiveness.

Therefore, the key is to convince companies that they can generate value and growth by working together. Appealing to each means understanding what each needs to join forces with others – especially large and small companies. How to get them to open up, work with vastly different cultures, and see the opportunities across industries and value chains.

Sometimes companies succeed when opportunity knocks, and other times they don’t even hear the knock. A promising example: Dutch innovator Daan Roosegaarde partnered with established infrastructure firm Heijmans to develop a photo-luminescent paint to mark traffic lanes. It’s a brainchild that could change how European roads are lit, address environmental challenges, and benefit both companies and society. In contrast, Airbnb shook the hospitality industry all on its own and now books the largest number of overnight spaces of any company in the sector. How could their market share have grown even more – as well as that of an established player, such as a global hotel chain – if the two had been brought together in a systematic way?

It’s happening in Germany, where High–Tech Gruenderfonds (HTGF) is the country’s most active seed-stage investor for high-tech start-ups. It has helped launch more than 400 companies since 2005 with 576 million euros of its own funds and another 940 million euros from government and corporate investors. In the Netherlands, StartupDelta connects enterprises, governments, research centres, and other players in the entrepreneurial community. And then there is Startup Europe, a matchmaker that introduces the best young companies to established corporations at special events.

Groups like these encourage open collaboration, turning real or perceived threats into a path to mutual gold. We could use more HTGFs, for instance, where pre-screening boosts larger firms’ confidence in working with start-ups. In turn, funding start-ups helps them cover the extra demands of joint projects.

Ultimately, the goal of such groups is to transform start-ups to scale-ups – entities at the micro level that have a marked impact at the macro level. The World Economic Forum report, Collaborative Innovation: Transforming Business, Driving Growth, illustrates the potential with a three-layer model of Prepare, Partner, and Pioneer. The Scale-Up Report, focusing on the United Kingdom, quantifies it: if just 1% of UK businesses aimed for high growth, they could create 238,000 jobs and nearly £39 billion ($61 billion) in new turnover in three years.

Author: Dr. Kai Engel leads A.T. Kearney’s Innovation Practice, is the founder of the annual Best Innovator Competition and supervises the IMP³rove European Innovation Management Academy. He is also the author of several books, including Masters of Innovation, and is advisor on the World Economic Forum’s Fostering Innovation-Driven Entrepreneurship and Collaborative Innovation: Transforming Business, Driving Growth.

Image: A tower at Abengoa solar plant at “Solucar” solar park is seen in Sanlucar la Mayor, near the Andalusian capital of Seville November 17, 2014. REUTERS/Marcelo del Pozo

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