European Corporations And Start-Ups Must Collaborate Or Fail

Credit: World Economic Forum

European corporations and start-ups must collaborate more and better on innovation if Europe is to remain internationally competitive, according to a new World Economic Forum report. Collaborative Innovation: Transforming Business, Driving Growth draws on more than 80 interviews and includes comments from government leaders as well as several CEOs of large multinationals and start-ups.

European companies and governments are increasingly turning to models of collaborative innovation, where established and incumbent companies partner with dynamic start-ups and younger firms, often giving them access to their facilities, network and markets. Examples featured in the report include ABB and Solar Impulse; BT and RingCentral; Royal DSM and Niaga; and Siemens and Ayasdi.

Sigmar Gabriel, Vice-Chancellor and Federal Minister of Economic Affairs and Energy of Germany, cited the collaboration between large, well-known companies like Volkswagen, Bosch and Siemens, and the “German Mittelstand” as a best practice. “These firms work in large or small associations with market-oriented research establishments,” he said.

Antonio Pires de Lima, Minister of Economy of Portugal, added that collaborative innovation has played a major role in the recent financial and economic adjustment period, contributing decisively to a structural shift in the Portuguese economy and driving a significant gain in competitiveness.

Other public figures such as Stefan Löfven, Prime Minister of Sweden; Mark Rutte, Prime Minister of the Netherlands; Pietro Carlo Padoan, Minister of Economy and Finance of Italy; and private sector representatives such as Marijn E. Dekkers, Chairman of the Board of Management, Bayer, Germany; Ellen Kullman, Chair of the Board and Chief Executive Officer, DuPont, USA; and Giuseppe Zocco, Partner and Co-Founder, Index Venture Management, Switzerland, also expressed their support for policies encouraging collaborative innovation.

“Due to lack of funding and fragmented markets, collaboration between established firms and young start-ups is particularly important in Europe,” said Nicholas Davis, Head of Society and Innovation and Member of the Executive Committee at the World Economic Forum. “While partnerships of this type are far from easy and not risk-free for either party, our research shows that there are a number of ways for both young firms and larger companies to be strategic and thoughtful about setting up collaborations, which dramatically increases their chances of realizing the huge benefits that can result.”

“European companies have been renowned for their innovation for centuries – think of large corporates like Siemens or Volkswagen or the German ‘hidden’ champions,” said Kai Engel, Partner and Managing Director, and Lead Partner, Innovation and R&D Management, A.T. Kearney, Germany, and knowledge adviser for the report. “But these traditional innovators are not as good at the creation of disruptive products and entirely new markets. With ideas with huge growth potential increasingly coming from technology disruptors, Europe needs new ways to ensure this potential is realized as widespread economic growth.”

This approach is not just good for large companies – collaborative innovation is also a much-needed path to scale for innovative, entrepreneurial enterprises across Europe. Data featured in a recent World Economic Forum report on Alternative Investments show that Europe’s venture capital remains at less than one-fifth that of the U.S., meaning access to essential growth capital remains difficult for European innovators. In addition, China and India together attracted twice as much venture capital as the whole of Europe, further highlighting the catch-up occurring in emerging markets in terms of innovation vis-à-vis the European Union.

Collaborative Innovation: Transforming Business, Driving Growth was produced by the World Economic Forum in collaboration with A.T. Kearney and European Innovation Management Academy IMP³rove. Click here to read the full report.