Digital deliberations

Willem Jonker, CEO of EIT Digital, spoke to PEN about the challenges facing digital innovation in Europe today.

Digital deliberations

EIT Digital is a leading European digital innovation and entrepreneurial education organisation driving Europe’s digital transformation. It delivers breakthrough digital innovations to the market and breeds entrepreneurial talent for economic growth and improved quality of life in Europe. It does this by mobilising a pan-European ecosystem of over 130 top European corporations, SMEs, start-ups, universities and research institutes.

As a Knowledge and Innovation Community of the European Institute of Innovation and Technology, EIT Digital is focused on entrepreneurship and is at the forefront of integrating education, research and business by bringing together students, researchers, engineers, business developers and entrepreneurs.

EIT Digital’s ‘Driving Europe’s Digital Transformation’ conference in Brussels in April outlined how the organisation is taking a leading role in shaping the digitisation of European society. Pan European Networks attended the event and spoke to their CEO, Willem Jonker, about the challenges facing digital innovation in Europe today.

What do you think are the biggest barriers facing digital innovation in Europe today?

Two of the perhaps more pressing issues concern the fragmentation of the market and the investor landscape. While the Digital Single Market and the Digital Union are working on this area, it is crucial that we do not simply wait for these problems to be solved around us. The scale-ups of today in Europe need help, but some of the many barriers preventing that assistance are yet to be removed, and that is something that we are now working towards.

The same is true when it comes to investment, which is also very fragmented. Currently, for instance, there are those companies which have thus far been able to raise a few million euros, but which need to go on to raise some €10m, €15m, or even €20m, and that can be extremely difficult to achieve. What is more, they will need to raise around €100m of investment before they begin to be recognised by some of the larger players in the sector. We are therefore also working to help with this issue.

Do you feel more could be done to boost the available finances for SMEs looking to embrace the digital revolution – i.e. in the form of low interest loans, etc.?

Alongside the European Investment Fund (EIF) and the European Investment Bank (EIB), there is the European Fund for Strategic Investments (EFSI), which has control of €300bn in funding. However, that should perhaps be seen as less of a funding mechanism and more of a favourable loan scheme, and it is more difficult for this to be used during the early scale-up stages. Of course, when a company reaches the point at which it begins to consider the scale-up process, then they will have already established a customer base and so on, and will be eligible to apply for a loan from the European Fund for Strategic Investments at favourable rates, which will help them to grow. However, this is perhaps not what these companies need at this stage. Rather, they require fully fledged risk capital, and the EIF can play a role here – more so than the EIB.

One other major issue we face in Europe is the small portion of corporate venture funds available on the market to support innovative start-ups. We have had several discussions with the EIF about this due to the fact that our network involves a lot of corporate investors in an effort to address this.

From our perspective, we are aware that such structures can become quite complex and it can be difficult for their effects to gain momentum, and so we are working to bring together individual corporate investors with perhaps venture capitalists or a regional development fund that is prepared to put some money on the table.

Europe’s SMEs have a lot of innovative potential but they also face many strategic challenges when it comes to getting products and services into the marketplace. As such, how are you working to help Europe’s SMEs?

The SME landscape in Europe is incredibly diverse, which can make it difficult to help. Within our own work we focus on those SMEs that have a growth ambition and provide the right support. For instance, if an SME is already quite well-established – employing some 200 people, for example – then it is not necessarily in the area of finance where we are best able to assist them, but we can help them when it comes to accessing new markets, because often they want to branch out into other countries and we have a wide network we are able to use to help them to make this happen – many of the SMEs we work with are Tier 1 or 2 suppliers to multinationals.

SMEs also often experience difficulties in keeping up with technology innovations; they are fast in implementing new technologies once they decide on a certain choice because they have a small organisation, but because of this size there is a difficulty for them in deciding which – potentially expensive – technology to invest in.

Because we work closely with the likes of the Fraunhofer Society in Germany, VNO in the Netherlands and VTT in Finland – which are not commercial institutes but which have outstanding reputations for conducting proper technology assessment and providing proper technology advice based on the technology that is already deployed by the SMEs – we are able to lend considerable assistance.

Additionally, we can help SMEs educate their staff via, for instance, our Professional School’s tailored educational programmes, which will enable them to keep their workforce at the forefront of developments.

When we look at the wider constellation of EU activities in terms of boosting innovation in the digital space, what are your thoughts on the progress being made by areas such as Horizon 2020 or the Digital Single Market, and do you feel more needs to be done?

Many of the issues in this area relate directly to the way in which the EU is governed – the European Commission, the parliament, the institutions that support the commission and perhaps to a limited extent support the parliament, and the Council of Europe.

The commission plays a fundamental role in pushing the agenda, but this is complicated by the fact that, ultimately, activities have to be implemented at the national level and, moreover, have to be agreed with the council.

As such, a central concern, particularly when it comes to digitisation, is that there are huge differences in Europe, and if the council decides on something of a common denominator that is to be implemented across the board, then there is a very real chance of this not working, and we have to find a way to overcome that.

Furthermore, there is also the danger that the inequalities in Europe will mean that many may well be left behind while others continue to advance, which is unacceptable from both a political and social perspective. This is a significant issue for Europe, and it will perhaps require the combined efforts of the parliament, commission and council to overcome.

Europe also needs to see much more investment in the deployment of a high speed, high quality secure network infrastructure. Significant differences still persist in Europe today with regard to this and, just as with the abolishment of roaming charges, the action being taken to rectify this needs to be sped up; barriers should also be broken down when it comes to issues such as copyright, as well as with regard to standards and regulations for equipment and so on, which can be very costly.

What are your hopes for the future in trying to overcome the challenges facing Europe today when it comes to ensuring not only that there is more digital innovation but also that it is more accessible?

Primarily, our organisation’s ambition is to make sure that the digital transition speeds up. It is also extremely important that this digital transition goes hand in hand with a social transition; Industry 4.0 should not lead to a divide between ‘the haves and have nots’; it should instead lead to an inclusive transition.

At the same time, that requires a very strong European position on the global stage. In Europe, we have a very particular set of values – privacy, for example, is very important to us, and we view this in a profoundly different way to those in the USA, for instance. When it comes to the digital world in which we now live, if Europe wants to be able to maintain these values, then we simply must have a strong leadership position because otherwise the values will just be imposed upon us – typically, the technology we are using incorporates the values from where it has been produced.

There is a lot of entrepreneurial talent in Europe today, but there are also a lot of barriers and complexities that need to be wiped away.

When it comes to European programmes such as Horizon 2020, this has a focus on R&D which tends to have lead times of five to ten years, but if you want that framework to guide innovation, which is a much faster process, then we have to make that much more flexible and make sure that the support we give is there and is readily accessible.

The EU is doing an excellent job in providing that support and in identifying that these topics should be on the table. We have the EU – the parliament and the council – to thank for putting EIT Digital on the map, and we will continue to work with them to drive this agenda.

It is also important to ensure a greater degree of flexibility in how these programmes operate, because the timescales for innovations, especially digital innovations, can be very short, and this should be properly supported by the EU instruments. Their simplification and enhanced degree of accessibility are thus of increasing importance but are changes that will happen over the long term.

The landscape is perhaps a little different for R&D, but the move towards entrepreneurship, while a positive one, will also require a revision of the instrument because the innovation domain is a much more dynamic environment than that for R&D.

Willem Jonker

CEO

EIT Digital

http://www.eitdigital.eu/

This article first appeared in issue 19 of Pan European Networks: Science & Technology, available here.