Is Europe blinded by Silicon Envy?

Profile picture for user slauchlan By Stuart Lauchlan October 28, 2013
Summary:
Does Europe have a bad case of Silicon Envy? And if it does, how best to shake this off and take a more positive outlook on developing a European technology industry?

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The green eyed monster

As a European, I’ve always been struck by the harsh reality that our region of the world has so much going for it in terms of ideas and intellectual property and sheer inventiveness, but has tragically lacked the necessary support from investors and from the market to become a tech powerhouse.

For decades the way for a European tech company to thrive was to fly under a flag of convenience in the US. I recall the days (far too long ago now for comfort) of one UK-based company that managed to make inroads into the US corporate market, but only by pitching itself as a Dallas-based firm to the IT decision makers and the media.

We can argue that SAP breaks the rules here, although the company’s joint-citizenship as US and German firm perhaps challenges that argument, and of course there are exceptions out there.

For example, UK firm Huddle is doing rather nicely in the US federal government market right now for instance, but it remains a rare example of such a phenomenon. More typically tech market dominance travels east from the US to Europe rather than the other way around.

And so we get those who bemoan US dominance of the technology markets in Europe and urge the miraculous creation of a domestic industry to counter what they see as a stranglehold on the region.

Problem One: there’s a perilously fine line between championing the European economy as a potential global powerhouse and coming across as jealous of the success of the US technology marketplace.

Problem Two: Problem one has some very powerful advocates.

Silicon envy?

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Neelie Kroes

Consider Neelie Kroes, European Commissioner for the Digital Agenda, and her recent speech at the HubForum event in Paris, where she declared:

“Europe can't afford to fall behind here. But we are. The global giants of ICT are among the biggest companies in the world. Google, Apple, Facebook, Amazon.

“You'll notice there are no Europeans in that list. That has serious implications for our economy. And by the way for our privacy.

“Why not? Europe has a vibrant history of invention and discovery. From the text message to the GSM standard, WiFi to the World Wide Web, Skype and Angry Birds, to Linux and Drupal: all were born in Europe.

“But too often, even innovators who start in Europe don't stay in Europe. And our global giants are falling fast. Even in areas where we were once strong.

“This matters to our whole economy, and our digital future. It matters if we cannot capture the opportunities of tomorrow, or don't have bright ideas born and growing in Europe.”

Now I’m not going to argue with the underlying thrust of her argument: it is indeed shameful that Europe has not backed the winners in the tech industry in the way that it should have done.

But the simple question remains: whose fault’s that?

And the answer: it's our own.

A low heat

In the UK in the 1960s, Prime Minister Harold Wilson articulated an ambition to see Great Britain powered by “the white heat of technology”.

But the time the 1970s were over, that white heat was on a low light - and even then only when the power cuts permitted!

Successive governments have made similar plays, but it is to the US that European innovators all too instinctively look.

Kroes insists - somewhat unconvincingly perhaps - that this is not about ‘silicon envy’. She states:

“I don't want us to be the US. We don't need to dig a new Silicon Valley over here, and we shouldn't try. But I do think we could learn from them, celebrate risk and support innovation.

“For another thing, we need to support the digital ecosystem. By investing in key areas. Supporting European excellence in fields like electronics, new 5G technology, or the big data on which sectors from retail to transport are coming to rely. That's what we'll be doing through the EU's Horizon 2020 programme.”

Again I don’t disagree with the sentiment. I’d love to see more European tech success stories get the backing and the support for innovation that  they need to thrive and take a place on a global stage.

But I question the methods proposed to address it which are transparently about pursuing the Single Europe political agenda - an immediately divisive idea - and less transparently about knocking down intra-Europe barriers while simultaneously making it more difficult for non-European providers through mechanisms such as proposed toughening up of data protection laws.

Brussels-bound

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All roads lead back to the pursuit of centrally-managed standardization out of Brussels. Kroes argues:

“European innovators don't have easy access to a single market. In the US, you can easily share, spread and sell your idea to a market of hundreds of millions.

“In Europe you must deal with many different rules and standards, a fragmented tangle - from payment systems, to cloud standards, to copyright and licensing, to how you identify yourself online.

“Put those obstacles together, and it's often far harder to trade online than in the real world. Bring them down, and we are giving our economy a real chance.”

Where Kroes will find no objectors is in her focus on the need for vastly improved network capabilities across Europe:

“Other parts of the world have far faster, better broadband. Fixed and wireless. The EU has just 6% of the world's 4G! Yet this is digital oxygen – online innovation can't survive without it. Broadband that is not just fast: but secure, high-quality and seamless.

“We are a market of 500 million. But every citizen without fast broadband is a lost opportunity. Unable to enjoy the latest internet innovation or try out that great new gadget. A missed opportunity for themselves, and for the whole European digital ecosystem.

“We won't get every European digital without a strong, healthy telecoms sector, one that benefits from the single market boost.”

Yes, yes, yes - we're completely on the same page here. Investment in infrastructure is critical to success. So let's focus on that.

But the frustrating thing - as ever - about Kroes is that for every piece of wider thinking there’s a swift return to the political agenda of European unification. So, she can argue:

“We won't get where we want to go simply by levelling down. By making it harder for internet innovation to flourish in Europe.

“By standing between Europe's citizens and the online tools they love. By applying more burdensome regulation, when you could be ensuring the competitive markets where regulation can be lifted.

“You don't win a global race just by obstructing the opposition.”

Indeed you don’t. And yet Kroes response to this - like so many in the Commission -  is again standarization, regulation, legislation.

This ignores the fact that US tech innovation has been powered more by individualism and willingness to take risks and challenge the standard norms.

And successful innovation is also about being able to fail fast and start again and not be ashamed of your 'failure'.

That's a cultural change - not something you can mandate - and a change that will take a long time to put in place.

Sadly Europe is still a long way from developing an indigenous climate that can challenge the status quo without defaulting to a ‘Brussels knows best’ mindset that will only ever create an artificial sense of progress.