European Commission

Hi all, welcome back to the blog, and I hope you all enjoyed the summer period!

This week, I am just back from a fact-finding visit to Silicon Valley, California. I visited many of the companies well-established in the area—like Hewlett Packard, Cisco, Google, EBay/PayPal, and Apple—and spoke with local executives from European companies like Nokia, Ericsson, and Deutsche Telekom, as well as a series of start ups, incubators and accelerators – including some from Europe.

Much of what we heard is already well-known. The weak points of Europe, the uniqueness of “The Valley”. The sheer volume of capital, the number of legendary companies with astronomic growth rates, and so on. Still, to see it “in the flesh” just underlines what a dynamic place this is and what entrepreneurial strength it has. Concerns or doubts that could prove barriers to enterprise in Europe are overridden with an overwhelming optimism and entrepreneurial drive. Risk taking, failing, moving on, and getting ready for the next new venture is all part of the game. Lots of people I met told me that for them, failure is an event, not a person; when a project has failed you’ll be asked: “so what are you going to do next?”

It is not the levels of brain power, creativity or education which separates the US from Europe. Far from it: Europe has great researchers, and world-class universities and institutes, probably overtaking the US. Rather, we tend to emphasise knowledge transfer and science, to honour reputations and institutions; in Silicon Valley it is all about business innovation, thinking big and taking the plunge.

The Valley is unique because it concentrates the essential ingredients for ICT based innovation and business development all in one place. The resulting cocktail draws in the talent from across the globe that embraces risk and seeks innovation. As someone said: “here the nerds meet the hippies…and wealthy grandfathers.”

You may find all of these factors in Europe, but they will be spread out. This limits the potential of each individual innovation centre in Europe to reach the scale needed to have an “innovation ecosystem” of innovators, venture capital, business angels, repeat entrepreneurs, incubators, accelerators, and billion dollar multinationals, alongside experts in technology, marketing, finance, etc.

And the Valley is unique even in the US. The nearest competitor is maybe the cluster in Boston, around MIT, but this is at best only slightly comparable. Replicating it has not yet been possible; even though there are interesting developments across the US and all over the world, like in Berlin, Singapore or Cambridge in the UK. To achieve the scale needed for a self-sustaining ecosystem, you need more than a good university with a brain park and a couple of companies; you need a few generations of investments, and corporate successes, and a culture of ‘dreaming BIG’.

In that sense, it isn’t strange that Europe doesn’t have its own Silicon Valley, nor that attempts to develop something similar elsewhere are not meeting with overnight success.  And it also occurs to me that, while there are a lot of attractions to the Silicon Valley model, of clustering everything in a single centre of excellence, perhaps it isn’t necessarily feasible or desirable, to aim for in Europe. After all, competition between different clusters may also be a way to incentivise governments at all levels to do more.  Rather I think we will keep our edge if we build on our existing assets.

Because I know that, even if we don’t have a Silicon Valley, we are in many areas leading in Europe. I already mentioned education and scientific excellence: Europe has managed to create a pan-European network of researchers in academia and private companies, unmatched anywhere else.  It’s true that, compared to Silicon Valley, our research network is dispersed, and lacks the important components of Venture Capital and enterprise. But we are learning these lessons: look at the proposals for the 2014-2020 budget of the EU and the Horizon 2020 research and innovation framework. We have deliberately chosen to increase investment in RTD&I, to simplify funding mechanisms, to allocate more funds to equity based financing mechanisms, to allow more concentration in centres of excellence.

And there are other advantages in Europe too. For one thing, we have a less litigious and costly patent system, an issue currently troubling many US companies. And I think we have the edge in terms of cultural sensitivity: for all its international input, the Valley ecosystem seems less able to understand the world and exploit developments elsewhere; whereas in Europe we (still!) pride ourselves on being more outward looking.

And, lastly, we in Europe have the edge on networks: better broadband connectivity than the US, a lead in mobile technology – this is digital oxygen, necessary for the Silicon Valley’s products to take off. To ensure we keep this advantage, I have made the roll out of broadband my number one priority.

But in other areas, public authorities need to think creatively about a wide range of policies to encourage a Valley-like mentality. Take migration policy, for example. To be competitive means to be able to attract the best people, including from abroad, and Silicon Valley is a shining example of a multinational community drawing in talent from all over the world . If we can’t tap this talent pool, we won’t achieve the needed level of innovation or scientific excellence. And Europe will also loose out on foreign direct investment, as foreign ICT companies simply cannot find sufficient engineers and designers and are forced to look at alternatives like India.

More generally, we need to change the way we make policy. I was reminded during my trip that Governments are generally too slow for the pace of technology; in a world that changes every 3 months, the process of making legislation is too time-consuming, too burdensome. We can only effectively contribute in partnership with industry and civil society. Yes, government has a role, and should not be afraid to wield the tools at its disposal. But, in a field like child protection, ultimately enforcement of ethical practices should in the first place be a responsibility of the service providers. And during my visit I was very encouraged by the willingness of leading firms to take this responsibility.

In summary, Silicon Valley offers a lot of insights for Europe. We should not try to replicate it, but we can learn from its example, and devise our own models. We need to inject a more entrepreneurial culture in our universities; invest in stronger trans-European networks of researchers, venture capital, and entrepreneurs; and stimulate our ‘old’ multinationals and incumbents to be more innovation friendly and to embrace, not fight, new technologies and disruptive business models. Going to the Valley is a breathtaking experience and anyone in Europe interested in developing an ICT business should go; hopefully they will bring back ideas to build the new global businesses of the future here.

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Tags: California, Cluster, Europe, Global, Hippies, International, Nerds, Silicon Valley, USA