Friday, September 29, 2006

European versus American Innovation

For my firm, OVO, I write a newsletter on innovation. Recently we decided to take a look at the similarities and differences between innovation in Europe and in the US. We talked to several firms in Europe that specialize in creativity and innovation, and also talked to a number of firms here in the US. We also looked at the firms that are purchasing and using our software for idea management and brainstorming.

What became clear is that while firms on both continents are seeking to become more innovative, their methods and approaches are relatively different.

Firms in Europe are receiving a significant leg up from their governments. This is especially true in the Scandinavian countries where the governments are actively funding programs and running education classes to help firms become more innovative. This is based on the realization that 1) the home market is fairly small and 2) there is no cost advantage or geographic advantage, so exports are important and the only way to maintain a healthy economy is to innovatve constantly. Note that the EU has just convened a special panel to focus on improving the factors for innovation across the EU.

This differs significantly from the US point of view. The traditional approach in the US has been a very hands off approach from the federal government, with some states providing funding and research space for start-ups, but no real consistent support or training for innovation. There is some funding available through the SBIR and STTR programs, but most of that money is targeted to research which benefits the government. Most entrepreneurs know they have to find their own money, and most firms that want to innovate know they need to generate the funds themselves.

Some of this thinking goes back to the mythos of the independent tinkerer or inventor in his lab. I think the US has encouraged independent thought and work, and a legend has grown up around the lonely scientist, inventor or innovator working in isolation in her "skunk works". Europe, on the other hand, has a much more collegial, collaborative approach to innovation, although I suspect the US still has the advantage in a pure entrepreneurial setting, due to the simplicity of setting up a business and the access to private funds.

This mythos lends itself to the culture of the firms, their processes and tools. Interestingly, many firms in Europe are trying to provide training in leadership and culture around innovation, while consultants in the US seem to offer to "do it for you" and outsource the knowledge to initiate and manage an innovation process. Europe is more collaborative and willing to work across boundaries - look at Airbus as one example. The US is just beginning to consider "Open Innovation". Europe seems more ready to adopt processes and tools to enable innovation, while the US innovator seems more likely to try to "go it alone".

Again, I think a lot of this goes back to national attitudes and beliefs which work their way down into the corporate cultures and fabric of the way we work. In the US, we've always been trained to think independently, work alone, succeed or fail based on our own initiative. Even our MBA programs until recently had little focus on teamwork or collaboration. We have less overhead, fewer restrictions, less guidance than our European counterparts.

Who's right? That's really a loaded question. When you have fewer bullets (people, dollars, market size, resources) you husband each bullet carefully. The smaller European firms have to succeed in innovation because their markets are small and they must export to gain profits and market share. Traditionally the US was such a large market that many firms could sell only in this market, and succeed or fail with little competition. With globalization, that fact has changed. We need to be as aggressive in our innovation as the Finns, the Swedes, the Singaporeans and others who have honed their craft through years of competing as the smallest player on the block - and done so successfully.

In the US, we've really not been exposed to those requirements and the discipline necessary to succeed until recently, and how we react - from a government perspective, from a business perspective and from a cultural perspective - will dictate our ability to continue to grow our economy in the future.
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posted by Jeffrey Phillips at 4:50 AM

38 Comments:

Anonymous Anonymous said...

Please stop using such simple reasoning. As one who works in this space I cannot say that you have found any thing that is remotely accurate.

7:25 PM  
Blogger james burke said...

i would like to point out that when you refer to Europe's small markets forcing companies to export, this is not really true. In the Netherlands we have 16,000,000 people. I don't know what your definition of small and big is, but for me, having a small success in a country with a population of that size is already enough. Also having read Krugman's pop capitalism, you soon realize that even though we live in a connected world, the biggest markets are still internal nation state markets within their own borders, ie greater than 90% of revenue earned comes from internal rather than external sources. (last idea was a bit of a side track) still its interesting to try to identify differences between the 2 cultures.
james

2:42 AM  
Blogger Jeffrey Phillips said...

Jeffrey Phillips:

I don't usually comment on my own blog, but I do want to point out that no offense was meant to "smaller" countries in Europe, but there are cities that are larger than the Netherlands in population.

If you receive our newsletter you'll know that we interviewed many consulting firms that specialize in innovation, and most of them came to the same conclusion - firms in smaller countries need to export in order to grow. You could argue that they don't need to innovate to grow, only to provide existing products to consumers outside their borders, but many firms in European countries thrive through innovation and export. Would Nokia be what it is without export? How about Tetra-Pak?

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