How politicians can make Europe more innovative

Political leaders love innovation and want more of it. It solves problems people are struggling with, creates new markets and jobs, and makes innovators rich. It is the basis for sustainable growth - take the mobile phone or the MP-3 player as an example.

Little wonder that innovation is the mantra many politicians call on to make Europe more competitive and fit for the globalised future.

True innovation creates real value in the market place. But just spending more money on Research & Development will not automatically yield more innovation. R&D creates knowledge, like patents, know-how, and scientific and technical papers. But beyond R&D, many players and stakeholders are involved in bringing novel products and services to the market - and converting this knowledge into money.

And so the question for politicians must be: How can policy help to create more innovation?

Let’s look at the different vectors of innovation. It all starts with an entrepreneur identifying an opportunity to create value. Innovation requires investment to realise this opportunity.

To their credit, policy makers in Europe have established many schemes to encourage entrepreneurship and risk capital, and help start-ups to get off the ground.

Who owns the value created by innovation? This needs to be defined by a clear and simple legal framework. The bigger the market, the greater the value created by an innovation. So this legal framework should be consistent - or even better standardised - across the EU.

Which of course begs the questions: Do we have a European patent? Do we have consistent standards and regulations in sectors like pharmaceuticals, where innovation is critical?

Innovation requires the balancing of many different factors. Some, such as cost versus performance, are within the control of the entrepreneur. Others, such as risk versus benefit, are more fraught.

Society is willing and ready to accept risks, even large ones. Think of the car. Although it kills thousands every year, people step into their cars to drive to work every day, accepting the risk of getting killed on the way. But it can’t be taken it as a given that all countries have the same perspective. Compare the risk-benefit assessment of nuclear power in France versus Germany.

All these factors increase the chances of an innovation failing, either by significantly reducing its potential value, or slowing down its progress on the way to market.

Policies are very often designed to reduce risks society does not feel comfortable with. The European REACH regulation of chemicals is a good example. These kinds of regulations tend to make people stick with what they know. Thus, they favour the status quo, or at best the optimisation of current products and services.

Innovation, however, is inherently associated with venturing into new, uncharted territory.

Innovation faces many hurdles and threats on its way to market, and the creation of jobs and wealth. Like a child growing up, it needs a parent to help it come of age. In many successful companies, these “parents” are high-level managers who owns innovation over and beyond their functional or organisational responsibility. Sometimes this is a board member with a special mission to take care of innovation across all its aspects – the Chief Innovation Officer – or the CEO.

In the political world though, innovation is often an orphan. Rarely do top-level politicians show ownership for innovation in the way that they feel responsible for national security, finances or research.

Here the European Commission and the European Parliament could take a leadership role in making Europe more innovative. Because of their European mandate and statutory powers to regulate many aspects relevant for innovation in a consistent way across Europe, they are in a perfect position to take on this mission.

But they need to step up to this challenge by visibly taking the lead. The upcoming changes in the European institutions provide a great and timely opportunity for a fresh start here. Never was innovation more needed than in a time of economic crisis and dramatic change.

Imagine what a commissioner responsible for innovation – with real teeth – within the new Commission could achieve. And what about a special committee in the new European Parliament responsible for making EU regulations – both existing and new – as innovation friendly as possible? Yes, politicians can make Europe more innovative.