STRENGTHENING INNOVATION IN EUROPE’S REGIONS

Markku Markkula, President of the European Committee of the Regions, has endorsed the European Commission’s communication “Strengthening Innovation in Europe’s Regions”, which proposes a set of actions to further help Europe’s regions, invest in smart specialization and generate the innovation, resilience and growth needed in the era of globalization.

It’s become the norm that we think about innovation as an input with a high tech output. But it’s much more than this, it’s related to new ideas and a new way of doing things; it’s definitely not all based on complexity or new technology. In fact, innovation can be a new way of doing things within an established traditional paradigm. Put another way, you can have innovation without the constraint of technology.

We are creating an excuse landscape around our businesses. Too often we fall in to the trap of saying we don’t have access to a certain technology, therefore we’re out of the innovation game. It’s not true, innovation can come in many guises and can spring out of the most constrained, unlikely places.

In addition to the excuse landscape there a number of common fears and barriers that put the brakes on innovation within our organizations. The fear of failure, a risk averse senior management, a fear of sharing ideas or a mismatch between company vision and company leadership.

There can be a misalignment between strategic direction, new ideas and management execution practices. There is a real need for companies to self-reflect on their own behaviors and look at where they are encouraging or creating barriers to innovation.

The key question for business is, can we systematically continue to deliver the core business while creating an environment that fosters innovation? this is the tricky balance at the heart of businesses seeking more innovative practices. Leaders need to find a way to continually deliver systematic and methodical results for their business whilst generating new ideas.

“The European Committee of the Regions has been working closely together with the European Commission, particularly Commissioners Corina Creţu, Carlos Moedas and Vice-President Jyrki Katainen, to help our regions embrace innovation, invest in their areas of competitive strength and to create successful regional innovation ecosystems. Introducing a tailored innovation strategy on smart specialisation in each region has started an inclusive and bottom-up revolution pushing innovation-led growth policies all across Europe. The policy guidelines and measures announced by the Commission yesterday, are a strong signal for place-based, sustainable growth, as defined in our recent CoR opinions on cohesion policy and smart specialisation,” President Markkula said.

“We are particularly happy that the Commission is proposing targeted support for regions facing industrial transition and for interregional innovation partnerships, such as the Vanguard Initiative. We must ensure that all cities and regions will be able to respond to industrial and societal change. Smart specialisation strategies are above all economic transformation agendas at regional level. Our Committee has signalled the importance of creating value chains across European regions on many occasions and most recently alongside Commissioner Mariya Gabriel at the Estonian Presidency’s Digital Single Market Conference in Tallinn. This new development will allow regions and cities to use the latest knowledge and best practices for scaling up crucial European partnerships,” he continued.

President Markkula also pointed out the need to fully exploit all the synergies between the different EU instruments for research and innovation as well as for regional development, highlighting the role of cohesion policy as the EU’s main investment tool. “The work done by each region to shape and launch their own strategies contributes to a substantial upgrade of the EU’s cohesion policy as a whole and boosts the integration of all available public and private investment tools. The smart specialisation strategy exercise clearly shows how vital it is to invest in a stronger cohesion policy; it is a unique and unreplaceable vehicle to spread innovation to every corner of the Union. While the EU can promote and fund excellence and top-performing projects, cohesion policy is crucial when it comes to promoting a shared, massive participatory and inclusive change,” he concluded.

There are real challenges here for business leaders as the Bi-Polar Challenge. Businesses have to focus on the key drivers of scale; efficiency, repetition, process, and hierarchy while also getting comfortable with wasted efforts associated with searching for new ideas and taking risks. Embedding innovation can be seen as a process of self-destruction with self-undermining results, meaning a company needs to commit time and resources to self-reflection, playing with new ideas and taking risks. It’s here where business can become unstuck, but it’s also where businesses can learn a lot from the research and those who’ve successfully juggled the demands of scale, stability, and innovation.

The first step towards success is to create a dedicated innovation function with a framework that fosters new ideas and innovation. There is not a one size fits all framework here, rather a group of principals from which business can build their own framework that suits their business model and culture. One such principal is the need to build a network that transfers and shares information openly within an organization. Networks within businesses are pivotal to the sharing of ideas but are also crucial when it comes to picking the good ideas and investing in them. Ideas are like signals and signals can get weakened or strengthened within a network.

There’s a powerful message here for senior leaders as the success of these networks largely comes down to how they are managed. If senior managers are effective at identifying ideas and exploring them then innovation will start to blossom, but if the opposite is true and managers either don’t have the time, inclination or ability to support the network then the innovation project will quickly wither on the vine. So a couple of starting questions for any senior leader looking to innovate should be how healthy are your information networks and how good are you at picking up the signals.

Big data and the Internet of Things is set to transform industrial processes, but it’s an open question which companies will ride that wave.  Across the globe, industry is about to change. Big data and the Internet of Things are going to transform industrial processes over the coming decade in the same way that the consumer world was transformed by the internet over the past decade. In this process, there will be leaders and then there will be followers.

There are already concerns that Europe will miss the boat on the industrial internet, in the same way it missed the boat for the consumer internet, because of imperfect regulation on this continent. The industrial internet is set to transform sectors such as manufacturing, logistics, energy, health care and transport. But if Europe doesn’t strike the right regulatory balance, those innovations will be developed not here but in North America and Asia.

One of the biggest regulatory concerns in Europe is about the portability of data, and the barriers that exist in this still fractured digital market.

When we are talking about the Internet of Things, we are talking about machines that will be able to communicate with each other and perform some activities through this communication. In this process, when we cross the borders of a country, we expect all the digital services we were receiving in one country, we should receive in the other. Europe should be able to guarantee the continued provision of services, without any dependence on location.

European legislators are hearing this complaint a lot from companies. Ensuring the free flow of data in the EU is crucial if we want to keep pace with Asia and North America. Data localization rules in different member states inhibit growth and are a barrier to the much-needed investment in infrastructure and innovative products and services.

Data protection is another thorny issue of EU legislation that could hold back innovation in this field. EU’s increasing data privacy legislation runs the risk of stymieing growth.  We don’t buy the premise that legislation drives companies to innovate. We see legislation doing the opposite. The first thing we need to do is legislate less. We need a less complex general data protection regulation, one that ensures more certainty about data flows. That data needs to come freely within the EU and into the EU, so that companies aren’t told where they can keep their data centers.

Data security is a real concern. Data portability is an important issue, but so is data privacy. The question is, how can we harmonize these tools so that we have the confidence to feel safe.

When it comes to digitalization, there is much fear among the public that it will lead to a loss of jobs – especially in sensitive industrial areas. Worker protection is another legislative area in the EU that companies are concerned could hold back innovation and actually end up killing jobs.

The risk of losing jobs is there, and it is serious, because robots can replace people. But it depends how we are defining a job. Technology brings new opportunities for employment, and in the first preliminary steps in this era we have already seen a lot of new forms for getting income.

Some job losses may be inevitable, but can be replaced by new opportunities. digitalization is an opportunity rather than a threat. We have gone through changes before – look at the rise of information technology in the 1980s and 1990s. These have been for the better in the long run in terms of job creation. Maybe some low-skilled jobs will become replaceable, but there will be different jobs in their place.

The government’s role then is to make sure that workers are appropriately skilled up to be ready to slot into those new jobs. One of the key things we need to do legislatively at member state level is make sure there’s proper training at schools, so that everyone who enters the work market is skilled up.

European legislators will continue to grapple with the thorny issues of data portability, data privacy and worker protection. But it is important that they get it right quickly. Because if the legislative playing field in Europe is not prepared for the coming industrial internet revolution, Europe could miss the boat once again.

 

Society is going through a transformation the likes of which hasn’t been seen since the Industrial Revolution. The rapid pace of change has created much anxiety across the world, as evidenced by this year’s political developments. At the same time, the digital transformation of society is presenting new opportunities to make the world a less scary and more comfortable place. It is innovators who are most tuned in to the possibilities, rather than the perils, of this new world.

CEOs who want to succeed in the business of making and marketing beautiful products or experiences, must first need to be able to discern what’s beautiful. Aesthetics cannot be outsourced to the creative department; it has to start with the leader.

It’s important for senior executives to possess a combination of aesthetic intelligence and aesthetic empathy, good personal taste combined with a good understanding of what pleases others. They need to understand how to engage the senses and elicit delight. People do not need more stuff, but they do need pleasure, and aesthetics is a powerful way to deliver it.

There is a role of aesthetics in strategy, organizational structure, succession planning, and investment allocations. There are ways in which aesthetic value creates financial value. Aesthetics matter. The business of aesthetics is built on storytelling, too. You can have a well-developed sense of what is beautiful and pleasurable, but if you can’t communicate it, you probably can’t execute it, and you definitely can’t scale it.

Most business leaders and citizens say they are feeling optimistic about the fourth industrial revolution. The drive to grasp this opportunity is there, but there is still much anxiety. Executives are quickly adapting to emerging technologies, and are concerned about digital Darwinism, the idea that companies which don’t adapt quickly enough will die out.

Policymakers should create a framework to prepare an environment that can connect young entrepreneurs with real business opportunities. Business leaders and policymakers need to make people feel excited about the changes in the air, rather than afraid of them. The world today looks different than it looked ten years ago. Policymakers should create a framework to prepare an environment that can connect young entrepreneurs with real business opportunities.

The worries of people come down to everyday life. They want something to do, and something to work for. If they don’t have that, they start to have anxieties and fears. Innovation in a changing world can help relieve those anxieties, and Europe is well positioned to offer those opportunities.

It’s very important for us to focus on our strengths, because too often Europeans talk about areas where we are lagging behind. But there are many fields where Europe is leading, like in engineering. We have to create a framework where these people stay here and develop their ideas here. Germany, Sweden and the UK come out on top for having policies in place to encourage their citizens to innovate. France comes out worst of the possible countries listed, while Ireland and the Netherlands are in the middle.

Reducing bureaucracy is the most important thing these countries can do to encourage innovation, followed by encouraging more collaboration between players. A lot of the political disruption that we’re seeing is also a consequence of business disruption and shocks on the labor market from trade, and from technological introductions, so it’s extremely important to address those issues. Businesses are particularly well placed to advise policymakers on what works and what doesn’t work.

As society moves forward in this new digital world, governments and businesses know that they have to do more to make citizens feel like they’re part of the transition. It is likely that some countries will do that better than others. There are time-tested, empirically-proven activities which will help not only retrain the mind towards the habit of creative thinking but also stimulate your environment to create the space for more creative output.

 

Keep a notebook or voice recorder with you for recording your ideas. Actively recording your ideas positively affirms the cognitive behavior of observation. Crucially it also helps you make associations between remote ideas which is the birthplace of innovation solutions. Creativity is just connecting things. Some obvious examples of idea association that turned into modern inventions include: wheels + gym shoe = roller skates. Also TV + Music = MTV.

Studies have shown that consistently creative individuals tend to approach their challenges from a wide variety of angles. Doing so helps create psychological distance from the problem encouraging abstract thinking, a crucial component in the creative process. Flip the question over or ask yourself from multiple different perspectives and you’ll likely come up with many different answers. For example, what would a child think about this problem?

One of the most famous examples of this in history is when Henry Ford invented the assembly line by moving the cars through the factory and keeping the workers still. There are more recent examples though of how asking a different question yields a successful result. Starbucks – Instead of asking “How can I recreate the Italian espresso bar in the United States?” Howard Shultz instead asked “How can I create a comfortable, relaxing environment to enjoy great coffee?” Instagram – Instead of asking “How to create a great location-sharing app? a better question turned out to be “How can we create a simple photo-sharing app?”

Proximity to the problem as a creative stimulant is starting to get scientific recognition as well. A recent study shows a 2X increase in the number of insight problems that could be solved when participants were asked to think about the source of the task as distant, rather than it being close in proximity.

Creating constraints around a problem can oftentimes lead to greater creativity. Famously, Seuss wrote Green Eggs & Ham after betting that he couldn’t produce a story using less than 50 words. Limiting the nature of a task can bring out your most creative side. For example, in 1907 asthma-suffering janitor James Murray Spangler was in search of a dust-free vacuum cleaner. With limited resources available he concocted a machine from a box fan, a soapbox, a pillowcase, and a broom handle.

Steve Jobs was famous for challenging Wozniak and his team to create the Apple 2 inside a fixed-sized box. He was determined to create a computer for personal usage within a certain set of dimensions and this forced Wozniak and his team to completely rethink the design and technology for the final product.

Research has confirmed what many creatives have said for years and that is that sleeping on a problem leads to greater creativity. Scientists speculate that the low levels of stress during sleep play a role in allowing people to access information from the subconscious and make connections that they would not otherwise make.

A recent study evidenced a 30% increase in creativity of participants immediately after waking up from sleep. Another 25% of people dreamt the solution to a problem they were set before sleeping.

History bears a number of famous examples of creatives talking about the power of sleep. For example, Paul McCartney said the melody for the Beatles song ‘Yesterday’ came to him in a dream. Indeed, some of the most innovative companies in the world such as Nike and Google both promote napping at work.

For millenniums, writers and artists have said that they develop their best ideas during a walk. Now the latest research studies have shown that walking, even indoors on a treadmill, can significantly improve new idea generation both during and shortly after the activity. It is thought the combination of increased blood flow to the brain and the freedom to allow the mind to wander is what makes walking so effective.

History shows us a number of examples worth considering. Some estimates suggest William Wordsworth walked a staggering 180,000 miles his life, which comes to an average of six and a half miles a day starting from age five. In 1941, Swiss engineer George de Mestral invented Velcro after observing the burrs that stuck to his clothing and his dog’s fur during a walk in the woods.

More recently, Elon Musk admitted that the idea for Tesla came to him whilst walking. The stories have recent scientific backing too. A study at Stanford showed that participants achieved a 60% increase in creative output after walking, even inside on a treadmill.

Historical studies of patent records have shown that overall productivity correlates with radical breakthroughs in science and technology. Sheer quantity ultimately leads to quality. The greatest creative geniuses of all time have been shown to have created the largest amount of output. Vincent van Gogh painted every day and became an artist because of it. The more ideas you come up with, the higher your chance of eventually producing a masterpiece.

Pablo Picasso produced over 50,000 works in his lifetime, yet only a fraction were masterpieces. Similarly Thomas Edison came up with 3,000 different lighting designs before the lightbulb. He died with over 1,000 patents to his name.

Many of the most famous ideas, inventions and slogans in the world have come from unlikely, spontaneous and sometimes accidental sources. As a creator, there is no such thing as a bad idea. Combining ideas or repurposing for a new application are both good practice for creating new ideas.

The famous Nike slogan came from a rather unlikely source – spree killer Gary Gilmore, who received the death penalty for murdering two people in Utah in July, 1976. Just before a firing squad did their duty, Gilmore was asked if he had any last words. “Let’s do it” he simply said.

Other odd examples include the Barbie doll which was reportedly inspired by a German sex toy. Also the SuperSoaker which came into being by accident from a NASA Engineer testing a heat pump at work and finding it could spray water. As a cautionary tale not to throw any ideas away: the Post It Note was born from a discarded idea for an adhesive that didn’t work

A relaxed state of mind is vital for creative insights. When our minds are at ease we’re more likely to move our intention inward and make associations from remote thoughts emanating in our subconscious. An ingredient that’s very important for this is dopamine: The more dopamine that is released, the more creative we are.

Typical triggers for creative events: taking a warm shower, exercising, driving home, etc. The chances of having great ideas then are a lot higher. A recent research study indicated that 72% of respondents around the world reported having some kind of new insight in the shower.

Spontaneity, random association and good fortune are at the heart of creativity. To increase your chances of success, constantly expose yourself to new experiences, ideas and ways of thinking, to help create new perspectives. The apple falling from tree was famously how Isaac Newton discovered gravity. He was not alone in serendipitous events, half of patent owners credited a serendipitous event for their invention.

In the always complicated courtship between entrepreneurs and venture capitalists, a reliable seduction line is: I’m passionate, I’m capable, I’m experienced, and I’m part of a strong team.

Entrepreneurs, especially in the tech world, have a lot of levers they can use to attract investors. But if entrepreneurs are not perceived to be passionate, there’s little chance they’ll get funding, and if they can’t demonstrate that they’re capable and experienced, then VCs will pass.

The abilities of a founder and management team are the most important factor driving investment decisions — often more important than even a product or technology itself. In a commonly used metaphor, they prefer investing in the jockey rather than the horse. That is followed by preferences for the entrepreneur’s depth of industry experience, passion, specific entrepreneurial experience, and teamwork.

The average investor evaluates 200 companies a year and invests in just four. Each deal takes an average of 83 days to put together, which includes 118 hours of due diligence.

Founders and management teams doing the rounds in pursuit of investment — especially those at an early stage, or in the IT sector — could give their chances a considerable boost by placing additional emphasis on their personal capabilities, passion, experience, and relationships as a team.

Venture capitalists gauge an entrepreneur’s passion level by their commitment of time, effort, and money to their idea. If you meet with an investor and have a great idea, but you’re pursuing it in your free time, that suggests there’s no passion involved. And if the entrepreneur is bootstrapping their idea, putting their own money into it, VCs really like that. It’s a huge signal about seriousness.

VCs also are looking hard at their suitors’ level of expertise. Because they often specialize in a specific type of investment, they become experts in that area and know how to quickly figure out if an entrepreneur really knows their stuff. Investors can pepper them with questions to which they already know the answers, but they’re interested in seeing how the entrepreneur thinks.

Look at the file-sharing company Dropbox and one of its investors. The VC thought file sharing was going to be a big thing, and he had spent a lot of time investigating this, including meetings with dozens of teams trying to build companies around the same idea. But the investor decided to invest in Dropbox less than an hour after meeting its founders. Why?

The investor realized that the Dropbox team understood the file-sharing concept and its potential much better than every other person he’d met, and they already had a plan to overcome the challenges he anticipated. That’s very important in ensuring that VCs will take you seriously. So whatever idea you have, you have to be very critical about it. This is something you can control. To get on the short lists of VCs, you really have to demonstrate both passion and capability.

Information technology investors tend to be interested in an entrepreneur’s management team, while health sector investors are more interested in products and market forces. California investors often are willing to back less experienced entrepreneurs because there’s an ecosystem in Silicon Valley that can provide an inexperienced founder with all the necessary advice, help, and mentoring they need.

Ever since the economist Joseph Schumpeter immortalized the phrase “creative destruction,” most economists have argued that technology innovation creates both winners and losers — but that the economy as a whole benefits.

During the July Plenary Session, Members of the European Committee of the Regions elected Karl-Heinz Lambertz (PES), Senator of the German-speaking Community of Belgium, to become their new President from 26 July. Markku Markkula will take over as the CoR’s First Vice-President.

Relevant CoR opinions and other documents:

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