INSEAD Dean Peter Zemsky opened the day’s sessions, explaining that the school believes that hard times in Europe may get harder before they get better, and that business are a powerful and positive source of solutions.
The panel’s propositions covered a wide of topics including deeper integration of the single European market, more investment in innovation and technical skills, and a focus on small and medium-sized enterprises.
Thierry Breton, CEO of IT services company Atos said that because of the burden of European debts, “the next 10 years will be hardest since the War,” adding that “for the first time since World War II, we all have the responsibility to reform our continent while reforming our countries”
Jim Snabe, CEO of enterprise software provider SAP, agreed: “It’s not an easy fix, and it will take years. I’m concerned as a business leader — and as a parent: what we’re doing today will have a tremendous impact on our children’s opportunities.”
However, the panelists emphasized that while there are clearly things that need to be done, European companies should not deny the region’s strengths and successes in innovation.
Markus Christen, an INSEAD Associate Professor of Marketing, had showed data in an earlier session that clashed with the assumption of European decline. European companies have done a remarkably good job maintaining their share of the Fortune Global 500 firms over the last 15 years, even as the US share has steadily shrunk.
Christen also quoted a 2009 study of “hidden champions” – companies that produce inconspicuous products, but in the market for these products they are ranked top in the world. This showed that Europe has a large number of market leaders on a per capita basis.
He argued that European companies were creating innovation by working closely with their customers to turn existing products as value-added solutions. He cited examples including Rolls-Royce Aero Engines, Hilti Power tools, and Air Liquide.
Panel moderator Lanvin pointed out that European countries make up six of the top ten slots in this year’s Global Innovation Index .
Breton added that the world’s top 3 information technology services companies (Cap Gemini, Accenture, and Atos) have more than their industry in common: all are European, and every one of them has a French CEO!
Crisis is an Opportunity
Snabe said: “I always believe there are ways to turn the situation into an opportunity. I don’t think we can wait for politicians to solve the problem. Our three businesses are in a sector that is characterized by growth, and we can have a tremendous impact in how we can improve productivity in all sectors.”
When asked about how his company is responding to the current crisis, he explained: “We looked at our company, and said ‘we need to drive an agenda of innovation’. It enables opportunity for us, for young people, and helps innovation in other companies. With nine quarters of double-digit growth, we’ve proven that if you put all your attention on innovation, you can be a European company with great growth.”
Both Breton and Jon Fredrik Baksaas, CEO of Telenor Group, argued that competition within the European market may have gone too far, and was not stimulating champions that could compete at a global level.
Baksaas said that telecommunications in Europe was fast becoming a “re-regulated” industry, with recent actions by Brussels to reduce prices, notably in European roaming charges. He criticized the slow decision processes around the rollout of new broadband frequencies in Europe to take advantage of 4G: “We’ve lost leadership to the US in the last few years.”
Breton pointed out that Europe has more than 200 different telecommunications networks compared to the four or five in the US, making the huge investments required for the future much harder.
Snabe emphasized one particular area that he believed could generate big opportunities: “I believe in the power of small. It’s from the SMEs [small and medium enterprises] that the breakthroughs often happen. Every second job is in a SME.”
He talked about SAP’s commitment to help small companies take full advantage of their breakthroughs and grow smoothly and quickly.
Breton explained that Atos was in the process of taking advantage of a little-used single-market rule, changing the company bylaws to become a “European Company,” rather than being headquartered in any particular member state. He urged his fellow panelists to take advantage of this possibility, arguing that it was a clear signal of the importance of the European market.
Baksaas pointed out that the Nordic regions had been relatively poor before the Second World War. He ascribed the region’s recent successes to a strong culture of equality and inclusion, leading to political consensus. While governments in the region shift, companies are not subjected to the “stop and go” policies that may slow innovation in other parts of Europe.
Breton concurred, saying predictability, stability, and continuity are key to resuming growth: “The main problem is that we change our laws and our fiscal policy too much. In the last five years, in France, there’s been a new fiscal law every ten days!…We need stability for fiscal policy, legal policy, and working conditions… We will deal with whatever they are, as long as you don’t change it too often!”
Snabe outlined his views on the need to make best use of Europe’s assets: “One of my biggest concerns is the unemployment rate among young people. With the long-term demographic problems we have, it doubly doesn’t make sense to have young people not working, and we have an obligation as business leaders to solve that.”
He pointed to the continent’s long traditions and ability to bring cultures together, arguing that “we should leverage Europe, and attract the best talents in the world. Imagine the best University course ever: a year in Paris, a year in Rome, a year in Frankfurt… – nowhere else could offer such inspiration to young people.”
He also argued that high labor costs in Europe were not the most important consideration: “You need to have a mix, to get the global talent. You should be in Indian not because it’s cheap, but because of the great talent. It’s about how you use resources. The time spent creating value for the customer versus time spent on irrelevance is a much bigger lever for cost savings. We do have to pay attention to costs: if they go through the roof, it’s hard to be competitive, but how you deploy your labor is more important. “
Snabe admitted that Europe’s job security rules prevent fast reaction to changes, and prevent prompt hiring when business returns. He proposed that the optimal solution may be one that combined job security with a firm commitment to retraining.
The panelists agreed that people issues are ultimately what matters most to European growth. There is clearly a higher degree of talent mobility around the world, and European companies must be open in how they combine people from different backgrounds and talents.