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Europe needs more lead markets

All rights reserved © iStockphoto © Mutlu Kurtbas

The final evaluation of the EU’s Lead Market Initiative, which aims to create and develop marketplaces for innovative products and services, has concluded that this approach has not only delivered concrete results in various sectors but needs to be scaled up in order to boost Europe’s competitiveness.

If Europe is to continue to prosper and overcome the current challenges facing its economy, the EU needs to become more innovative, and this needs to be achieved not only by boosting the supply of innovative products but also bolstering demand for it.

This requires the EU’s massive single market to have the capacity to nurture and incubate new innovations and help disseminate them through specific sub-markets – this capacity was referred to as ‘lead markets’ by the landmark 2006 Aho report on creating an innovative Europe.

In 2008, the EU launched its Lead Market Initiative (LMI) to bolster innovation by promoting collaboration between the European Commission and Member States. In order to focus resources on the most promising innovations, the LMI seeks to identify sectors which are highly innovative, have a strong technological and industrial base and provide solutions that can help meet broader strategic, societal, environmental and economic challenges.

Following a thorough public consultation, six sectors were selected: e-health, protective textiles, sustainable construction, recycling, bio-based products and renewable energies. Combined, it is estimated that these six areas could be worth an estimated €300 billion and create an additional 3 million jobs by 2020.

Under the LMI, an action plan was developed for each of the six sectors which outlined a range of achievable outcomes to be delivered through a combination of demand-side policies, including legislation, public procurement measures and standardisation efforts.

A lead worth following

The LMI has led the way as an innovative approach to boosting innovation, a recent evaluation of the initiative’s pilot stagepdf concluded. Described as being at “the forefront of an important shift in innovation policy”, the evaluation noted that the LMI’s “major strength was its potential to focus on a relatively restricted number of inter-related policy issues”.

The evaluators, who consulted with concerned stakeholders to produce the evaluation, found not only that the LMI had made the right choice in selecting the six sectors upon which it focused, but that the sectoral action plans were implemented in their entirety (with minor adjustments) and had mostly delivered concrete and promising results.

Moreover, despite not having a dedicated budget, the Lead Market Initiative has delivered a lot of bang for its buck. Not only did the LMI lead to a number of specialised calls for proposals under the EU’s various funding programmes, it also prompted industrial actors to play significant roles in these emerging sectors, particularly bio-based products, e-health and protective textiles.

Even in sectors where impact was more limited, such as renewable energies, this was mostly down to the fact that the sector is ‘busy’ in policy terms which resulted in the LMI being crowded out by other, high-profile or existing initiatives and programmes.

Scale up and integrate

Despite the undoubted successes of the LMI, it was constrained by the fact that it was a relatively modest pilot initiative. Now it is time, the evaluation concludes, to scale it up and integrate a coordinated lead market approach into the EU’s mainstream innovation policy instruments, which are increasingly recognising the importance of demand-side measures, such as the Europe 2020 flagship initiative, the Innovation Union. The LMI and other demand-side measures are also mentioned in another Europe 2020 flagship, ‘An integrated industrial policy for the globalisation era’.

Any successor initiative must effectively coordinate the efforts of European and national authorities with those of industry and other stakeholders. Once scaled up, the LMI should continue to pursue a holistic and multidimensional approach and the temptation to focus on the component instruments in isolation should be avoided. Some of the current six lead markets will continue in other policy packages (notably recycling, sustainable construction and eHealth), whilst new lead markets should be identified and nurtured through measures and interventions specifically targeted at their unique circumstances. ‘Smart regulations’ that complement lead markets and help them mature are another vital ingredient of the future success of the LMI’s successor.

Hitting the right public procurement notes

A key player in demand-side efforts to boost innovation is the public sector, which makes up a staggering 44% of the EU’s economy. With so much purchasing power at its disposal, the public sector can play a major role in developing lead market and promoting the uptake of new technologies, while simultaneously improving the quality of public services.

That is why public procurement is a major focus of the LMI, under which three public procurement networks were established. One of these was ‘Sustainable Construction & Innovation through Procurement’ (Sci-Network) which connects public authorities across Europe who are looking to procure innovative and sustainable solutions within their construction projects., The network aims to identify new and effective construction solutions, as well as promoting innovation in construction procurement.

PIANOopdf is one example of a national partner who has offered their expertise in the context of Sci-Network. This public procurement expertise centre based in the Netherlands seeks to promote high professional standards in purchasing by Dutch public authorities and improve the cost-effectiveness and compliance of public procurement. In addition to offering support services to public sector bodies, it also provides about 3 000 members with the opportunity to network, assist one another and exchange good practice.

The right medicine for supply and demand

As anyone who has studied economics can tell you, supply and demand are intimately connected. For that reason, some LMI initiatives have focused not only on demand issues but also on questions of supply.

An example of this was epSOSpdf, which worked to supply health professionals with patient data in order to improve healthcare for European citizens when they are abroad in the EU. The epSOS system enables the digitisation of patient data through interoperable, open source IT systems. This involves both the creation of a standardised pan-European IT architecture and standardised rules for entering data.

By enabling a patient’s data to travel with the patient, epSOS is helping to improve European healthcare services, especially in these austere times, by enabling the efficient use of resources, and is facilitating the emergence of an increasingly unified European e-health market.

epSOS is part of the e-health LMI which focuses on developing lead markets in electronic health sectors, such as tele-medicine and homecare, as well as clinical and health-related information systems.

The e-health sector is constantly growing in importance, given the interrelated challenges of a greying population, tightening health budgets and the growing cost of healthcare.


Policy Development for Industrial Innovation' Unit
Directorate-General for Enterprise and Industry

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