Austrian Open Innovation Strategy Event, 1 December, Sofiensäle Vienna AT
Openness as a Catalyst for Innovation
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Ladies and gentlemen,
Let me start by saying what a pleasure it is to finally be here in Vienna in the wonderful Sofiensäle.
I would like to personally thank Vice Chancellor Mitterlehner and State Secretary Mahrer for their kind invitation.
This is a very fitting venue to discuss Austria's strategy for Open Onnovation. As you know, the Sofiensäle have a rich history.
Starting off as a steambath, the building has seen many transformations over the years. Given Vienna's rich cultural tapestry, it is music that has had the biggest impact here. Johann Strauss performed here 150 years ago for the opening ball.
It is the pool beneath the floor that gave it wonderful acoustics, and made it a principle recording venue for your famous Philharmonic Orchestra.
The reinvention of this building amid the melodic echoes of the past, serve as a guide for the future. With a solid foundation of rich cultural innovation to build upon, Austria's outlook is bright.
Ladies and gentlemen,
Austria has never been afraid of being bold. You are an example for other Member States in the renewable energy field. And soon, we will have much to learn from you in the open innovation field as well.
I must congratulate you on becoming the first Member State, and indeed one of the first in the world, to develop a national Open Innovation Strategy!
This shows real commitment, but also foresight. As I have said many times before: we are in the century of Openness.
Openness makes us more effective. It makes us more competitive. Science is changing, and the way we use science to solve global problems is changing too.
Today I would like to pay tribute to your efforts in building and promoting open innovation; and briefly explain how it goes hand in hand with what we are developing at European level.
Let me now briefly explain my vision for open innovation.
A fundamental issue in today's economy is the uneven growth in productivity and prosperity.
And that's why people don’t understand when you talk about innovation. Innovation should be creating growth for all and not just for a few. In developed economies more than 60 % of productivity is explained by innovation.
If we look at the OECD work on "the Future of Productivity", this shows that the overall slowdown in productivity is not present everywhere.
In fact, the leading companies have been rapidly increasing their productivity over recent years. These productivity improvements are concentrated in markets such as ICT and in companies that are using digitisation.
It's great that these sectors are thriving - but they add up to only a small part of the economy – 10% according to Harvard economist Dani Rodrik.
But all the other companies are stagnant, with virtually no increase in productivity. Here we are talking about major parts of the real economy, such as health care and government services.
And the gap between the leading companies and everyone else is growing.
The cities and regions where the 'productivity leaders' are located are powering ahead. But other regions do not benefit from this. The individuals with the right skills are benefitting. But others are not.
This lack of diffusion from the top to the bottom and across sectors feeds inequality, which has a huge cost for all of us. It translates into wasted resources, wasted talent and wasted potential.
Not to mention political discontent.
Why is this happening?
This lack of diffusion comes from demand-side and supply side constrains.
Take the demand side first. In rich economies, consumers spend the bulk of their income on services such as health, education, transportation, housing, and retail goods. Areas that have not seen much impacts of digitisation and productivity improvements.
But I believe there is good news coming on the demand side. As Steve Case puts it, the "third wave" of the internet is going to transform traditional sectors in the coming years.
So I believe that the constrains for Europe are more on the supply side. On the supply side the question is if the innovation sector has access to ideas that create new markets and capital in order to scale those ideas up.
Innovations that combine physical and digital; that put the users at the centre; and where newcomers with new business models will enter and rapidly create entirely new markets.
The only way to go from incremental innovation to Market creating innovation is through Open Innovation.
I was lucky to have as Professor Henry Chesbourough the father of Open Innovation and later on I met Eric Von Hippel the father of User Innovation.
They used to say that in the Physical world Schumpeter was right the producer is the one who creates new products and pushes them to the user. But in a digital world there is a paradigm shift where innovation is not any more linear process. The user is feeding back to the producer what he wants as innovation.
The challenge of Open Innovation is our ability to create an ecosystem where people and sectors can foster co-creation. This is the core for Open Innovation.
That is why I place great weight on Responsible Research and Innovation under our funding programme Horizon 2020. Research must respond to the needs and ambitions of society, and reflect its values. An inclusive approach will guarantee this.
Once we can capitalise on digitalisation, mass participation and collaboration, we will be that much closer to creating an open innovation ecosystem.
There are three things we have to get right to make open innovation a tangible success in Europe.
The first is a reform of our regulatory environment. This will help increase investor confidence. Something we are lacking in Europe at the moment.
At European level we are working hard on ways to make innovation easier.
We recently closed our expression of interest in the Innovation Deals. I was delighted to see an Austrian proposal submitted on recycling waste.
These will help us identify and address perceived legislative barriers more quickly. By providing clarity, or identifying solutions within existing legislation.
The second point we have to work on is increasing private investment, especially into risky research.
In 2014, venture capital investment across the EU was around 5 billion euros, which is more than 5 times less than in the US.
This is why, together with the European Investment Fund, we're currently setting up a Venture Capital Fund of Funds.
This Fund of Funds could invest in a combination of early stage, later stage and expansion stage venture capital funds, above 500 million euro.
The majority of funding will come from the private sector; with independent fund management.
This would bring an entirely new momentum to the European venture capital market and increase investor confidence.
My third and final point relates to impact. Wherever I go, I hear the same thing: Europe is a source of excellent science. But we lack sufficient disruptive market-creating innovation that is required to turn our best ideas into new opportunities, businesses and jobs.
This is why Europe needs a European Innovation Council that will listen, harness and add value to the ideas of Europe's entrepreneurs and innovators.
Europe does not have a good track record at market creating innovation.
And if I look at Horizon 2020, we offer great support for incremental innovation. But we do not focus on market creating innovation. And the new generation of start-ups and fast growing companies do not come to Horizon 2020.
So my idea of European Innovation Council is to champion market creating innovation.
To complement the great support we already offer in Horizon 2020, with a new approach that targets market creating innovation. The kind of innovation that does not come from technology roadmaps. That does not fit neatly in existing sectors but is at the interface. And that has the potential to scale up quickly.
In a Call for Ideas conducted earlier this year, 80% of respondents agreed that the lack of market-creating innovations is holding back growth in Europe.
So I would like to develop an European Innovation Council which changes the landscape. We will proceed step by step, with a preparatory phase in 2018-2020 and a full-scale EIC in the next programme.
In the first phase, we will introduce a set of reforms to improve the way we fund innovation within Horizon 2020. For example, the Commission is committed to introduce an entirely bottom up approach in the Horizon 2020 SME instrument. We will change our evaluation criteria and process to increase the probability of funding market-creating innovations. We will interview the people, not just evaluate the paper proposals. We will introduce mentoring and coaching support. We will look at ways that companies can graduate from grants to private investment.
And we are engaging top innovators to help us introduce these reforms and to recommend what we should do in the next programme
Ladies and gentlemen,
Europe is lucky to have an open and forward-looking member of its Union as it does in Austria. You can be immensely proud of your achievements in delivering the EU's first national Open Innovation Strategy.
I am confident, after my discussions with Vice Chancellor Mitterlehner and State Secretary Mahrer, that Austrian innovation is set to lift off. You can count on my services, and my personal support.
We have to get this right, and I believe you have provided an excellent blueprint for others to follow.
Ladies and Gentleman
Globalisation has decreased poverty but has unfortunately increased inequality. I believe that Open Innovation will help us to close the gap between those that today enjoy the great aspects of innovation and those that are still excluded.
Thank you. Danke Schön.