We do not need artificial industrial giants. We need a level playing field that unleashes our innovative SME economy.
Oliver Grün, PhD, is the President of European DIGITAL SME Alliance, CEO of GRÜN Software AG as well as president of the Federal Association IT-Mittelstand eV (BITMi). Since 2013 he is also in the Advisory Council of the Federal Government “Young Digital Economy”, which advises the German Federal Ministry of Economics on questions of the digital economy. Oliver first completed his 2001 diploma in engineering, before obtaining a double PhD in the field of Business Informatics. He is the author of various publications over the years.
The European Commission will soon publish its new industrial and SME strategy. At a time of digital transformation, it is key for the strategy to identify the right priorities to unleash the potential of the European industrial ecosystem.
US and Chinese tech giants dominate the global markets and are nowadays a threat to many European industrial sectors. Both countries have seen the establishment of giant global players, but I do not believe that this is the right strategy for Europe. While the Commission is under pressure to relax EU competition policy in order to approve a mega-merger between Siemens and Alstom, one may wonder – why not allow successful European companies to merge so they can compete with the US’ and China’s champions? At first sight, it may look like a good solution for European players to have a fair chance in the global economy. However, such a strategy is short-sighted, because what matters is innovation, not size. Consider this:
1. Competition rules are crucial to ensure a level playing field for European companies in the digital era.
The global digital platforms use their dominance to increase their market power. They effectively function as “gate-keepers” in many sectors, to the detriment of all other companies. The success of such platforms fuels their constant drive to grow into new fields by acquiring competing innovative firms. Companies that use platforms to reach their clients with innovations are increasingly facing competition from the very same platforms, which in turn use their power to favour their own products and distort market dynamics. Here is where the EU can support its industry by enforcing tough competition rules to curb abusive behaviours by tech giants. In other words, surrendering our antitrust rules for the sake of one European industrial champion (who will not even be a game-changer!) is not an acceptable solution.
2. Europe’s strength is SMEs.
Europe’s strength has never rested on large industrial players only, but a combination of highly successful international companies that grew out of a large and agile SME economy. SMEs are a vital asset for Europe’s industrial value chains, where they provide a constant source of fresh and agile innovation. 99% of our companies are SMEs – among them a large group of technology frontrunners and innovators. Over 260,000 European SMEs were classified as Innovative Enterprises by the European Commission in 2014[1]. Many digital SMEs are the ‘digital enablers’ that engage in synergetic Business-to-Business (B2B) relationships with other enterprises and local ecosystems offering technology solutions and skills to the other sectors. The European Commission’s SME and industrial strategies should focus on Europe’s small hidden champions rather than on artificially created industrial giants. Only supporting our agile and innovative SMEs and offering them a level playing field against dominant digital players, can give Europe a leading position in the digital age.
I hope that the European Commission will take this into account when developing a new long-term strategy for Europe’s industrial future. We need an industrial strategy that builds on and supports the strength of its SME-based economy. European DIGITAL SME Alliance and its members, on behalf of which I am writing this, urge the European Commission to focus on the following policy priorities:
- Creating a level playing field by making sure that multinationals pay equal amounts in taxes & by strengthening competition enforcement.
- Making SMEs and SME policies the centre of Europe’s new industrial strategy.
- Supporting SME access to R&D funding and to EU funded programmes by making sure those programmes are accessible to SMEs. Setting a concrete target of 50% of the EU funding for R&D for SMEs.
- Designing an SME strategy that taps into the role of digital SMEs as enablers of the digital transformation of other SMEs to strengthen the industrial ecosystem.
- Creating a public-private “Pact for Skills” for SMEs to connect the entire ecosystem and to provide leadership and foresight for the uptake of digital skills by SMEs in the different sectors.
- Developing an ambitious data strategy. SMEs need access to data and a legal framework that strengthens innovation.
We believe that Europe should go its own way and rely on its strong and diverse SME economy. Let us join forces to allow our “digital enablers” to truly seize the opportunities of the Digital Single Market and lead Europe into the digital age!
