Thoughts on Innovation in America and Europe

Updated: Jun 12



Thoughts on Players, Playing Fields, and Results in Innovation


On May 30, 2020, the world witnessed the first human space flight by a private company, SpaceX, in cooperation with the American National Aeronautics and Space Administration (NASA). With the start of the Falcon 9 rocket carrying the Crew Dragon and two Astronauts on board, the United States of America resumed launching crewed missions. This start finished a long break since the retirement of the Space Shuttle program in 2011. It is an impressive achievement of all people involved in this project and an essential milestone for commercial space flight. 


Watching this event live via the Internet, and Social Media also brought a question to my mind: Why do innovative achievements like this never seem to happen in Europe?


This question is part of a subject I have been thinking about often in recent years: Why is America by far more innovative than Europe? To be more accurate, why is the United States of America by far more innovative than the economically advanced countries in Western and Central Europe? 


Year after year, I have had quite interesting discussions on corporate levels or events in Europe about innovation and entrepreneurship. From time to time, it was an extraordinary experience: People explained to me, some of them very passionately, a few with noticeable resentment against America, why Europe is doing so much better in many ways than America. In the meantime, technology giants like Amazon, Google, or Facebook emerged on the scene. Furthermore, some traditional European sectors like the watch industry or the car industry got disrupted by Apple's Watch and Tesla's electric vehicles; banks took 15 to 20 years to recognize what PayPal meant for their industry. (See also: Thoughts about Innovation)


Without a doubt, societies on both sites of the Atlantic have been facing enormous challenges and crises. I am old enough to be able to look back on a couple of decades. I can't remember a decade without at least one major dilemma that brought tragedy, pain, and challenges to people. 


I am also convinced that both America and Europe can have a bright future. I believe that in terms of innovation and entrepreneurship, it is always worth taking a look at America's success stories. 

Thoughts on Players


In recent history, extraordinary innovations in America have often been stories of exceptional founders and startups. Think about Jeff BezosMark ZuckerbergLarry PageSergey BrinElon Musk, or Steve Jobs to mention a few prominent names. They created products and services that needed little or no explanation at all. Nobody had to highlight Amazon, Facebook, Google Search, or Android as an innovation. And even people with little interest in rockets got the concept of reusability when they saw a SpaceX rocket-booster or a rocket-stage landing at a designated spot. In the case of the Apple iPhone, consumers realized the game-changing character even before many industry experts. It happened again later with the Apple Watch. It's what I described as "Innovation at First Sight." 


Well, some might say that it is also a question of marketing. Marketing works as an amplifier. The more you have to explain why something is innovative, the less innovative it is. If there is no innovation, then there isn't much to amplify, and customers will realize this sooner or later. 


But it is not merely a story of men in technology in Silicon Valley! 


Sara Blakely is an excellent example of an innovative entrepreneur, who pursued her idea, starting with just 5'000 USD in savings, took risks to found a company called Spanx, and became a self-made billionaire. 


Thoughts on Playing Fields


These exceptional innovators touched down on a playing field that has a long tradition of freedom. Freedom allows innovation and creates opportunities. It is a place where people pursuing their dreams are not automatically considered as awkward or insane. Some of them take the phrase "everything is possible" literally. 


The United States of America attracts exceptional people. Elon Musk stated: "America is where, where great things are possible, more than any other country in the world." A remarkable number of outstanding innovators and entrepreneurs are immigrants or children of immigrants. They or their parents made a life-changing decision and chose to start over on a new playing field. 


Visions and inspiration are critical! John F. Kennedy declared the ambitious goal "before this decade is out, of landing a man on the Moon," which initiated this impressive enterprise. Steve Jobs spoke about the computer as the bicycle of the future. Elon Musk paints the picture of humanity as a multi-planetary species. 


I am not saying that there are no people with visions in Europe. But maybe they don't want to share their views, or people don't want to discuss such topics on a broader scale. In contrast, it's pretty easy nowadays to find people in Europe who wish to complain about problems. Of course, there are problems and have always been. The question is what we can do about it and how a better future should look like. 


Taking the internet economy as an example, America and Europe have chosen very different roles. In brief: America innovates. Europe regulates. 


America innovates. Europe regulates.

Without a doubt, regulation is necessary to mitigate risks for people and avoid dysfunctional market situations. And taxes are required to provide public services. But excessive regulation and taxation over a longer time can decrease innovation.


Extreme regulation creates market entry barriers for new companies. It also lets innovators think twice whether going threw a product approval process is worth the efforts. Massive taxation reduces the amount of capital in people's hands, which they could use just to try out a new idea. If investors face an enormous tax on their investment returns, they have less capital to fund new ideas. They also could avoid the high-risk investments, which might lead to groundbreaking innovations, as possibly significant profits would be taxed away for sure.


In individual cases where regulation appears just to protect a traditional status quo and interests, it can also provoke sudden disruptive innovation when customers are unwilling to accept the situation anymore. 


According to essential rankings, some might argue that a couple of European countries with relatively high levels of regulation and taxation are year after year among the most innovative in the world. On the other side of the Atlantic, you will find the extremely innovative companies with market capitalizations between a billion and a trillion US-dollars. These companies are relatively young and are results of fast business growth based on innovation. European companies in that league are mostly relatively old. Some of them can look back on a century history and are results of mergers and acquisitions. It's a good sign to have businesses with a history of success. But it's a warning signal when companies that combine distinctive innovation with rapid growth are missing.


Intrapreneurship is a recent trend in mature companies to revive innovation: Employees are asked to become intrapreneurs by executives who have never been entrepreneurs. Furthermore, it's also a different challenge to navigate a giant supertanker across the ocean than to create a new ship while floating offshore. 


In general, I appreciate the efforts in many parts of Europe, to create innovation ecosystems and to support startup founders. But innovators and founders with promising ideas always have to be aware that the preferences and interests of others are connected to these initiatives, competitions, programs, and clusters. 


There is the impression that innovative startups in Europe have a lower growth-speed and are slower in their expansion across the continent or the world. On the other side, popular explanations for fast-growing startups in the United States are the large home market and a common language. I believe that it shows more a difference in ambitions and mentalities. Europe possesses a huge harmonized market, and at least in business, English is a universal language. Of course, there are significant cultural differences and multiple languages across the continent. On the other side, the United States is, in reality, multicultural with more than one language. The harmonization of markets has its limits: Depending on the type of business, you face significantly different laws and regulations in multiple states of America and Europe's various countries. 


Differences in handling risks and failures are more than a cliche. Failing publicly in business and going bankrupt in Europe often leads to ridicule and stigma; people rarely get a second chance. While failing in business or losing money is probably nowhere appreciated, Americans seem to be more realistic and perceive it as a signal that somebody at least tried and hopefully learned a lesson. 


Innovation and rapid business growth can require vast amounts of capital. Peter Thiel, a founder of PayPal and the first outside investor of Facebook, was repeatedly asked about his investment decision. It became a famous sequence in the movie "The Social Network" that also suggested a rather fast decision. 


He explained that the website appeared to be well-engineered, and the number of users grew fast. But the reason for being able to make such a swift decision was his preparation. He knew the topic of social networks and had talked about it with Reid Hoffman, who later founded LinkedIn. 


Everybody who has ever applied for a business loan or a mortgage to buy property realizes that this investment story is based on a different kind of thinking and expertise. It shows a willingness to invest in innovative startups with high-risks. Furthermore, it demonstrates how valuable experienced and well-prepared investors are who also have built themselves fast-growing billion-dollar companies. They can provide capital together with invaluable expertise. 


Conclusions


In general, America and Europe show remarkable differences in their approaches towards innovation and the results they achieve. The apparent successes in Silicon Valley and across the United States are stories of exceptional individuals, very innovative startups, and risky investments in a unique environment. Unfortunately, Europe today has little to offer that comes close to this. There have been multiple efforts to create innovation ecosystems in recent years. But significant differences in the ways of thinking on both sides of the Atlantic remain and are visible in both groups, the players in innovation and those who are responsible for the playing fields.


If you are a player in innovation, you might want to ask yourself these questions:

  • What is my idea or vision?

  • Why is it important for the world?

  • What does it take to turn it into reality?

  • Are you willing to play big? Would you like to go global or even beyond? 

  • Which mindset, skills, and resources do you need?

  • Which people will I need to create my innovations? 

  • What kind of mindset and skills should these people have? 

  • Where will I find them?

  • What is the right environment and place to launch this enterprise?

  • What are the critical factors and resources? 


If you are responsible for the playing field in innovation, you might want to ask yourself these questions:

  • What is my vision? What is my motivation?

  • What is the scope? A company, a campus, a cluster, a region, or a state?

  • How can I attract exceptional innovators?

  • What do they want? What do they expect?

  • Which mindset, skills, and resources do I need? 

  • How can I convince others to support me in creating such an attractive environment?

Do you have any questions? Let's talk and find out how I can help you. Schedule a Call



Sources and Recommendations


Jeff Bezos (2020, June 09). In Wikipediahttps://en.wikipedia.org/wiki/Jeff_Bezos


Sara Blakely (2020, June 09). In Wikipediahttps://en.wikipedia.org/wiki/Sara_Blakely


Sergey Brin (2020, June 09). In Wikipediahttps://en.wikipedia.org/wiki/Sergey_Brin


BuzzLab BUEntrepreneurship (2016, August 23). Peter Thiel - Factors that led to him investing in FB. YouTube. https://www.youtube.com/watch?v=zA1lyR43DrM


Steve Jobs (2020, June 09). In Wikipediahttps://en.wikipedia.org/wiki/Steve_Jobs


Reid Hoffman (2020, June 09). In Wikipedia. https://en.wikipedia.org/wiki/Reid_Hoffman


Inspirational Visionaries (2017, April 24). Elon Musk: Why I Came to America [Video]. YouTube. https://www.youtube.com/watch?v=l7u7CXoGGKc&t=8s


Isaacson, Walter (2011, October 24). Steve Jobshttps://books.apple.com/us/book/steve-jobs/id431617578


John F. Kennedy (2020, June 09). In Wikipedia. https://en.wikipedia.org/wiki/John_F._Kennedy


Elon Musk (2020, June 09), In Wikipedia. https://en.wikipedia.org/wiki/Elon_Musk


Larry Page (2020, June 09). In Wikipediahttps://en.wikipedia.org/wiki/Larry_Page


The Social Network (2010). In IMDB https://www.imdb.com/title/tt1285016/


Peter Thiel (2020, June 09). In Wikipediahttps://en.wikipedia.org/wiki/Peter_Thiel


Thiel, Peter & Masters, Blake (2014, September 16). Zero to One: Notes on Startups, or How to Build the Future. https://books.apple.com/us/book/zero-to-one/id795977428


Vance, Ashlee (2015, May 19). Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. https://books.apple.com/us/book/elon-musk/id887481567


Mark Zuckerberg (2020, June 09). In Wikipedia. https://en.wikipedia.org/wiki/Mark_Zuckerberg


Thiebus, Sven (2018, December 13). Innovation at First Sight. https://www.thiebus.com/post/innovation-at-first-sight


Thiebus, Sven (2017, May 30). Thoughts About Innovationhttps://www.thiebus.com/post/thoughts-about-innovation


Photo: AEPerspectives.com

© 2011-2020 by Sven Thiebus Innovation Consulting

Imprint & Disclaimer