FES06 - "The earlier you start, the more time you have to make mistakes"

Running notes from the first Future of Europe Summit in Andorra.

I'm moderating a session on innovation (thanks Ed for help with note-taking), which opens with a short speech by Karoli Hindriks, a young entrepreneur from Estonia. She's 23, launched her first business when she was 18 and has more recently helped launch MTV in Estonia. Her first meeting with entrepreneurship actually happened two years earlier, when se was 16: "a teacher assigned us to set up a pseudo-company, create a business plan, figure out how to get to market; I was elected president of that pseudo-company", and she got the virus. At 18 she came up with an idea: fashionable reflectors for youngsters that are at the same time clothing accessories (by day) and life-saving devices (at night). "Making innovation means creating a fairy tale in business", she says. But it's also hard work. "Adults kept telling me: do it the right way, stay in school, go to university, there is no point in wasting time with pointless things". But she kept at it, asked questions to every entrepreneur she could meet, researched the market, found the right materials, checked with the patent office and discovered that no one had yet done something similar, and got the company going. Called GoodMood, it now takes in revenues of a little above 100'000 euros, so it's a niche venture, but a great example of young European entrepreneurship at work. "The earlier you start, the more time you have to make mistakes - and to fix them".

Without Karlheinz Brandenburg, there would be no iPod. I'm not overstating it. Karlheinz is a German audio engineer and with his team, in the early 1980s he developed the MP3 audio compression format. MP3 is one of those great technologies - the World Wide Web is another - that have been invented in Europe, yet have found their first meaningful commercial applications in the US, and have first made the fortunes of American companies (from MP3.com to Apple's iTunes and iPod). Why can't Europe leverage these innovations? "There is a problem about attitude - says Karlheinz - to a new idea people react with 'this is a great idea, but have you thought of this or this?', they basically tell you why it won't work. In other parts of the world, such as the US, they would have said 'how will you do it?'. And there is a problem about financing". If MP3 was introduced today, would the climate be different? "It would be better and worse. We are better at technology transfer and transforming innovation into products, and have a greater emphasis on entrepreneurship, but we also have less public funding for research - even if politicians tend to say the opposite".

Kelly Richdale is one of the founders of A4Vision, a young company based in Geneva, Switzerland, that develops facial recognition systems applied to the security market - you walk past a camera, the computer "recognizes" you, and if you're authorized it opens the door. "I have had not much time to make mistakes", she says referring to Karoli's previous statement and pointing to the European attitude that chastises failure. She tells how A4Vision, although being based in Europe and having a strong technology, couldn't find financing in Europe and had to "migrate" to the US - and yet now, a few years later, Europe is their biggest market (so their difficulties were not about lack of demand: were about lack of venture funding). How to turn things around? "Part of the answer lies in creating a better fiscal structure". She uses the example of Switzerland: "for the last five years, we have been technically bankrupt every year, because we were investing heavily, and every year we had to explain to the fiscal authorities why we were in this situation. The Americans understand this". And she brings up the example of Singapore: "In Singapore, if you're selling a new product or service, your first installation gets partially financed - 50% - by the government; that takes the risk factor out of 'trying' the new product, making the cost lower for the first customer and therefore encouraging adoption of innovative technologies and solutions. And If a company provides a service or product that improves government efficiency, it gets financed by 90%, making the government a lead user of innovation". "Another part of the answer is education: to be an entrepreneur, you need to break structures and habits, but our schools don't teach you that".

Alfons Cornella Solans is the founder of Infonomia, a network of Spanish innovators. He contends that future innovation and growth will come from connecting disciplines, from cross-pollination, from the collision of different sectors and different cultures - which should be a strength of Europe. "We talk about Research & Development, we should talk about Risk & Scoring - a more fluid risk culture". "Companies have to be able to set aside 'free budgets' for innovation, we need to provide tax relief for new ideas, we should change the concept of EU programs into EU projects - more focused towards solving problems".

Karoli is asked for more general information about the Estonian environment. It turns out that US president Bush visited the country recently, and received as a present from the Estonian president (instead of the usual piece of art) a Skype phone. The Skype software that makes possible free or almost-free phone calls over the Internet has been developed there. They didn't invent VoIP, but Skype made the world aware of the engineering capabilities of the country. But there is much more: Estonia, like other Eastern European countries, had a chance fifteen years ago (when the Berlin Wall fell) to start over, from scratch, to re-imagine itself. And made some very interesting choices: flat-tax, zero tax rate for profits that are reinvested, no trade tariffs (until they joined the EU, then things changed), a totally new, young, political class, government as "lead user" of technology (Estonia ranks among the leaders in e-government; the Cabinet holds paperless sessions), widespread cheap or free Internet access, sensible privatization, easy and cheap incorporation of new companies.