As I write this, I’m on my way home from a conference organized by the European automotive industry. Many will realize that this industry is having a very hard time right now. Low economic growth is causing people to not buy new cars. This is exacerbated by competition from the west and the east in terms of, respectively, luxury automobiles and cheap vehicles, comparable to European models but at a significantly lower cost.
The general vibe at the conference was that we have to collaborate more and we need the EU to fund large research and development projects to help the automotive industry regain its competitiveness in an international setting. The interesting thing is that, first, the large automotive players aren’t allowed to collaborate on anything that’s not pre-commercial without explicit permission from the European Commission, as there are laws on forming cartels that would go into effect.
Second, I was told a story about how a group of automotive players had, during a meeting in 2024, convinced senior decision-makers in Brussels of the importance of supporting their industry with more funding for innovation and development. They’d received some money for 2025 with the intent of preparing a large funding application to be submitted in 2026. If granted, decided in 2027, the project is scheduled to start in 2028. We’re looking at a four-year delay between an industry that represents 10 percent of the European economy reaching consensus on taking joint action and a response from “the system.”
I wish this were the only example of sluggish innovation processes in Europe, but I have examples from the medical domain, the defense industry, telecommunications and industrial companies that point at the same problem: we have a need for speed, but we’re moving way too slow. Our international competitors are running circles around us. A Chinese car company can get a new vehicle from decision to production in 12 months, whereas a typical European car company needs 40 months.
We seem to be in a deadlock where, between regulatory pressures, legacy playbooks that worked in the past and a European organizational culture where you need 20 people to OK any change you’re looking to implement and every single one of them can torpedo and stop it, nothing happens. Most people I meet are OK with it and point to Europe being different from the US and Asia and that we have our own approach to introducing technology into society. Unfortunately, this leads to several problems, including the displacement of European companies by international players, unethical outcomes due to the delayed introduction of new technologies and poorer outcomes for the very people we’re trying to protect.
First, even if many claim that Europe is different from the rest of the world, we don’t seem to have a problem buying products from the rest of the world. We use Apple and Samsung phones, drive Teslas or BYD cars, wear Apple and Garmin smartwatches and so on. The obvious outcome is that the vast amount of expenditures of European citizens is on products that are developed and produced elsewhere in the world.
Second, the very conservative and cautious approach to new technologies, as we follow in Europe, has an ethical side that’s often not discussed. For example, more than 1 million people per year die in traffic accidents. The vast majority of those deaths could have been avoided if we had introduced autonomous cars, the safety record of which is vastly better than that of human drivers, who, frankly, aren’t very good at controlling vehicles. Who’s responsible for all the people who unnecessarily die in traffic accidents because we delay the introduction of new technology into society? We never discuss this.
That brings me to the third point: the very people we’re looking to protect, ie the citizens of Europe, are the ones getting hurt. Many well-paying, high-tech jobs have shifted to other parts of the world and aren’t available for Europeans unless they’re willing to move to those parts of the world and subject themselves to the local legal and rule system. In addition, many of the technologies that could improve the lives of many of us are simply not available until much later than in other parts of the world, causing unnecessary suffering.
Now, a fair question from you, my dear reader, is what I think we should do about this European system, as we’ve gotten to know it. In my view, there are at least three changes that we should work on to get out of the situation: clean slate approaches, suspension of regulatory compliance requirements and funding for scaling successful new ventures.
First, having tried my best to drive change in traditional, large industrial companies for well over a decade (maybe my entire career, to be frank), the results aren’t encouraging. Established organizations get to a point where the existing practices, ways of working and culture are embedded in the walls of the buildings. As the saying goes, culture eats strategy for breakfast (and lunch and dinner). So, instead, we need to initiate completely new enterprises that start from a clean slate and without all the baggage that established companies tend to collect.
Of course, we typically talk about startups in this context, but there are also intrapreneurship approaches that can be used, where established companies create independent daughters that get to operate autonomously. The challenge is to hire the right people in these endeavors, as it’s quite easy to get former colleagues who bring their playbook with them, resulting in no change. Instead, we need to organize these new enterprises around visionary product leaders who may be wrong, but who aren’t forced to compromise on every decision, as that would result in a “design by committee” approach that would for sure fail.
Second, we need a context in which newly established companies can secure a position in the market and prove their viability without being strangled by regulatory compliance requirements and outrageous fines from the get-go. In my view, these businesses, either as free-standing startups or as independently operating daughters, should be allowed to operate without having to satisfy such requirements for the first years of their existence and as long as they’re below a revenue ceiling. And if and when they’re successful, the regulatory compliance should be enforced gradually, allowing them to “ease in” to operating as mature, established companies.
Third, anyone who has worked in the startup space knows that acquiring funding for the first stages of a company is quite doable in Europe. However, once the business needs serious amounts of funding to scale, the opportunities tend to be few and far between. The consequence is that many European startups become US-based (Delaware, typically) and tap into the US funding ecosystem, which is taking much more risk, but also, as a whole, reaps by far most of the rewards. Obviously, it should be feasible to get the funding for scaling in Europe, but rather than project officers at national and European funding agencies, it should be venture capitalists and others who have skin in the game.
Of course, there are many more factors to consider, such as harmonization of all 27 markets in Europe so that businesses can scale more easily, a common regulatory framework for startups to simplify operating over national boundaries, a model for employees in newly established companies to own stock and options without the excessive taxes they’re subject to today and so on. However, the three I discussed provide, in my view, a reasonable starting point.
Our risk-averse, slow-moving approach here in Europe is causing exactly the opposite of what it’s intended for, in that it hurts the people that it seeks to protect. Europe lost the mobile industry in the 2000s. We never succeeded in the SaaS industry. We’re now at risk of losing the automotive industry. We need a new approach, but above all, we need a new culture among, especially young, people on our continent. One where risk-taking is encouraged because we believe in a future that will be better, much better, than what we have today. One where taking a leisurely, work-life balance approach is frowned upon as not doing your part. And one where those who are successful are rewarded handsomely for the value they bring to Europe. Because these people tend to invest most of their proceeds back into the industrial ecosystem. To end with a quote by Mark Zuckerberg, the greatest risk of all isn’t taking any risk at all.
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