Keynote debate: innovation and international entrepreneurship

Report on session at 6th IBA Global Entrepreneurship Conference, 16 – 17 May 2022, presented by the IBA Closely Held and Growing Business Enterprise Committee

Co-Chairs

Giuseppe Coco Ughi e Nunziante, Milan; Membership Officer, IBA Closely Held and Growing Business Enterprises Committee

Stan Robbers Heussen, Amsterdam

Speakers

Nora Klug Group General Counsel, Robert Bosch GmbH, Stuttgart

Stef Prinsen Senior Account Manager Digital Technology Innovation Quarter, The Hague

Mustafa Tanriverdi Member of the Board, Dutch Development Agency, Amsterdam

Alper Utku President and Co-founder, European Leadership University, Amsterdam

Keynote speaker

Constantijn van Oranje Special Envoy, Techleap.nl, Amsterdam

Rapporteur

Caterina Iodice EMW Law, London

The experts’ panel discussion was opened by Stan Robbers who welcomed all attendees and announced the introduction of the keynote speaker via video link. Each panellist was introduced to the audience followed by some brief remarks on the topic for discussion, which emphasised the important role of innovation for companies who were willing to be successful and operate in an international market despite the current geo-political and post-pandemic challenges.

Giuseppe Coco opened the discussion by considering that we were living in an increasingly complicated world which is becoming more interconnected every day. He invited Alper Utku to give his personal views on what innovation meant and why it was so important. Utku provided a brief explanation on the use of the word ‘innovation’. From the 13th century the word was actually used in a legal text to renew contracts. In 1939, the economist Joseph Schumpeter used the word innovation with today’s meaning for the first time. Since then, as technology has increasingly developed, the word innovation has become a popular term.

In the view of Utzu, the meaning of innovation was all about technology. It was important to distinguish between innovation and invention. People often mixed the two terms up with each other or with creativity or R&D. Historically, it appeared that ‘innovatus’ meant making something new. He emphasised that there was an intentional element to innovation, while invention could happen by accident. In Schumpeter’s opinion, innovation first required that there was an intention towards a social or economic impact or change. Second, innovation was a social process and, like any social process, it required dialogue. In Utzu’s view, innovation required incubators, ecosystems, accelerators where people could come together and have meaningful conversations with regard to the issues that stimulated them to pursue change.

Stan Robbers considered it would be of interest to know about what government could actually do with innovation and if it could actually keep up with the pace of innovation as the world of innovation was moving so rapidly. He invited Stef Prinsen to share his views on what governments could do to foster innovation.

Prinsen first questioned why governments should be involved in innovation. He referred to some interesting research by Professor Michael Porter of Harvard University in the 1990s. It showed that an economic indicator such as GDP (gross domestic product) was not the only factor to consider when establishing the success of a country. It had been argued that in the long term, it was important to look at the capacity of a country or a region. Since then, several governments have been much more involved in the process of economic development. In his view, there were generally three main activities which governments could carry out. First, they could buy innovation and therefore invest by themselves in certain sectors (eg, National Aeronautics and Space Administration (NASA) and the United States defence and space industry). Second, governments could implement regulations which push forward new developments rather than slowing down innovation. Third, governments could be more actively involved in innovation by setting research and development (R&D) incentives, attracting foreign investments, working with certain industries and investing in certain sectors. He also highlighted that it would also be very important for governments to continue investing directly in infrastructure, education, public research and science.

Mustafa Tanriverdi intervened, highlighting his experience as a former government consultant who assisted and guided a range of companies with international headquarters and startups to invest in the Netherlands. He realised that although a huge pool of investors was created at that time, it was hardly used. He later founded a development agency with his business partner, which focused on making use of a pool of investors and their knowledge and experience to help other companies come to the Netherlands. Their development agency had to liaise with, and make use of existing government agencies. The combination of investor experience and the business platform created by Tanriverdi and his business partner was able to connect the right people with the right companies, making a suitable match between them and bringing startups and investors together so that they were able to learn from their experiences. Tanriverdi highlighted that the government was currently supporting their development agency in various ways and was involved in carrying out their initiatives and activities.

Coco intervened to focus the discussion on the concept of innovation and its link with startups. However, he stressed that innovation would be a key issue to consider for any healthy business. He referred to the speed and complexity of the innovation process. Coco then introduced Nora Klug to speak about how multinational companies would deal with the continuing fast-growing innovation process.

Klug wanted first, to point out that Bosch was not a publicly-owned company and it was very much a closely-held concern. She then highlighted that innovation and Bosch were inseparable and Bosch had been holding a legacy of innovation and invention for 130 years. As Bosch had been keen to continue to remain one of the largest tech-players, it was currently engaging 78,100 specialist workers in R&D and 38,000 in software development. Innovation for Bosch also meant paying attention to diversity, as it included a wide range of fields such as electro-mobility, sustainability, chemical energy conversion, fuel cell systems and quantum computing and technology. Since it began investing in innovation, Bosch and its specialist workers have been very much focused on the continuous fulfilment of three main goals. Klug highlighted that any innovation was required to fulfil feasibility, marketability and then, economic viability standards. In order to maintain such a level of activity within the rapidly-growing innovation process, Bosch carried out its commitment to innovate together with other organisations and was heavily depending on around 850 R&D partnerships worldwide in more than 60 countries.

Robbers asked Utku to join the discussion and share his experience and vision as a startup entrepreneur in the Netherlands. He highlighted many positive aspects of starting a business in the Netherlands. For instance, there were many incubators, accelerators and ecosystems that were able to engage well with startups companies. He also highlighted that in the Netherlands social values of collaboration and trust where accepted and were pretty much an element of Dutch culture and could generally be considered unique. In addition, the Netherlands was known to be a leading country in proficiency in the English language. In fact, the Netherlands scored 94 per cent in the English proficiency index. He believed that there was a great potential for the Netherlands in the future world economy.

Robbers introduced the keynote speaker, Constantijn van Oranje, who appeared via video link, and asked what innovation meant to him. Van Oranje confirmed that although he very much cared for innovation, he did not have a definition for it. In his view, innovation needed to be applied in the real world, in that innovation was required to enter the market in a sustainable way and apply to society. Van Oranje considered it important that innovation as a mechanism was able to make an impact in the real world.

As the video connection was interrupted, Coco had the opportunity to ask the panellists their views on whether environmental, diversity and social issues were intimately linked to the concept of innovation or whether such a link could be seen as merely a current trend.

Utku wanted to draw attention to the concept of innovation as an application rather than referring to the conceptual view of innovation. He agreed with Coco that innovation was linked to such environmental, social and diversity issues. In his view, innovation made changes and had an impact on the real world and this was what innovation was all about.

Coco asked Prinsen whether such environmental, diversity and social issues being linked to innovation would be important for a governmental agency. Prinsen confirmed it was important for any government and that currently it was rightly a part of the culture of government agencies and many businesses.

Coco mentioned the importance of a network and ecosystem for startups to gain visibility and to achieve business targets broadly. He addressed this point to Klug, inviting her to explain how large companies help the creation of a network and ecosystem.

Klug confirmed that it could be carried out in numerous ways and that it was not done merely out of helpfulness but was largely due to companies depending on ourselves. In particular, there was also a need to watch for disrupted development. This could be done through an innovation process and fostering a growing platform where they have their own startups. They had also supported their startups by providing them with infrastructure and a flexible and fast environment where they were able to develop ideas. Moreover, they had access to their own venture capital which had heavily invested from small to mid-size investments and occasionally carried out seed investments. Finally, they had carried out mainly venture capital activities in deep tech areas such as mobility and all sorts of technology but they had also focused on consumer goods which were less technology-driven but much more consumer-needs driven.

Coco put the same question to Prinsen, emphasising whether it would be important to create an environment, network and ecosystem for startups.

Prinsen confirmed that it was undoubtedly crucially important to do so. He said that Dutch government had invested in startups at a very early stage and also in de-tech companies that initially did not obtain much attention from the market. They generally supported Dutch startups to access the market, go abroad, making use of other successful organisations to partner with them and fund certain startups to join their programmes. They also set up several networks in the Netherlands where startups could work together with other companies and also incubators and accelerators.

As the video link with van Oranje was established again, Robbers considered the word ‘tech’, which stood for technical innovation and technical startups. He questioned whether it was essential to focus on tech and invited van Oranje to explain the reasons why his choice was for ‘tech startups’ rather than just ‘startups’ in general.

Van Oranje highlighted that technology was changing everything in a very wide prospective. In his view, this was most important, as it could be seen as a driving force for today’s rapid innovation. Generally, he considered that tech-companies engaged typically half or two-thirds of their staff in tech. However, there were other tech-companies who had fewer staff in tech as they work towards creating revenue flow and productising their offering. However, he did not typically work with these companies.

Robbers questioned whether van Oranje wished to create an eco-system for startups and how he could create such a system.

Van Oranje clarified that he was willing to create communities of entrepreneurs as he did not trust governments to provide any necessary interventions. Generally, his company tried to work on cultural elements to make companies more supportive and transactional and create a framework enabling companies to support each other, remove obstacles, and encourage investors and businesses to provide their time for mentoring.

Robbers intervened to ask van Oranje his view on how he considered current entrepreneurship in the Netherlands to be as the country was traditionally known as an entrepreneurial nation.

Van Oranje pointed out that it was important to distinguish between traders and entrepreneurs. Dutch people were known as mainly skilled traders who were generally inclined to go for a quick deal and were reluctant to take much risk. In this respect, he recalled that insurance was actually invented in the Netherlands. Whilst entrepreneurs typically liked to be independent. Therefore, autonomy was very important to entrepreneurs. However, it appeared that the more entrepreneurs’ businesses expanded, the less autonomous they became, as they were more likely to depend on investors, structures and staff. In the Netherlands many entrepreneurs want to be independent. Van Oranje also considered that there was an entrepreneurs’ cultural challenge to overcome, as in his view, it was required to make them understand that they could start to build something big. Actually, he often came across entrepreneurs who typically built companies for the Netherlands market and then started considering how to expand abroad. Although it could generally not be so obvious, any company should be required to have a cross-border vision and work hard for such purposes from the outset.

Robbers wanted to explore van Oranje’s experience regarding entrepreneurs’ cultural challenges, and asked whether it was the case that Dutch companies could do better at expanding and speeding up the growth of their business.

Van Oranje emphasised that many other factors could challenge a companies’ growth and its business escalation such the availability of funding. Certain categories of companies created with the support of universities which, although specialists in providing education and science, were often not open to tech-transfers and unable to provide the specialist professional skills required to develop their companies’ growth. Van Oranje acknowledged that there were many successful tech companies and large IPOs in the Netherlands. He considered that their success was not a positive result of the Netherlands' system but acknowledged that it was due to remarkable entrepreneurs and their ability to engage with foreign capital. He believed that the entrepreneur community is currently expanding, and that the increasing number of international companies coming to the Netherlands was key to attracting talent and business developers. Consequently, this ongoing process would reach a point at which a high concentration of so many talented operators in one geographical area would enable them to start assisting each other, set up their businesses, grant share options, etc. All this would create a tech eco-system. Despite the fact that the Netherlands could not yet be like Boston, Silicon Valley or Israel, it was doing well. He highlighted that such a critical mass was currently growing due to such factors as Brexit, the Dutch Government’s stability and of course instability in other countries which forced many companies to move their operations towards more attractive jurisdictions.

Stan Robbers considered the role government would have in the current climate referring to issues highlighted by the panellists early in the discussion and asked van Oranje what the Dutch government could do or could improve on, and how the Dutch government could become more involved in supporting the entrepreneur community.

In van Oranje’s view, it would be better for governments not get involved if they were to intervene in an unproductive way. He stressed it was the market which drove innovation, not governments, but there was much that governments could do. Governments could set framework conditions such as fiscal stimulus and flexibility in the labour market. They could also force universities to be more open to tech-transfers and improve immigration policies to attract talent and venture capitalists. He referred to Israel and Singapore who were doing much to attract venture capitalists and also mentioned the UK government’s fiscal stimulus at the early stage of a companies’ funding and its remarkable job in consistent programmes continuing to invest in innovation (eg, nano-tech, bio tech). For instance, he referred to London as it was known to be the second eco-system in the world after Silicon Valley. He pointed out that London had been incredibly consistent in implementing its strategies and policies since the end of the 1990s/start of the 2000s. As a result, consistent government strategies and policies could work well in supporting the growth of an entrepreneur community but he would discourage any government from trying to be a venture capitalist or accelerator.

This topical discussion brought the intervention of Utzu who asked van Oranje what, in his view, an entrepreneur would need to know in order to accelerate entrepreneurship in the Netherlands.

On the basis of his experience, van Oranje believed that entrepreneurs were required to work together, build big business and if they were successful, they would reinvest in a new business. Entrepreneurs were also required to work with people who have specialist knowledge in structures and systems and focus on being as successful as possible.

Marco Rizzi, from the audience, wanted to share his considerations on what was so far the panellists’ discussion on innovation, stability and companies’ internationalisation. He asked van Oranje how innovation was placing itself within the current difficulties the world is facing and how it would deal with today’s challenges and disruptions affecting various sectors such as food, commodities, logistics, etc.

Van Oranje referred to the pandemic which boosted innovation tremendously, and how much potential in certain fields such as medicine and education had been held back from developing for more than 20 years. In his view, disruption could sometimes help innovation, boost creativity and drive the urgent need to new solutions by using available technologies to make viable propositions. He was not negative about innovation. However, he considered that the market was not developing like it had been through globalisation, and that this was causing many problems in the way supply chains operated. It therefore needed to be re-designed. This could be a big problem for large companies that had complex supply chains, while more agile startups would manoeuvre more easily, although many of them will fail while large companies were unlikely to fail. As a result, he pointed out that a startup or tech approach could be a strategy to mitigate some of the consequences of the current disruption.

Klug agreed with van Oranje’s considerations and asked him what were the main problems or main mistakes he could identify that entrepreneurs are making in the Netherlands, which are preventing them from being international and developing into large companies.

Van Oranje said that it was important that entrepreneurs had a vision on what they wanted to be. If they wanted to be international, they would need to adopt an inclusive culture, recruit people from different backgrounds and raise more capital to attract and retain talent. If an entrepreneur does not have a vision, they would not be in position to build their business for such purposes. He also emphasised that a lot of talent and knowledge is in the US where investors would know the technology at PhD level whilst PhD students would know how to do business and how to do finance. In the Netherlands, everything was still kept separate rather than coming all together where, for instance, scientists could be also venture capitalists and venture capitalists could also teach in schools, like what happens in Silicon Valley. However, such a concentration of excellence seemed to be missed by the Netherlands. It would be a truly important strategy to bring all the country’s specialists together.

Robbers intervened to ask whether there was a necessity to create a similar eco-system in the Netherlands.

Van Oranje emphasised that bringing such high-profile expertise would create more competition into the Dutch venture or European venture market, which would be capable of shaking up the current system. This would be one of the best strategies for moving forward. As a matter of fact, there were good businesses in the Netherlands which were undervalued compared to their counterparts in the US. Such good businesses could attract US investors who generally invest hugely worldwide but he pointed out that it would be important to make sure that there was a good environment in place for them to invest. Of course, many new developments such as decentralised finance or new business models required to be supported by governments rather than face restrictions and limitations imposed by the regulatory framework which appeared to be unable to deal with new technology. In such circumstances, lawyers could definitely assist in making the necessary changes to support new technological developments.

Coco asked the audience whether there was anyone who they were felt part of the innovation eco-system. Few hands were raised, so he asked the panel if there was anything lawyers could do to become more involved in the innovation eco-system.

Utzu stressed the important role of lawyers, who are needed to prepare contracts, in providing legal certainty and the necessary infrastructure for any innovation eco-system to work.

Van Oranje agreed with Utzu and valued the great job that was generally undertaken by lawyers. He cited the extraordinary amount of documentation lawyers are required to work with, their compliance with certain formalities to execute documents and the overall legal complexities which lawyers are required to deal with in any investment round.

In conclusion, Robbers asked van Oranje whether his organisation Techleap.nl’s lifespan was coming to an end, and that he was leaving behind a self-empowering and self-sustaining ecosystem, and whether he was positive about it.

Van Oranje clarified that before they had the 18 months of interaction with Star Delta, they used to have a short period when they would have to re-invent themselves and see whether they were still valuable. They were not allowed to compete with the market, and they were not funded by government. They always had to prove the value added, and typically if it is longer than four years, it could become institutionalised. Therefore, in his view, it was good that an end date had been set, but it did not mean that the issues they had attempted to tackle had ended. It also did not mean that they could reassess how at the best they operated and how the private entity worked better than their organisation had done. Perhaps, it may be the case that the governments need state intervention in other places. They were going to start a conversation the government on that issue, to establish their aims, and then to see how these could best way to achieved. Nevertheless, it was likely that entrepreneurs would need other types of support. If so, they would be able to continue supporting them no matter what the government did, and they – and other entrepreneurs – would find ways to provide these services.

Coco wanted to return to the topic of the concepts of growth as a process and innovation. He asked Utku how startups and innovators were keen to grow. He also called on Tanriverdi for his thoughts from a teaching perspective on how he helped startups to expand overseas.

From the growth prospective, Utku emphasised the culture of ‘thinking big’, that the world is like one big market and the culture of scaling up is crucial. He referred to Richard Pascale who was an economist and a former consultant at McKinsey who believed that whatever you dreamt about and everything you did should have been built in accordance with your dreams. Therefore, he associated the concept of growth with an entrepreneurial mind set.

Tanriverdi referred to the bottom line that entrepreneurs needed to make money, as had been mentioned by van Oranje. He believed that the Netherlands had a very good range of investors but was still a small market. Through the network that they had created, they were able to connect several companies and told them not just to start here but they would also have to continue further because there were huge markets to invest in across Europe. Accordingly, they guided, supported and helped them and made use of their networks and partners including lawyers, as people to trust and work with so that they could grow.

Coco talked about how innovation could often be linked to disruption as most of the successful businesses became so successful by disrupting the market and industries. He wanted to hear from Klug and asked whether well-established large corporations had to deal with disruption and whether they preferred to keep their position, rather than disrupt the market.

Klug agreed that large corporations were mainly focused on maintaining their position and ideally improving it. However, they had gone through both scenarios such as being the disruptor and also had been disrupted themselves. One of their major advantages over startups was that they could afford the endurance, time and patience, if needed. From a development project to breakeven such a project would take around 16 years. This represented probably the biggest challenge for startups that could not last sufficiently long enough to achieve it. She pointed out their unique situation which sometimes put them in pole position when it comes to disruption but also made it difficult because it exposed them to something which could potentially disrupt.

Prinsen was asked to explain how he saw disruption, was it was always a good thing?

Prinsen referred to van Oranje about how governments should be aware of business where it was happing. Over the years, however, the venture capital eco-system had actually changed a lot. There is now much more money in the market than five years ago. Their role has also changed markedly from supporting companies and obtaining funds, to also working on being more focussed on de-tech such as in long term developments, university spin-offs that had a difficult time at the beginning or companies that built a better world such as through impact investing. It appeared that industries and politics had come back to work together. The government had a national growth fund with €20m to invest in industries of the future such as quantity technology, artificial technology. Prinsen gave the audience an idea of how the Dutch government was working with industries and how it made money today and would make money in ten years’ time.

The panellists were able to meet the delegates’ high expectations. The session was most inspirational and provided much food for thought. It was an opportunity for delegates to come close to the world of tech specialists and learn more about their experience and visions. Although interactions with panellists were limited by the time available, panellists and co-chairs were able to establish a lively and interesting discussion throughout the session.