This article is part of our special report SME’s Access to Finance.
EU policymakers should already be thinking of a Single Market Act III, says Mark Spelman, vice chairman of the American Chamber of Commerce Executive Council.
Mark Spelman is global head of strategy for Accenture and vice chairman of the American Chamber of Commerce to the EU Executive Council. He spoke to EurActiv Editor-in-Chief Daniela Vincenti.
The EU and the US continue to be each other’s most important markets, with US investment in Europe reaching €1.7 trillion and accounting for over four million jobs. US companies have eagerly taken part in the European Single market, which remains a work in progress, to retake the expression used by AmCham, in its latest report. Do you feel Europe is on the right track to recovery?
People are preoccupied with stability and confidence. This is necessary, but not sufficient for Europe going forward. And so, I think it’s very important that we do get into the underlying issues of competitiveness skills and innovation.
When you talk about growth and jobs: Growth is an outcome of getting other things right. So, if you start thinking about jobs and where jobs are going to come from, whilst there will be some jobs that are created through larger enterprises, actually what we are seeing now is much more cross-border organisations. Increasingly in the Single Market, companies are all looking beyond borders and increasingly we are going to talk about cross-border organisations.
You see that in terms of large companies working with smaller companies. You see that specifically in the pharmaceutical industry. A lot of the innovation now takes place outside of a company, not inside a company.
So it’s about the ecosystem of how organisations operate and work. And the reason why SMEs are going to be so important in a European context is because they are going to be a critical driver of innovation, a critical driver of jobs and job creation. But in order to do that, a lot of it is going to be about how the ecosystem works in practice.
So how will the ecosystem work in practice? The Single Market was launched 20 years ago, Mario Monti two years ago devised a plan to finalise the single maket, now Commissioner Barnier has launched several actions within the two single market acts. Do you think all this will create the right ecosystem?
I think it help. Let’s keep coming back to the phrase “work in progress”. But let me come at it from a couple of different angles.
One is that people underestimate the way that work is going to change. The digital revolution gives consumers much more power, because they have a lot more information. That is a fantastic enabler for small businesses because it enables them to access more information, it enables them to reach many more markets.
So what becomes important is that we continue to accelerate in the areas I think which can make the biggest difference. Not just in terms of growth, but in terms of critically creating jobs.
The ability to start companies up, the ability to grow small enterprises – knowing that the average size of a small company in Europe is smaller than it is in the United States – is paramount. If you could get everyone of the small companies to employ one more person, you make a big dent t in the unemployment numbers.
Now to do that, the Single Market helps because you are able to help smaller companies,sell more cross-border and digital infrastructure helps because it gives them the access and the leverage you wouldn’t get if you were just operating in a single country.
So the critical issue here is that it’s the enabling conditions to help small and medium-sized enterprises start up, and then to grow. So what we need in Europe is more start-ups and more small enterprises to keep on growing and not to hit glass ceilings.
So exactly what do you need in order to have that kind of start-ups grow in a significant number so that you have the scale of growth that is expected? What barriers need to be dismantled?
The digital agenda has set out some targets for 2020, for example broadband coverage. So, rather than just setting out targets, what we need is interim milestones and clarity on the roadmaps as to how we’re going to hit some of the key targets.
We don’t want to wake up in 2017 and suddenly say: “Surprise, surprise, we’re not meeting the targets that we got for super-fast broadband penetration or we’re not going to hit 100% coverage on broadband.”
We need some very clear intermediate targets, particularly around broadband coverage and making sure that that happens. It’s about the roadmap and the journey. It’s not just about the target. And my view is that we have been long on targets and short on the clarity around the roadmaps to hit the targets. And it’s about looking at the interim steps that we need in order to get that.
Are you airing some criticism towards the Commission, which launches ambitious long-term strategies but fails short in setting the roadmap to move targets forward year after year? How to redress this situation?
Companies today, particularly the bigger companies, rely a lot on contingency plans: they say “What happens if?”
I think, the European Commission, should in in the same way, have contingency plans for what happens if we are not tracking into the direction of the targets that we want to meet.
And this to me is about having clarity on interim mile stones, but it’s also about clarity on contingency and “What do we do if?”. I think that what we see is a much stronger attempt by the Commission, particularly through things like…
The Single Market Act II?
Yes, partly through the Single Market Act II, but also working with national governments and their reform programmes to try to be able to apply pressure into targeted intervention to accelerate particularly in terms of the critically enablers.
The way I look at it, is that one of the most useful things that the Commission is trying to do here is what I call unblock the European arteries.
If you can unblock the arteries and let things flow, which we’re trying to do, then enable particularly the private sector to drive the jobs that are going to be very important if the European economy is going to grow.
What do you mean by unblocking the arteries?
You can look at the arteries both in physical and in digital terms. The physical arteries would be obviously things like the transport infrastructure and how you move things around, for example by road or rail. That’s one dimension of it.
Another critical dimension is energy and the related problems, being that so little of the electricity in Europe is actually traded cross-border. That is a critical artery.
The third artery is, and I think it’s increasingly important one, the digital artery. Let me again explain why it’s so important.
The iPhone only came out in 2007. Today in 2012, we now have iPhone 5. We have had five versions of iPhone. Roll the clock forward to 2020. We won’t just have had five versions of iPhone in the next eight years. We will probably have had 15 or 20 equivalents. That is going to be a huge revolution in terms of the information that consumers have at their fingertips, the capacity that the smaller companies have got to be able to access the consumer base.
That is going to be a huge, huge change which I think a lot of the policy makers a struggling to come to terms with and to fully understand.
That is going to be a massive potential accelerator in a world where actually the EU does have a lot of very good, skilled people. The question is… it’s about unlocking the potential.
What actions then to unblock these arteries?
For example, online shopping: it is going to absolutely explode. It’s all about convenience, people are going to buy more and more things online. The consumers would want it because basically it’s more convenient, they are better informed and they are able to use money more effectively as a result.
So what we already see is an explosion of online marketing. If you look at these comparative websites now – if I want to buy an insurance product, I go on to the website, I compare 50 different car insurance offers and I choose the one that is the most relevant. That is symptomatic of the way we are going to go. That’s one dimension.
The other dimension is the efficiency that we are going to get from machine-to-machine communication. What do I mean by that? In the past, we had to send out work crews to go and find the problem with your machine, the problem with your transmitter or the problem with your generator. Now, you have remote diagnostics on your kit. That’s sent back to a central control unit. You find out when are things going to break down and you send out a team now to be able to replace it before it breaks.
That whole notion that you got much more intelligence in your assets is going to change the way that you maintain your assets.
Another example: Look at the way people is going to use electric vehicles in cities. People buy a car for an hour. What’s interesting is that the business model is changing. Now you got “Rent a car”, you need a utility so that you can plug it in or charge it or fuel it up. You need a telecom company because basically when you buy the car you got to be able to communicate with your bank. You need a bank because you need to be able to pay for it and you need a payment system. So all of a sudden you got a convergence between a car manufacturing utility, a telecom company and a bank. The world has fundamentally changed, the boundaries have changed.
The next question is then: Are policy makers seizing these fast changes and are they acting in a coordinated way? Or are we risking a complete anarchic development of the system? How can we make sure that the system is not derailed completely before the regulation comes into force?
I don’t think we’re going to get anarchy, but what we are going to get is inefficiency. The message is, in a world, particularly in Europe, where we are going to have slow growth, low growth and high debt, the longer it takes to work out how you unblock the arteries, the more inefficiency you leave in the system and the longer it will take you to generate the growth.
There’s a world opportunity, but in order to release the opportunity and the potential, we must unblock and unlock. If you don’t unblock and unlock: a) it’s going to take you longer and b) you are probably not going to realise some of those opportunities that exist out there.
This particularly for the small and medium-seized companies, because those are the ones that can be set up quickly, those are the ones who can respond to new markets.
So if I understand you correctly, you’re saying no regulation until we see a little bit clearer?
No, I think we have to look at the specifics. Take payment systems: Clearly the quicker we move on payment systems, the easier we’ll facilitate cross-border sale.
So I think there are tangible things that you can do, but part of what I’m saying is, unblock the arteries which is sort of the physical and digital infrastructure, and then help with facilitating and enablement, like payment systems, but also data and data ownership, for example.
These all will help. The more the politicians will start thinking about what’s going to happen in the future, rather than thinking about the problems of the past, the more likely we will create conditions for more SMEs to grow and develop.
My fear is that we spend too much time on the necessary but not sufficient, you end up in a mode where you are not addressing these types of issues fast enough.
You should look at this in terms of waves. It has taken us too long to get to the Single Market Act II. We should already be planning for III, and we should be thinking about IV, and we should be thinking about this coming in waves which are linked with how we are thinking about how future market opportunities are evolving.
Do you find that other areas, regional areas, and I’m talking about the United States, is much more advanced than Europe when it comes to creating this ecosystem? Will Europe be able to compete?
The straight answer is we definitely can compete. And there are lots of reasons for this. Look at the numbers. Nine out 20 most competitive countries are in Europe – which is the largest exporting bloc.
But I don’t think there’s any room for complacency and I do think we are in a world of comparative advantage. Europe is going to work out where it’s going to play and it has clearly got some strength and certain key sectors, automotive, nano-biotechnology.
Past success is no guarantee of future success. The speed and pace of change is huge. If you look to the IMF reports, there is no growth in Europe with -0.4%, while the global economy is growing at 3.3%.
I can point to huge areas around the world that are growing at 5%. Asia is growing at 5%, sub-Saharan Africa is growing at 5%, Latin America at 5.5%. They are not standing still.
So you have to look at comparative advantage that’s moving over time. And my view is that technology is a huge driver of that, and Europe must keep its eye on that – that is the only way it will make sure to play a role.
This is not a all-or-nothing game. We have some really good comparative advantages. I think the real trick is, does that get defused down broadly and widely enough.