New Decade of European Innovation?
In March 2020 the prospects for the majority of businesses around the world were grimmer than during the financial crisis of 2008. Worldwide lockdowns halted economic activity in most sectors, leaving many people jobless and with no hope for re-employment. In Europe, these unprecedented circumstances added momentum to the already happening transformation sparked by Brexit. Nevertheless, European start-ups may be not as worried as one may think.
When full lockdowns hit Europe in late March last year, the European economy experienced a huge supply shock. The demand for workers as well as goods and services plummeted, dragging GDP with it. Everyone was rightfully expecting a recession, with economic indicators confirming the predictions.
The huge downturn was quickly at the forefront of policy debate. Notably, unlike any other recession, the halt in production happened to entire markets and industries suddenly and at the same time. Besides the economic consequences of large-scale unemployment, the psychological ones could have been magnified by the peculiar nature of the crisis. With the rapid transition of entire societies towards the remote, digital world came the need for new, innovative solutions on a scale not seen before. On the other hand, governments aware of the potentially disastrous scenario had to implement appropriate protective measures – the fiscal stimuli reached record levels, their aim to boost the demand for labour and support the overall money flow. Monetary policy brought interest levels close to or even below zero in the hope to incentivise investment and bring the economy back to life.
For start-ups, however, these circumstances are of key significance. Firstly, entirely new markets emerged with no existing actors to suffice the demands. Secondly, there was strong institutional and governmental backing of such projects.
It is now common knowledge that the pandemic has largely increased the pace of digital transformation that would inevitably occur anyway. Therefore, it has brought forward the need for innovation and already existing demand for its products. This was noticed already in March 2020 when first lockdowns were imposed in Europe, and the shares of online meeting platforms rocketed up, with the share price of Zoom Video Communications Inc. reaching up to 560 USD in October compared with its pre-pandemic value of between 70 and 90 USD. Businesses have been forced to design contactless systems of communication and maintaining business relationships without the need of physical presence. Professional trainings, work induction programs and external audits have all pushed executives to explore new digital tools. In many cases these precautionary measures have turned out to be at least as effective as the traditional ones, yet costing significantly less time and money to the employers. Therefore, it is highly probable that this ‘new normal’ will become just normal, and the private sector will continue to use systems that enable remote communication. There is certainly room for improvement in terms of making the digital experience even more realistic and capable of evoking in users psychological reactions similar to those created in real-life meetings. Developers have also been creating solutions to let people experience their usual social activities, such as movie nights, board games, and dance parties, yet remotely. Perhaps virtual reality will be applied not just in entertainment, but also in professional and personal communication services. This might be one of the trends that will shape the new decade of technological innovation.
Another trend we are likely to observe in 2021 and the next few years is the increasing digitalisation of health care services. Research shows that over 80% of primary care services can be delivered virtually. This is likely to go hand in hand with the progressing automation as AI-based diagnosis is cheaper and more accurate than doctors. At first, however, we will see a growing market share of telehealth, which has expanded by 50% compared to pre-pandemic. In this scope, the largest challenge for innovators is to provide develop automated solutions not deprived of the human aspects of empathy, care, supportive gestures and expressions.
Likewise, governments are likely to engage more in state digitalisation. Lockdowns have had a drastic effect on the working of state agencies due to the volume of traffic they usually involve. Many countries unprepared to tackle this issue have been forced to do so and experiment with different solutions which will be invaluable when state digitalisation is brought to the policy debate, probably in the post-pandemic reality. When it comes to innovation, the pandemic might not be a terrible start to the new decade.
When it comes to education services, the widespread lockdown has prompted people, especially pupils, students, and teachers, to appreciate technology as a tool for learning. Therefore, although a systemic change in education is rather unlikely, there will be a rise in edtech applications and solutions, perhaps even endorsed by ministries and academic institutions.
The sudden halt of industrial production and transportation has caused drastic disruptions to the supply-chain across all sectors. This has forced companies to shift resources to developing stable systems capable of withstanding the shocks that inevitable affect human workers. The already rapidly progressing automation has been given a boost in a form of sudden market demand and general public awareness. Indeed, we have already observed a surge in contact-free deliveries to end-users. Producers and intermediary companies have also been developing such solutions yet those are much more difficult to implement. The invention process of logistics ecosystems will now forward at an increasing pace, with the Three Seas Initiative’s Smart Connectivity project being a great example thereof. The program intends to create an entirely new ecosystem of digital networks, automated processes and AI-based transportation systems that will enable a swift, nearly human-free exchange in goods between the member countries in Central and Eastern Europe.
Due to most of our activity moved online – be it personal or professional – the issue of cyber security has been brought to light. Not only have we been sharing more vulnerable data, but the Internet providers have been challenged to sustain the increased online traffic. We will therefore see a rise in cybersecurity solutions, to all end-users, small and medium-sized enterprises, as well to government agencies, educational institutions and other service providers, making room for innovation in the ISP, telecommunication, and financial sectors. The volume of contactless payments is likely to remain high after the pandemic, with new, modern banking services emerging on the market.
Given the above, the European Union could become the newest global leader for innovative solutions. In recent years European start-ups have already enjoyed increased interest of American VCs and investors. The growing prestige of Silicon Valley and immigration of global corporations have made the region even more expensive and thus unreachable for young firms. Brexit has also contributed to the relatively optimistic prospects for European start-ups. With London no longer part of the EEA, large companies have been moving across the La Manche to Paris, Amsterdam, and Berlin. This, however, is not only of a matter of capital and foreign investment, but also of discontinuing the brain-drain caused by the excellence and long tradition of British education. With university fees for EU students now thrice as much as before, bright minds are more likely to choose universities in the Netherlands, Germany, France, or Scandinavia. Consequently, they will be more likely to stay within the EU after completing education, realising their innovative ideas within the borders of continental Europe.
The pandemic caused immense demand for innovation and an environment supportive thereof. With the European Union encouraging of products and services dedicated to the public welfare – including education and health, the region will lure socially responsible start-ups. This will further reinforce the image of the region as innovative, business- and innovation-friendly, which will contribute to keeping bright minds within the borders of continental, united Europe.
This article was originally published on “Polish Daily News” and “Polish Express”.
Author: Jędrzej Duszyński
Alumnus of Worth School, a British Independent School, where he pursued Sixth Form education on a full academic scholarship. Alumnus and Volunteer at United World Colleges Poland. He gained professional experience during a research internship at Institute of Economic Affairs and a consulting work placement at Oliver Wyman, London. He currently works as a Project Assistant at the Warsaw Institute think tank.