A wake-up call
Download PDF [PDF, 419KB]
PDF Help If Europe is to realize its potential and take
the lead in the evolving Internet world, says the EU's dot.commissioner, it
must change its attitude about everything from venture capital to education.
Europe might lag behind the United
States in many new technology sectors, but it does hold one coveted trump
card—leadership in the field of mobile telephony. The number of mobile phones
in Europe is growing so rapidly that mobiles, rather than PCs, are likely to be
the key terminals of the future, according to Erkki Liikanen, the 49-year-old
Finn who is the European Union's commissioner for enterprise and information
society.
Indeed, says Europe's so-called dot.commissioner, "By
combining digital literacy with strength in mobile communications, Europe can
lead the next great leap to a wireless Internet world."
So far, most transactions have been one-on-one-a buyer using
the Internet to expedite a purchase from an established supplier, for example.
But the fastest growing segment of B2B is the so-called eMarketplaces, online
auctions where a buyer can choose among bids from multiple suppliers, or a
supplier can meet a variety of buyers.
Closing the gap with the United States and realizing this
ambitious goal will not be easy, however. Roughly half of all US homes are
online, compared with just 12 percent in Europe. America's well-established
lead in computer and software technology has made Internet access both widely
accessible and relatively affordable. Its entrepreneurial and risk-taking
spirit is fed by a remarkably energetic capital market.
In Europe, by contrast, the price of Internet access remains
high. And compared with the United States, venture capital, the lifeblood of
new-technology enterprise, is still in its infancy.
 Yet this is sink-or-swim time for Europe. According to the commission's
own estimates, by 2010 half of all jobs in the 15 member nations of the EU will
be in industries that either produce or use information technology. There's an
urgent need for investment in the right sort of education and training to
underpin new skills and new jobs. Governments must also do much more to give
tax breaks and other incentives to companies that foster the use of new
technologies.
In the longer term, changes in social legislation and social
attitudes are crucially important. Labor market rigidities, caused in large
part by inflexible attitudes toward job security and social welfare, have
contributed to double-digit unemployment in some European countries. Yet the
information industry suffers from an acute labor shortage.
Working Overtime
No one is more
aware of Europe's urgent need to act—and how painfully slowly the wheels of
bureaucracy often turn—than Liikanen. A former minister of finance in Finland
and head of his country's mission to the EU, Liikanen has been working flat out
since last September, when he assumed his current job, to convince European
politicians that there is no time to lose.
He has called for a "wake-up and shake-up" to prepare the EU
for a position of global leadership in eCommerce. And although he firmly
believes that regulation should be used in moderation and largely as a last
resort, he has not flinched from using his influence to help achieve his
vision. In April the commission launched legal action against Germany, Italy
and Spain for telecommunications pricing policies that it says effectively keep
new entrants out of their markets. .
At the same time, the commission approved plans for a more
competitive regulatory regime that would cut charges for Internet access by
forcing incumbent telecom operators to open up the "last mile" of networks, the
final preserves of former state monopolies, and to make it easier for new
telecom companies to obtain licenses.
For 100 years companies have been buying goods and services
by saying to themselves, "Gee, I need to buy $10 million worth of metal parts
this year. The parts break out into three different subsegments, so I need to
choose three metal-parts suppliers." The natural default position is, "I'll
just use the people I used last year."
Liikanen also wants to see all European
schools connected to the Internet by the end of 2001 and an EU commitment to
take action on a whole raft of pending eCommerce legislation by the end of
2000. Speeding up completion of the internal European market to accelerate the
development of eCommerce is a top priority.
It's an awesome agenda, but the commissioner is much
encouraged by the support he has received from European governments. At their
Lisbon summit in March, the heads of the EU governments identified
telecommunications reform as a major part of their drive to modernize the
European economy and enable it to compete effectively with the United States.
So it was an optimistic Liikanen who sat down in his
Brussels office in late April to talk with Outlook contributing editor Wendy
Cooper. He explained why telecommunications reform is so important, not only
for European consumers but also for the small and medium-sized enterprises that
form the backbone of the EU's economy.
But he was also keen to look further ahead—to explain what
he thinks Europe can learn from America, why he is convinced that the Europeans
finally are beginning to adopt an entrepreneurial spirit, and why he believes
eCommerce and B2B in particular are key to making his vision of Europe as a
leading information society a reality.
Outlook: How would you define an "information
society" in European terms? Liikanen: I would like Europe to be a
fully connected continent where businesses create opportunities for a new
entrepreneurialism—a Europe where public administrations [set] a strong example
of open government and open governance, and where they actually create an
inclusive society in which populations have access to the Internet and have the
literacy to use these new tools. I want to see an information society which
encourages innovation.
Your stated policy is minimal regulation but a "firm
hand." What will this mean for business in Europe?
We need
regulation to create the internal market rules—but otherwise only when
necessary. B2B is the most urgent thing for business. It's key because the cost
benefits it brings are very important for competitiveness. I hope that European
business [is] ready to move into the B2B area very fast.
As you know, the Americans are very advanced in
this area.
They are not as advanced as you think. It is
moving, but even in America it's an ongoing process. But yes, B2B is the issue
of the year in the US. And our idea is to make it the same in Europe. We want
to encourage business to go online and take advantage of new ways of doing
business. I'm sure that in Europe the gains in productivity can be at least as
high as they are in the US.
What can Europe learn from the
Americans?
In those areas where the Americans are more
advanced, it's important to learn from their experiences. Internet penetration
is higher, and eCommerce has developed more quickly. In innovation and venture
capital, they are also very strong. But it's not just a one-way street: There
are areas where Europe is strong.
For example?
We are strong in
mobile communications and digital TV, and the Internet will go mobile. In the
B2C area, too, there are fields where the US is clearly more advanced, and
there are areas where Europe has strong experiences. In America, [online]
health [care services are] very important, which is not the case here. In
Europe, on the other hand, we have some examples, notably in retail banking,
which have progressed very far.
Right now, it's estimated that Europe accounts for
just 20 percent of global B2B eCommerce, but this could rise to one-third by
2004. Do you agree?
These figures are not the issue. We should
aim to ensure that all European businesses are fully able to go online. It's
important because in B2B, decisions are made by businesses and management. When
they decide to go online for their procurement and sales, their partners and
subcontractors must also go online. B2B is a revolution. The B2C area is more
evolutionary because consumer habits are slower to change.
What are the biggest obstacles to the development
of B2B in Europe?
The biggest companies know that they must
move. But the small and medium-sized enterprises have not yet concluded that
when the biggest companies go online, so must they. The sense of urgency is not
there. They must recognize that B2B is not only a threat but also an
opportunity. When you're online you have a growth market throughout the world.
What else needs to be done to ensure that
European eCommerce realizes its full potential?
We have to get
Internet costs down. That's especially important for smaller and medium-sized
businesses. Secondly, especially for B2C, the legal framework is important. The
minimum legislation we need—legislation relating to electronic signatures, the
responsibilities of providers and copyright—must be in place. We'll try to
clear it this year. Thirdly, we must improve Internet literacy. And fourthly,
we have to create an entrepreneurial spirit.
But how realistic is it to expect Europe to shed
what you have called "old behaviors" and "old reflexes"?
In
Europe, creating an enterprise takes too much time and is too expensive. We
don't have enough experience [in] risk taking. If you succeed, you must be
rewarded. If you fail, it cannot be the end of your life. It must be part of
your learning curve. There must be a second chance. Europe has a lot to learn
here from the US. But we are not weak everywhere. There have been some first
signs. The venture capital markets are starting to develop.
The second issue we must tackle is cultural change. We need
changes in education [and] attitudes. That's always slower. But I'm sure that
as the venture capital market develops, the political recognition of the
importance of risk taking will help make this cultural change happen.
What about the vast differences between European
countries?
It's not a homogeneous continent like the United
States. The picture in Europe is always very diverse. If you look at mobile
telephony, the Nordic countries are on a level with the US and even ahead. But
if you look at entrepreneurship, the UK and Italy are very strong. And if you
look at B2B, Germany could be stronger than people expect, once it gets
started. There are strong software companies there as well as traditional
industries. The picture is mixed, but we must try to learn from the
achievements of the others. That's why benchmarking is so important.
How does benchmarking work?
The
idea is to try to define the indicators which measure in the best way those
factors essential for our enterprise policy to succeed. We've started a
benchmarking exercise this year to create ways to learn from the experience of
others.
Why are the Nordic countries so advanced in the
technology area?
In Scandinavia, markets were liberalized very
early. There was also heavy investment in high tech. But situations move all
the time. They are strong, but they must also work hard to remain strong. Other
countries are also moving very fast.
Is there a danger that Europe might fail to
realize all this potential?
The Lisbon summit back in March was
a very good sign. At the level of prime ministers, there is a clear sense of
urgency. It's a very encouraging message. We've agreed on our aims to
liberalize markets in all countries. And we will legislate on this together
with member states. Literacy and skills issues are more for the member
countries themselves to decide and act on.
There's a serious IT labor shortage in
Europe.
Won't that require massive investment in education and
training? Also in America. They're talking about it there too. It's a global
challenge. But yes, in Europe we must invest very heavily in education.
What about the issues of privacy and data
protection?
We recently signed a data-privacy agreement with
the US, which employs the safe-harbor concept to give US companies the right to
do business with European companies.
Where might Europe go wrong? What could derail
progress?
If we're too slow to act. It doesn't mean you should
act without consideration. But you mustn't miss opportunities. We may go wrong
in some details. But we can adjust them later. The key issue is not to be too
slow.
You've been in this job since September, and you
have a five-year term. What would you like your legacy to be?
In this area, things move so fast I hope it can all come to pass in two
years! There will be many new challenges and many other technological
revolutions. But essentially, I would hope that in the field of innovation and
enterprise, the European atmosphere, the European spirit, will change. It's a
slow process, but we can help.
Back to Contents
 To Top
|