A Frenchman in Silicon Valley: France needs an innovation revolution

With Emmanuel Macron as president and his party winning a decisive majority in recent parliamentary elections, France’s ailing economy may finally receive a shot in the arm. Investors hope Macron can deliver on his promises to relax stringent labour laws and curb public spending. But the sad fact is even these ideas are not nearly radical enough to help France compete globally and win, in particular, in today’s digital economy.

France’s problems are well known: a heavy tax burden, intransigent unions and an uncontrollable public deficit. These are compounded by a lack of dynamism in its main European trading partners. But more than anything, France has a particular weakness when it comes to innovation ranking a dismal 15th in the 2017 survey of global innovation by the World Intellectual Property Organization, well behind Switzerland, Sweden, the Netherlands, the US and the United Kingdom, which top the list.

Large French industrial firms spend heavily on R&D, but entrepreneurs and small businesses struggle to attract the capital to launch and scale new ventures. French engineers excel at producing highly sophisticated and expensive industrial products like nuclear power plants, high-speed trains and fighter jets. This kind of industrial innovation is increasingly outdated, as the source of corporate and national advantage shifts from physical products to digital platforms, meaning the likes of Facebook and Airbnb, which create, find and share knowledge, and connect consumers with goods and services.

As a Frenchman based in Silicon Valley, I have worked with companies in France for the past 25 years. It is frustrating to watch French engineers take years to develop a perfect product, rather than gradually improving it based on customer input, which is often received through digital platforms. I am baffled by the limited collaboration between French companies and universities and startups, when such links run deep in Silicon Valley, and to a lesser degree in rival countries like Britain.

Just as their industrial cousins struggle to compete, French companies focused on premium branded products have failed to grasp the new ways consumers behave. Since the 2007 recession, French consumers have become thriftier. In some ways this has helped a small handful of sharing economy start-ups, like ride-sharing app BlaBlaCar. The vast majority of mainstream French firms are struggling to engage with this turn towards sharing and frugality.

As a tech-savvy young leader, Macron personally understands this new digital world. But awareness isn’t enough. He needs a radical programme of changes, beginning with three important steps.

Firstly, Macron must encourage French businesses to plug into the sharing economy, which is currently restricted to citizens directly sharing cars and apartments. PwC estimates that Europe’s sharing economy — dominated by consumer-to-consumer (C2C) transactions — will grow from €28 billion today to €570 billion by 2025. France can go much further and pioneer business-to-business (B2B) sharing by building digital platforms that enable large firms and SMEs to become more efficient and innovative by sharing resources, ranging from waste, idle factory equipment and office space, to employees and even intellectual property (IP). B2B sharing could turbocharge the fourth industrial revolution.

There are pioneering models that France can follow. In Denmark’s Kalundborg Eco-Industrial Park, for example, several co-located companies exchange material waste, energy and water as an integrated ecosystem. Similarly, Dutch hospitals use FLOOW2, a B2B marketplace, to find and share idle medical equipment, staff and services, thus providing better care to more patients at a lower cost.

To encourage B2B sharing in France, Macron’s government needs to institute a comprehensive new framework that encourages the sharing of assets and personnel, probably including the deregulation of rules covering areas such as legal liability, taxation, IP protection and workers’ rights. If done well, France can shape and dominate the global B2B sharing market, potentially worth trillions of Euros, by creating demand for it and by developing the necessary digital platforms.

Secondly, Macron needs to decentralize innovation. Paris has some elements of an innovation hub with a supportive mayor, top universities and an impressive new start-up campus, Station F. But other regions that could produce innovative tech clusters — such as Hauts-de-France, a former industrial region in the north that is transitioning to a waste-free, clean-tech-fuelled circular economy and the Nouvelle-Aquitaine region in the south-west that is leading agricultural tech innovation in Europe — are being left behind for lack of support.

Such regions lack scientists and engineers, as well as innovation links between universities and companies, especially in high-demand areas like the Internet of Things, bioscience and clean-tech. Macron, who is proud of his provincial origins and a big advocate of greater regional autonomy, should set up a regional innovation development fund to help existing “pôles de compétitivité” (competitiveness clusters) become “pôles de compétences” (talent clusters).

Finally, Macron must position France as a global leader in frugal innovation, a disruptive way of creating high-quality products that are affordable and eco-friendly. A few French firms have led the way here, including the automaker Renault, which shook up the global car industry in 2004 by launching the $6,000 Dacia Logan and two years ago introduced the €3,500 Kwid in India. The European Commission recently published a landmark report highlighting the huge social value and vast economic potential of frugal innovation for European nations.

Macron could make France a global hub to invest, test and scale low-cost, eco-sound inventions for European and even developing markets. He could do so by asking French engineering and business schools to incorporate frugal innovation into their curriculum. Macron could also set challenges for entrepreneurs with prizes given to those who create disruptive frugal innovation in vital sectors, like food, energy and health. Known as “10x10x Grand Challenges” the winners will be projects that deliver at least 10 times greater value, but use 10 times fewer resources than existing solutions.

Macron is an ingenious political entrepreneur: he used innovative data-driven campaign tactics to win hearts and minds and got elected by a landslide as France’s youngest president. En Marche!, his one-year-old political organization, is still in start-up mode. But having disrupted the French political landscape, President Macron now needs to lead a French innovation revolution as well.