Innovation & Entrepreneurship Ecosystems in Croatia - HAMAG-BICRO - Apr 16 2015

Building Innova-on and Entrepreneurship Ecosystems

in Croa-a, Europe and Silicon Valley Industry, Universi/es, Startups and Government

Dr. Burton H. Lee PhD MBA Lecturer, European Entrepreneurship & Innova4on, Stanford Engineering

www.StanfordEuropreneurs.org | @Europreneurs

Congress Center Forum Zagreb Host Organiza-on: HAMAG-‐BICRO

April 16 2015

Gree/ngs from Silicon Valley

(and the Republic of California)

Major Themes Today

•  Europe’s core crisis today is a ‘Crisis of Innova4on’ •  This crisis is poorly understood and diagnosed in Europe

•  It is systemic, structural and ins4tu4onal, and cuts across industry, universi4es and government

•  Un4l Europe develops a holis4c approach to its innova4on challenges, Europe is unlikely to meet its job crea4on goals, and will con4nue to lose the baNle for global compe44veness

•  There *are* bright spots in the European innova4on sector, but few are high growth or result in major new job crea4on

Apr 16 2015 Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley 3

ABOUT THE SPEAKER

DR. BURTON LEE PHD MBA

STANFORD SCHOOL OF ENGINEERING | INNOVARIUM VENTURES

[email protected]

WWW.STANFORDEUROPRENEURS.ORG

@EUROPRENEURS

hNp://www.europeanentrepreneursatstanford.com | hNp://me421.stanford.edu Apr 16 2015 Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley 5

Map of Presen-ng Speaker Na-onali-es

European Entrepreneurship & Innova-on @ Stanford Engineering

(ME421)

Winter 2014 – Year Six

Enterprise Estonia Silicon Valley

Ghent, Flanders Region Belgium

iMinds ICT Research Ins-tute

February 10 2014 @ Stanford Engineering Jeff Lynn, Seedrs (UK) & Matija Kopic, Farmeron (HR)

January 27 @ Stanford Engineering Vassil Terziev & Japec Jakopin

January 13 @ Stanford Engineering Uwe Horstmann & Signe Viimsalu

Topics Covered

Apr 16 2015

Equity Crowdfunding

European Entry Strategies for Valley Startups

East v West Europe

Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley 10

The Story of European Entrepreneurship in Europe Europe vs Silicon Valley

Apr 16 2015

Entrepreneurship and Innova-on in Europe Today

Europe vs Silicon Valley

Europeans in Silicon Valley

Arts, Culture, Design, Language

& Tradi4ons

History & Poli4cs

Law & Policy

Ins4tu4ons & Personali4es


Selected Industry Experience


Co-‐Founder Member, Advisory Board Co-‐Founder

Major Global Trends in Technology, Innovation and

Entrepreneurship

Major Global Trends Technology and Innova-on

•  Technology –  Social Networks –  Cloud & Mobile –  Big Data –  Internet-‐of-‐Things –  Wearable Compu4ng –  EduTech –  Robo4cs –  Electric Vehicles –  Space Systems

•  Innova4on –  Financial Innova4on –  Corporate Innova4on


How Silicon Valley Works

The World’s Most Dynamic Regional Innova/on Ecosystem

Where is Silicon Valley Going?

What is Silicon Valley, Precisely ??

•  2.9 Mn inhabitants •  4 Coun4es, 40

municipali4es •  1.3 Mn jobs •  Growth areas:

–  Soaware –  Industrial/Energy –  Media & Entertainment –  Biotechnology –  Medical Devices –  Manufacturing

•  48%+ of US Venture Capital investment in 2014


Apr 16 2015 17 Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley

What We Do in Silicon Valley •  We build and grow (“scale”) companies to a global level

faster – and more efficiently – than anywhere else in the world

•  We create more new jobs and industries – faster – than anywhere globally

•  We look for and reward disrup-ve ideas, technologies, teams and intellectual property that can be scaled globally

•  We do world class research and technology development •  We design, build and manufacture great technology

products and services

•  Silicon Valley is where the World Learns First new approaches to innova7on –  And where Europe, China, Japan, Korea, Singapore and India come to learn



Source: S. Blank, “The Secret History of Silicon Valley”, 2009

Product Design plays a key role in sustaining incremental innova/on inbetween new waves of disrup/ve innova/on

Apr 16 2015

Seven ‘Engines’ That Drive Silicon Valley Forward

•  Talent Crea4on Engine •  Intellectual Property Genera4on Engine •  Startup Crea4on, Growth and Destruc4on Engine •  Product Design, Prototyping, Development & Management Engine

•  Sales and Marke4ng Engine •  The Storytelling and Culture Crea4on Engine •  New Value, Wealth and Capital Crea4on Engine




Android & iPhone “Disrup7ve Innova7on” via New Business Models + Advanced Product Design Apr 16 2015 Copyright 2015 Burton H. Lee and Innovarium Ventures |

Silicon Valley 23

“Company-‐Busters” New Products and Services for Global Markets

New Companies Start with New Products & Services


New Products|Services

New Companies New Jobs

Europe is placing insufficient emphasis on new product design and development in Engineering, Medical & Business

Schools – and in Enterprises

Product Design & Development •  ‘Design Thinking’ •  Disrup7ve product concepts

–  Europe excels in incremental product improvements

•  ‘Needs finding’ in the marketplace –  Observing and talking to users and customers –  Look at how customers behave (shopping, driving, etc)

•  Product design + business model design –  ‘Product-‐market fit’

•  Product Design belongs at the heart of entrepreneurship educa4on

•  Stanford Design School (d.School) •  Not the same as:

–  “Industrial Design” –  Architectural or Ar4s4c Design


Great Product Design as a New Generator of Value and Wealth


Actual Product Design Process

Product-‐Market Fit

What is Different About ‘Design Thinking’?

•  Avoids ‘Hard Engineering’ ac4vi4es, expenditures and commitments for as long as Possible

•  Combines many ‘hard’ & ‘soa’ disciplines: –  Sociology Design –  Psychology Art & Drawing –  Anthropology –  Human Factors –  HandiCraas & Making Things –  Business –  Engineering & Architecture

•  Searches for disrup7ve and new crea4ve approaches to solving societal problems and marketplace gaps

•  Focuses on finding and ‘asking the right ques4ons’


Product Concepts & Prototypes developed by students in collabora/on with industry partners and sponsors


Making *Money* vs

Making *Things*

Which of these is the Source of Value and Social Status for You?

(and Croa-an society) ??

Silicon Valley vs Europe:

Major Differences, Strengths and Weaknesses

Entrepreneurship in Europe vs Silicon Valley Today

Silicon Valley Style Entrepreneurship

•  Highly Scalable –  Technology, Product Architecture,

Business Model –  Business Processes & Back-‐end IT Systems –  Equity Structure –  Innova4on-‐centric Culture –  Very Rapid Execu4on and Growth

•  “Lean” –  Mostly soaware-‐based + some hardware

•  Serial •  Parallel •  Build-‐to-‐sell

European Style Entrepreneurship

•  Highly Scalable –  Skype, Spo4fy, Soundcloud, Rovio

•  Tradi4onal SMEs –  > 20 Mn firms; 92.2 % with < 10 employees

(2012) –  Food, agriculture, tourism, construc4on,

real estate, services

•  Family-‐based Entrepreneurship –  German MiNelstand, Italy, France

•  “Black” Entrepreneurship –  Black market – Belarus, Greece, Italy, etc

•  “Sustainable” Entrepreneurship –  Corporate entrepreneurship

•  Export-‐oriented •  One-‐4me entrepreneurship







“Sohware Is Not Tradi-onal Danish”

Senior Official, Danish Ministry for Science, Technology and Innova-on

Copenhagen, DK

Europe Does Not “Get Sohware”

* Consumer Sohware * Enterprise Sohware

(vs embedded sohware … which is quite good in Europe as a rule …..)

[with a few excep/ons …]

Europe and Sohware •  Widespread confusion about the major categories of soaware, and their rela4ve contribu4ons to economic growth, profits, investment and new job crea4on


Consumer SW

Enterprise SW

Embedded SW

Major Sohware Categories Ranked by Poli-cal Priority|Status in Europe

Consumer SW – Low; Embedded SW -‐ High

Consumer SW

Enterprise SW

Embedded SW

Major Sohware Categories Ranked by Market Size, Value

& Job Crea-on Impact Consumer SW – High; Embedded SW -‐ Low


Enterprise CIO Role is Expanding

Money Culture Silicon Valley vs Europe | Russia

•  Europe | Russia –  Lots of capital !! –  Mostly built by lending, specula4on – or natural resources extrac4on –  Or inherited thru family channels –  “Bank Capital” = Old money –  Some “new money” built with new companies, but rela4vely liNle

–  Values: •  Conserva4sm, real estate, old 4es, tradi4onal schools, old ideas •  Building wealth for one’s self, family & close friends only •  ‘Use or Be Used’ mentality •  Heavy, in4mida4ng – Black limousines •  Closed groups •  Ostenta4ous demonstra4ons of wealth in public for status and appearance

–  Does Not Value: •  Giving back to the community (that’s the government’s job, right?) •  Sharing wealth genera4on with employees on a large scale •  Openness, trust, collabora4on •  Technology, science and engineering as generators of wealth, value or prosperity •  Contribu4ons of young people •  New ideas


Money Culture Silicon Valley vs Europe | Russia

•  Silicon Valley –  Lots of capital here !! –  Built by building new companies –  “Risk Capital” = New money –  Values:

•  Fun, intellectual challenge, teamwork, collabora4on, technology/science/math, technical culture, geek culture, learning and higher educa4on, openness

•  Sleek, fast, cool – BMW, Tesla, Prius •  Social responsibility – environment •  Openness, avoidance of eli4sm •  Sharing of new wealth created with employees •  Giving back to the community, philanthropy,

passing it forward, coaching & mentoring the next genera4on

–  Does Not Value: •  Ostenta4ous social demonstra4ons of wealth for

status or appearance •  Black limousines, gold jewelry, young women

fawning over rich millionaires and billionaires ;-‐)


Challenges for the European Innovation System:

Industrial Performance

University Performance and Reform Entrepreneurship Innovation Policy

Key Issues •  Company Performance in Europe vs USA

– Major declines in numerous large na4onal enterprises •  ICT and consumer sectors

–  Chronic gap in ICT-‐related produc4vity of enterprises –  Brings into ques4on the quality of training curricula at many European business schools

•  Demand-‐side Problems with new ICT Services –  Delayed demand, shallow adop4on by enterprises and consumers

– Without strong local demand for new ICT services, Europe will find it difficult to grow new companies, who will have to move closer to early adop4ng customers in the USA

•  Needed University Reforms are not being Addressed –  University reform in Finland as one successful example to study







Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley 52 Apr 16 2015

EU – US Produc4vity Gap


Source: The Europe 2020 Compe44veness Report: Building a More Compe44ve Europe (2012)

Apr 16 2015

ICT Adop4on & U4liza4on A Key Contributor to EU-‐US Produc4vity Gap


Source: THE LISBON STRATEGY AND THE EU’S STRUCTURAL PRODUCTIVITY PROBLEM (2004)

Apr 16 2015


Source: ICT and produc4vity: a roadmap for empirical research – T Kretschmer, M Cardona, T Strobel

Apr 16 2015

Demand Side v Supply Side Blind Spots in Global Innova4on Policy

•  Europe Has a Major ‘Demand’ Problem – which is not being addressed today

•  Europe Cannot Fix Its Innova-on Challenges only by Tackling the ‘Supply Side’

•  Europe Must Understand & Directly Address Its ‘Demand’ Gap

Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley 56 Apr 16 2015

Viral Growth in ICT Demand: Silicon Valley ‘Hockey S4cks’


University Reform in Europe Problem Statement

•  Majority of European public universi4es are under-‐performing vs their US equivalents –  Excep4ons: Germany, Switzerland, Netherlands, UK and some Nordic countries

•  Generally under-‐funded •  Many are mis-‐aligned and disconnected from na4onal innova4on systems

•  Generally poor representa4on in global rankings •  Jurisdic4on over universi4es resides at na4onal/regional level, not at EU level


University Reform in Europe Problem Statement

•  Most European universi4es are geared to teaching as primary mission, not research –  Important excep4ons in Germany, Switzerland, UK, Netherlands and some Nordic countries

•  Generate rela4vely liNle intellectual property •  Do not work well with industry •  Generally poor at commercializa4on of research •  Professors have liNle industry experience, and see liNle value in acquiring same

•  LiNle encouragement of entrepreneurship by students


Finland’s University Reform Vision 2020

60

Other Major Impediments to Entrepreneurship & Innova-on in Europe •  Cultural aztudes towards failure and risk •  Strong preferences for employment security

–  Government and big company jobs •  Rela4ve lack of student interest today at most public universi4es •  Rigid and out-‐of-‐touch public university systems

–  Do not promote entrepreneurship as a career choice for students –  Do not adequately empower students

•  High cost of star4ng new companies – and 4me delays –  Paten4ng, legal fees, etc –  Outdated incorpora4on laws and regula4ons

•  Weak (but improving) angel & venture finance markets •  Weak market for purchase of new startups by exis4ng enterprises

–  Difficult to do “exits” in Europe •  Weak intellectual property base and markets

–  Much research in Europe is not converted into IP, and is not commercialized •  Late adop4on of new ICT technologies by enterprises & consumers •  Puni4ve bankruptcy laws and regula4ons •  A preference for complexity over simplicity

Apr 16 2015 61 Copyright 2015 Burton H. Lee and Innovarium Ventures | Silicon Valley

Brief Observations on Croatia

Observa-ons from Croa-a & Europe

•  3 days as Mentor in ‘Geek Business Camp’, Brown Forum, Osijek (April 2015)

•  Seven (7) years working in Europe with tech startups, investors, universi4es, engineering and business professors & schools, governments and the European Commission

Inexperienced Startup Teams Ohen Miss These Key Ac-vi-es

•  Develop too few product/service concepts –  Have just 1-‐2 ideas

•  Too few interac4ons with real users/customers –  2-‐3 discussions vs mee4ng/observing 00’s –  Don’t make serious effort to go into market, understand customers and the market

–  Develop liNle sense of market segments: high, middle, low •  Build insufficient prototypes

–  1 or 2 vs 10 vs 500 •  Test prototypes with too few real users •  Start with the Wrong Ques4ons About User Needs

Innova-on & Entrepreneurship Ecosystem Gaps in Europe

•  Startup Forma4on Rates •  Product Design Skills •  Sales & Marke4ng •  Product Management •  IT Systems Architecture

•  Many European companies and universi4es show substan4al weakness in these areas

Suggested Focus Areas for Croatia

Importance of Product Design

for Building Successful

Companies…

… and Reducing Failures

Thru ‘Premature Scaling’

Product Design Excellence & Skills Are Essen/al to

Growing Successful Companies in Croa/a

Open Discussion with Attendees

Innovation

and the Future Business Landscape for Croatia

Suggested Industry Compe--veness Ini-a-ves in Croa-a

•  New University Programs –  Product Design, Product Management –  Direct User/Customer Engagement – ‘Lean LaunchPad’

•  Company Training Programs –  Sales & Marke4ng –  Product Design, Product Management –  IT Systems for Compe44ve Advantage: Strategy, U4liza4on, Architecture

•  Competencies Surveys of Croa4an Companies Are Needed –  Product Design skills, experience and success rates –  Informa4on Technology (enterprise soaware) skills, u4liza4on &

effec4veness •  Many Croa4an companies and universi4es need improvement in

these areas

Innova-on Opportuni-es for Croa-a ??

•  Strengthen Focus on IT/Soaware Sector •  Universi4es and University Reform

–  Teaching students how to ‘build companies’ vs the ‘theory of entrepreneurship’

–  LiNle evidence of focus on product design, development and management

•  This is *not* the same as ‘engineering design’, which is currently taught in Austrian university engineering facul4es

–  Low number of new companies generated •  Improving Management & Technical Skills Gaps in Industry –  New product design, product management, enterprise soaware, sales & marke4ng, ‘growth hacking’

•  Silicon Valley Ties and Bridge to Croa4a? Apr 16 2015 Copyright 2015 Burton H. Lee and Innovarium Ventures |

Silicon Valley 72

73

Join Our Online Community

@Europreneurs

Speaker Presentation Slides

www.slideshare.net/burtonlee1

Speaker Videos

‘StanfordEuropreneurs’ ‘European Innovation @Stanford’

www.StanfordEuropreneurs.org me421.stanford.edu

WRAP-UP AND CONCLUSIONS

THANK YOU Dr. Burton Lee PhD MBA Stanford School of Engineering [email protected]

WWW.STANFORDEUROPRENEURS.ORG

@EUROPRENEURS

Working in Silicon Valley, Europe, La-n America and Washington DC

•  Senior financial, technical and strategy advisory services for global technology innova4on organiza4ons •  Professional Services

–  Technology startup and growth companies •  Interim CXO and Advisory Board roles •  Expert guidance & decision-‐making at the interface between market/customers, technology and finance •  Business development – industrial and government •  Business plan prepara4on/research/review; Government Grant proposal prepara4on/review •  Coaching and mentoring of CEOs and other CXO-‐level managers •  Assistance with government regulatory and policy agencies

–  Angel, venture capital and private equity Investors •  Fund strategy, team selec4on and market posi4oning •  Due diligence: technical, financial, strategy and business models

–  Public and non-‐profit R&D laboratories •  Technology transfer & partnerships; venturing and spin-‐out of companies; strategy and business development; grant applica4ons

–  Research universi4es •  Innova4on-‐related models, policies and prac4ces •  Technology transfer and licensing; industry partnerships and rela4ons; development and strategy; grant applica4ons

–  Na4onal and regional government agencies •  Innova4on policy formula4on, analysis and review; cluster development strategy; economic impact studies •  Science & technology policy formula4on, analysis & review: space, avia4on, nanotechnology, soaware/AI/robo4cs, manufacturing

•  Selected recent clients –  US/European technology startup companies – alterna4ve energy, robo4cs/AI, soaware, Internet, nanotech –  Venture and private equity funds – aerospace, nanotechnology, ICT, compu4ng, advanced materials, clean tech –  Office of the Prime Minister, Ireland; European Commission; Na4onal Science Founda4on; NASA, Na4onal Academies

•  Dr. Burton Lee PhD MBA, Managing Director –  Contact: [email protected] Based in Palo Alto, CA near Stanford University –  Bio/References: LinkedIn Profile –  Lecturer, European Entrepreneurship & Innova4on, Stanford School of Engineering


Small Business & Entrepreneurship

Innovation & Entrepreneurship Ecosystems in Croatia - HAMAG-BICRO - Apr 16 2015