As the Netherlands emerges from lockdown and begins the road to recovery, the country might also see new knowledge hubs, a consolidation of start-ups, and more resilient entrepreneurs. There is no question that the public health crisis has thrust the world into a more digital and uncertain future. Like many countries, the Netherlands is facing an enormous test of its innovation ecosystem. But with disruption, comes opportunity. Eager to understand the opportunities and pitfalls that lie ahead, Innovation Origins spoke with Remco van der Veer, former Global Head of ING Innovation Labs and Eduard Burer, Founder of venture capital fund, FARE Capital.
Firstly, let’s reflect on innovation in the Netherlands. The country has had a long history of outstanding successes – what has been the key to its success?
Van der Veer: “Yes, the Dutch do have a long history of innovation. We’re known for our entrepreneurial, resourceful, and commercial mindset. We look for ways to add value and to do business. It’s relatively easy to start a business here. In fact, a large part of our economy is made up of SMEs and this drives new ways of thinking, hard work, and ultimately innovation. Successful knowledge-intensive regions such as Eindhoven, Rotterdam, and those surrounding Twente have added to our innovative reputation too.”
Burer: “In order to be able to build on this further, I’d say our trading mentality, our willingness to collaborate with others, and widespread fluency in English all contribute to our success. We’re a small country and the knowledge economy has always been important to the Dutch. We’ve been successful at creating a global brand of innovation.”
At a time that is really testing the Dutch ecosystem, where do the greatest risks lie?
Van der Veer: “Yes, this pandemic will expose where the gaps are and create risks, nevertheless it’s also an opportunity to recognize those gaps and fill the void. First of all, we can build up greater resilience amongst individual entrepreneurs given that the ‘tall poppy syndrome‘ is endemic here. This mentality prevents some entrepreneurs from reaching their full potential and I think Dutch entrepreneurs should think in bigger terms and foster global ambitions. I’d like to see more Dutch entrepreneurs on the world stage. We live in a globally connected world and a global mindset will appeal to international investors as well. If entrepreneurs can’t raise enough capital, they will be funded by international companies and this could result in IP, value, people, and decisions moving away from the Netherlands. Although it is very important to attract international investment, this could also pose a risk for our country and economy.”
“In addition, I think our education system is not connected well enough to the uncertainties of the future. In a few year’s time, there will be all kinds of roles and professions that don’t exist at present. I think we can do a better job of preparing the next generation for this new world.”
Burer: “I think it’s an important point made by Remco van der Veer. Our entrepreneurs need to think on a global scale. European start-ups should have more of a global presence. The European Union has work to do as countries such as China, South Korea, Australia, and Canada are rapidly moving to develop their capabilities, translate research into commercial ventures and prioritize innovation in the public and private sector.”
The Netherlands currently invests 2.18% of its gross domestic product in R&D (research and development), while Germany already invests 3% and is intending to expand that to 3.5%. Do you think the impact of the pandemic will hinder or rather accelerate investment in innovation?
Burer: “I believe we will speed up our investment in both the private and public sectors. I think we will see more growth within industries like healthcare, food & agriculture, social enterprises, and technology.”
Van der Veer: “Yes, Germany is investing more in R&D and we can learn a lot from our neighbor. On the other hand, our approach to innovation isn’t very hierarchical (unlike many areas in Germany), so senior management tends to delegate decision-making which in turn helps create a culture of innovation. The pandemic has changed the world so those companies that are reluctant to change will eventually fall by the wayside. It will be interesting to see what the ecosystem will look like in one year once governmental fiscal support has come to an end. It’s great to see a lot of companies adapting quickly and I think innovation will only increase in some sectors. Such as teleconferencing, e-commerce, digital payments, to name a few.”
Will the post-pandemic new workstyle norm see more start-ups and corporates working together? What trends have you noticed in this area?
Burer: “Generally, I think we will continue to see large corporations become leaner and they’ll outsource problems to start-ups and scale-ups more often. We might see more partnerships seeing that companies want to reduce risks and tap into the strengths of others. I believe leaders will attach more importance to collaboration.”
Van der Veer: “When I led the ING innovation labs team, we always tried to build on the competencies of others because you can’t do it on your own. So yes, I think this co-productive model will grow. I believe there will be more opportunities for start-ups to work with corporates. However, scale-ups seem to work more effectively with corporates because it’s more of a level playing field and there is a better understanding of the corporate context. In my experience, the chances to succeed are higher with scale-ups over start-ups, as start-ups are still very much focused on getting their own business models up and running.”
In order to ramp up innovation, entrepreneurs will need more capital. How can the Dutch ecosystem attract more capital from domestic and international investors?
Burer: “We’ve both mentioned the need for entrepreneurs to foster a global mindset so that they can better align with the interests of global investors. We’ve had some excellent success stories in the past, so we already have a strong national brand to build on.”
Van der Veer: “To begin with, entrepreneurs need to have more clarity on their ability to scale up and
internationalize; so as to see the Netherlands as a springboard for other European markets and beyond. We have European funds and government support which is very helpful, but we need to attract investors on the basis of the value and future potential that they see, irrespective of government grants and support. Also, it’s important to focus on certain key domains and regions so that we stand out. For example, the Eindhoven region is doing very well, so it’s attracting a lot of international capacity and funding. In this way, we are diversifying while still focusing on specific knowledge sectors such as agriculture, IT, and water management.
Do you think the government has done a good job in supporting the innovation ecosystem during the pandemic?
Van der Veer: “Yes – the government has been clear from the beginning about the support that’s being given to start-ups.”
Burer: “Yes I agree, funding and support have been swift and helpful. The next step is to focus on companies and industries that will shape the future economy. It’s also an opportunity for the government to create partnerships between public and private industries because they basically need each other. Once again, I see that more collaboration between people, companies, governments is only set to increase after this pandemic.”
How is the Netherlands doing compared to other countries in the EU and around the world? Where do its strengths lie?
Van der Veer: “All countries are different and all are trying to build on their natural advantages. For example, in Munich, there is a strong focus on innovation in automobiles, Berlin on digital solutions and in France, they are very good when it comes to creativity and technology. The most important thing is that we double down on what we are good at and collaborate so that we can fill in the gaps.”
Burer: “I agree. We’re living in times where everyone is looking for a way to move forward for the better. It’s the EU’s job to bring everything together so that we, as a whole, are competitive, creative, and diverse. I hope we rise to the challenge.”
Finally, what might a large commercial bank like ING or ABN AMRO look like in 10 years?
Van der Veer: “These are difficult and trying times for banks. The regulatory bodies are getting stricter, Fintechs are moving up the value chain and tech companies are moving in, cherry-picking what services they want to deal with, based on where regulation is the least stringent. There are two different ways commercial banks could go. I think banks will get really good at the core banking side of things, or they will branch out, diversify and find new revenue streams in order to survive.”
Burer: “That’s a tough one, only time will tell how banks and other corporations will evolve. But the mantra ‘innovate or die’ is as real now as it has ever been.”