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Is innovation possible beyond Silicon Valley?

PorÁngel Bonet- 22 / 12 / 2014

 

A few days ago I was debating with a close friend of mine, a senior manager at one of our country's leading companies, who asked me for advice on the future of his professional career. His restlessness was tied to his need to work and participate in innovative companies. He was frustrated because companies in Spain were too traditional, classist and ruled by policies for innovation to be possible, therefore obligating our country's best managers to consider working in the USA or Asia. The truth is that thinking of the issue objectively, he was mostly right, but my recommendation was for him to consider staying in “Europe” for two reasons. First, that given the high number of young highly educated Asians and Americans with a “digital” business perspective, I doubt that any senior manager from Spain would have more opportunities there than in Europe. Second, given that a majority of European companies are undergoing a generational shift and a transformation process, these are orienting their corporate focus toward internationalization and innovation. In other words, there is going to be a demand for young managers in Europe, which is to date unmet, from my point of view.

Certainly, though old Europe is not precisely the birthplace of the digital economy, traditional sectors exist that offer an incredible roadmap for innovation. One good example of this is coffee. Let's analyze, first of all, some data on the coffee business and its derivatives, or what is known in the world as the “Hot drinks” industry:

  • 5 million tons yearly
  • €61 billion yearly
  • Annual growth in the last 5 years of 2.8% in volume and 9.1% in value
  • All markets are growing, with Asia-Pacific the largest

Given this data, it is surprising that such a traditional market and product can have such growth and, furthermore, with value. When thinking harder, the easy answer is "the capsules". Nespresso has literally revolutionized the already deregulated sector, with the resulting battle between capsules waged to date. Only in Europe and the USA the sales of capsules already represent 28.5% and 24.2% of the market, respectively, in value!

Nespresso is the trademark of Grupo Nestlé, headquartered in Switzerland. Its products are based on a system of individual capsules containing ground coffee and specific machines capable of brewing coffee, using the capsule’s contents. Nespresso offers a model for personal use at home and a specific model for special clients, such as offices or hotels.

Its impact is so great that generic brands can hardly compete in this category on a global scale. In Western Europe alone, it assumes a significant volume of 25.7% (even so, much lower that most categories).

I don't want to overlook the case of Starbucks, which has managed to create a value model based on the high-quality consumption experience that is capable of charging €3 for a coffee, when we used to pay just €1 at any other coffeehouse.

Starbucks Corporation is an international coffee chain, founded in Seattle, Washington. It is the world's greatest network of coffee shops, with approximately 17,800 establishments in 50 countries. Starbucks sells brewed coffee, hot drinks and other beverages, as well as sandwiches and some other products such as mugs and coffee beans, and also books, music CDs and movies.

Conclusion. Is innovation possible beyond Silicon Valley if you are not a start-up? Yes, and possibly much more so, given the resources and the need for reinventing outdated sectors.

Does Europe innovate? Of course it does, and it will much more in the future. Nestlé is just one example of hundreds of large, medium and small enterprises that never cease to develop new strategies for winning the race of global competitiveness. But I don't intend to deceive my friend. While the 78-year-old owner and/or his teams of managers aged over 60 continue to lead the business, for the time being there won't be innovation... we'll have to wait for a generational shift (which perhaps my friend may lead).

MERRY CHRISTMAS!!!!!!!!!!!!!!!!!!!!!