Innovating industry in Europe: which strategies?
Grenoble opens the way to SMEs in France

By Philippe LEGER

Technological innovation is the key to economic competitiveness and sustainable development in industrialized countries. But who decides on the innovation? “It is the market! ”, exclaimed in chorus the participants at the round table of the 10th Forum 4i which was held in Grenoble on Thursday April 24, 2007 on the topic “Industry in Europe: Which Strategies?” The Forum 4i, organized by the City of Grenoble, is currently a strong European reference.

“It is the market which decides on the innovation. You can develop the most splendid, the most innovating product… but if you do not sell it, innovation serves no purpose!” This was the inaugural comment by Michel Vieillefosse, the Director of the Eureka Secretariat, at the Forum 4i round table. The participants agreed… Among these renowned personalities was the former minister Edwige Avice, now the Director of BIPE, the European expert on finance and innovation topics. At the European level, Forum 4i is recognized as a privileged venue for exchanges on creation and development of innovating businesses, with the specific objective of directly connecting businesses and venture capitalists. The project bearers benefit from in-depth information and top quality advice, from partners, investors as well as from specialists of the Direction du Développement Economique, Innovation, Insertion (Management of Economic Development, Innovation, Integration) of the City of Grenoble.

Forum 4i: a highly appreciated “Dauphiné technogratin”

Is this interest for project bearers who are literally “geese laying golden eggs” enough to explain the success of Forum 4i which celebrates its tenth anniversary? Today, its organizers in Grenoble can be proud of an undeniable success. Since its creation in 1998, 141 projects (innovation - industry - investment - international) have been presented at the “Venture Capital Forum”, an event within the event. 107 companies are still active. 1,500 employments have been generated on the whole including 1,100 in the Grenoble area and nearly 205 million euros raised. This is truly a good return on investment for the City of Grenoble!
According to a survey conducted this year by students of the Master Innovation of the IAE of Grenoble, 91% of the project bearers are “satisfied to very satisfied” after visiting Forum 4i. At the minimum, 78% of the projects have benefited from successful contacts with investors. According to the same source, 75% of the project bearers could not have met them without this Congress. Lastly, more than half of the bearers see their projects increasing in value after visiting this event. Success is guaranteed. Year after year, project bearers and investors are always keener; they ask for more of this Dauphiné “technogratin” … especially prepared with golden eggs! But what is the secret of this recipe?

The four highlights of the Forum 4i

The 10th anniversary of the Forum 4i was punctuated by four highlights: the “Venture Capital Forum” enabled the meeting of innovating technological project bearers and national and international venture capital companies. For the “Innovating Industry in Europe: Which Strategies?” theme, a round table brought together personalities of the economic world recognized for their experience, their know-how and the relevance of their analyses. The technological showcase presented the latest technical innovations resulting from research laboratories in the Rhône-Alpes.
And for the first year, an SME/innovating technologies Forum was held in order to promote technology transfers from technological laboratories/platforms to innovating SMEs.
Even though it is still too early to know all the economic and financial repercussions of the 10th edition of Forum 4i, it has undoubtedly benefited the project bearers and the investors… And, of course the City of Grenoble.

MicroOLED wins the “Forum 4i -Jean-Michel Lamure” trophy

The 4i-Jean-Michel Lamure Trophy (as a tribute to the cofounder of Soitec who died in 2006) was awarded to the project considered most innovating by more than 60 investors present that day. After having auditioned the project bearers, the investment companies were in a position to judge the quality of the projects presented in terms of technological innovation and economic potential. Based on this, they decided on the 2007 prize winner.
At 1.30 pm, Michel Destot, the Mayor of Grenoble and Edwige Avice, the European Expert, gave this prestigious trophy to Eric Marcellin-Dibon and Gunther Haas, the founders of MicroOLED. For the recipients, this trophy is an encouragement as well as a recognition of their know-how and their competence, at the regional and national level. This prize also highlights the dynamism of the Rhône-Alpes region and its excellence in innovation and research.
The investors selected MicroOLED which makes high resolution micro-displays with very low energy consumption for mobile video applications. The technology developed by this company enables a resolution up to 4 times higher than that of its competitors, with a 4 times lower energy consumption. These determining advantages result from the unique OLED technology (Organic Light Emitting Diode) developed by this team and protected by an important patents portfolio. This type of miniature screen is to date mainly used in viewfinders of video cameras and digital cameras, but new applications for the general public (telescopes for mobile video) or professionals (medical, movie camera, military) are ongoing development. The potential of this market is very attractive, because the MicroOled technology is unique and answers a significantly growing request for these applications.

What’s Important: “Being reactive”

Back to the round table which preceded the Trophy award. So which strategies should the innovating industries adopt in order to conquer the market? For Michel Vieillefosse, “It is necessary to be in the forefront …After the others, it is too late! Prices are starting to plummet; investment is no longer profitable. It is thus extremely important to be reactive… A number of initiative networks have been developed with an industrial choice; investments are made strategically”, he adds, ridiculing the ambient sluggishness, totally unknown in Grenoble but which apparently exists elsewhere, and which expresses itself peremptorily by “we are lagging behind this or that country”. The Eureka Director joyfully recalls that France is a global leader in some fields, and not the least… Thanks to Eureka. “We are leaders in future business … in telecommunications… Today, when you go to China and use your cell phone, you are not using American technology, you are using a GSM technology … and it works! We are also world leaders in the automotive industry, in aeronautics, for smart cards… We have sold 3 billion smartcards… this is, nevertheless, the most individualized product which exists (it contains your name and many other data in your own language); we hope to sell 5 billion smartcards in the years to come…”

The Eureka missile 

Launched in 1985 in Hanover (Germany) at President François Mitterrand’s request, “Eureka” is first an intergovernmental initiative aiming to reinforce the competitiveness of European industry. Eureka has since then experienced a spate of successes, in a globalized economy and in different fields. Michel Vieillefosse gets carried away when he talks about the achievements, with the audience admiring him. “The navigator you use in your car is a Eureka project, just like the power components used in the TGV… or the special effects of Harry Potter!” He recalls that today research companies and laboratories, public or private, of 37 States (30 members of the European Economic Area, plus Croatia, Israel, Russia, San Marin, Serbia, Turkey, Ukraine) are invited to offer collaborative projects, on topics and according to partnerships of their choice, to develop products, processes or services required by the market in the long term. After an assessment with the Eureka authorities, which includes the European Commission as a whole, projects receive a “label” which enables them to obtain, in the majority of the cases, financial support according to procedures in force in the countries concerned. Each State can finance its nationals (assistance up to 60% of eligible expenses). The assessment is made based on the same grid in all participating countries. Agreement on the label and the final decision are taken in the European meeting. The review is rapid: 3 to 4 months. What more to expect?

Establishing links between the world of research and the industrial world

The point of view expressed by Michel Vieillefosse is reiterated by Gerard Mézin, the Deputy General Manager of Sogeti France (Capgemini group) who specifies: “The market guides, industrialists are generally closer to the market, they dictate the trend … yet it is necessary that they be linked with an aspect of academic or industrial research, to meet the market requirements sufficiently quickly. Only investors ready with the technology required by the market at a particular instant will be able to succeed in obtaining market shares. Having achieved a position as a global leader in certain fields, in order not to be overtaken, it is absolutely necessary to create links between the world of research and the industrial world so that tools and products meeting the market requirements can be introduced. And today the cycles are increasingly short!”

Multiplying bases

Like the other speakers, Gérard Mézin wonders: “Does Europe represent an opening? Is it necessary to evolve to a form of European organization?”  His reply is to the point and goes up like an uppercut: “There is no choice! For reasons of competitiveness, it is a must to have local bases… like the “Dauphine technogratin”, a base which is excellent and recognized at the international level, as well as international bases, in the industrial, university, research hubs as well as in the big groups and SMEs. “

Helping SMEs knock on the right door

Europe promotes development, but what are the devices which support it? According to Michel Vieillefosse, “There is the scope program of the European Union - a rather top down approach, with perfectly defined subjects. Also the Eureka program …. and the competitiveness hubs and regional initiatives”. “Please, no more! We have more than enough.” “In order to help SMEs profit from this jungle of initiatives, in order for people to go to the right places as soon as possible, so that they do not waste a huge amount of time applying for programs whose chances are bleak from the start, it is urgent to draw up an overview of the various possibilities”, says the Director of the Eureka Secretariat.

For Edwige Avice, “One should not be deluded. The European Union today includes 27 countries, and there is a lot of money… there are essentially 300 billion euros of Structural Funds, 80% being spent on countries of convergence… Europe is launching out today in financial engineering, it is necessary to work with efficient methods and leverages, i.e. a little European penny triggers off the rest.” “For it to work at the lowest level of action, we do not speak about regional level but of a level a notch below: the most local level, it is necessary to find projects… quality projects! They should be hunted and launched out by all means! It is also necessary that they are sufficiently labeled to inspire trust and thus, thanks to Europe, financial means will be available.”
“The beginning of the beginning is therefore the knowledge of businesses … and in our country; it is not that easy as each one tends to hide his copy! There are many administrations which deal with this, there is competition. It is thus necessary to inform again on the European means available but also on issues of general interest.”
For Pascal Lagarde, the General Manager of CDC Entreprises, the financial means referred to by Edwige Alice should be invested in research and development, in order to boost our economic performances and remain competitive vis-à-vis economies like those of United States and China. “The 2006 figures published by the OECD (Organization for Economic Cooperation and Development) for R&D (Research and Development) show that the European Union countries have a deficit of 39 billion euros in information technologies, about ten in “pharmaceuticals”… We have to face the challenge against United States which invests massively in R&D… and new competitors like China which has multiplied its investment in R&D five times within ten years, China whose economy was initially perceived as a manufacturing type!” According to the OECD, China will have overtaken Japan by end 2006 and would be the second global investor in R&D after the United States! Has Europe taken measures to face this double challenge against the United States and the emerging countries like China? Are investments in the EU in line with the challenges?

Integrating European funding

“We have made considerable progress in ten years!” says Pascal Lagarde. Funding of innovations in SMEs has grown considerably, “venture capital, which did not represent much in 1995, has since become a large-scale industry”. In France, last year, a growth of 20% in venture capital was recorded, a good growth, but not enough as compared to the performance of the United States. With constant GNP, funding in France is four times less.” Pascal Lagarde criticizes the segmentation of European financing: “SMEs which produce similar goods in Germany, France or in the United Kingdom are financed… the challenge now is to integrate.” He supports Michel Vieillefosse’s statements: “It is necessary to capitalize on the strengths rather than to want to catch up with things…” This means that it is stupid to invest in a business if its market has already been conquered by another entity. Still one would have to be aware of this… The “panorama” desired by the Director of the Eureka Secretariat takes all its meaning here.

Creation of France Investissement

The General Manager of CDC Entreprises is delighted with “the craving of the stock market for innovating companies…” According to him, “encouraged by the return on investment, more and more companies invest in the stock market. It is a new hope which is emerging on the horizon.” He observes that in France “Capital Investment comprises 6% of venture capital (against 40% in 2000)”, a fall, “the remainder in LBO. Institutional investors prefer the short term… but there is good news, however, with the listings on the stock exchange in particular and the launching of France Investissement which links public financial institutions and private investors.” The government’s objective is to redirect French savings towards the most productive and most dynamic section of our economy, the development of the innovating SMEs. For 2007, six private partners announced a commitment of 400 million euros. The Caisse des Dépôts et Consignations will try its utmost to mobilize 300 million (or twice as much as in 2006).
Jean-Michel Karam, the CEO of Memscap, has a very operational and concrete view of the actions to be taken, by businesses, authorities as well as the European Union. Let us start with businesses: “Money is invested in “techno” for selling”. Jean-Michel distinguishes two phases: the financing phase, “at the firm’s expenses” and the selling phase, “which will bring in money”. For him, a good manager, “is the one who can reduce the interval”. There are “several sources to get money: the government, people who take risks and agree to finance projects which will require a certain time before being executed … but all this doesn’t carry much weight!” Understand: these sources do not have large flows. He quotes the example of the region which has completed a project with the State for 170 million euros… whereas he, in three years, “has raised solely for Memscap … 138 million euros!” Jean-Michel Karam expects “something else” from the Authorities: he asks them “not to load the back too heavily”, an expression which another participant in the round table will translate by “not to overload the bag” but the popular expression “not to overload the mule” would be more appropriate. For this company manager who has lived in the United States and has an American accent, there is no need to feel bad about the comparison: “France has the surface area of Texas” and when he compares France to the American giant, he does not hesitate to say “that we are a million times better… We are smaller and fare better.” His vision of business is powerful and motivating: “When a business is launched, it is necessary to want to change the world; the doors have to be moved! You need a lot of energy”. He would like the French to cease “demonizing the capital”. In France, “one shouts “Stock-options! Stock-options! … Not demanding them but condemning them! But who pays them? It is the capital! It is the general assembly of the shareholders… which is diluted to stimulate management. And when this right is exercised, the State recovers 50% of their value which could have been used elsewhere! Let us stop demonizing things! ” This is what the CEO of Memscap of France expects, but what does he expect from the European Union, or rather the European potential?

A strong foreign policy required from the EU

“Since the creation of Memscap, 97% of the performance has originated from abroad”. For him, France is a “very small market”; on the other hand, Europe, is an opportunity “to negotiate”; Jean-Michel Karam expects much more from the EU and its institutions… not just a little amount of money from the European Commission. It is not that he considers 300 or 400 K as “petty” but he expects France to be an efficient partner vis-à-vis the giants of the world economy. His reasoning is clear: “China, accounts for more than 1 billion people; the United States, 340 million…. With 60 million, France weighs less. The EU accounts for more than 450 million people; this is good insofar as Europe does not yield.”
“French companies must respect the social legislation which expresses our desire for a social model, that’s the reason we work in France… we are not Americans, we do not want to be Americans! But we see that the Americans work as they want; they come to France, on our territory, not just France but Europe… If Europe expands, its negotiations will carry more weight vis-à-vis America and …”
Isn’t this logical? “But what is the worth of France or Europe vis-à-vis the American, Chinese or others?” Jean-Michel Karam asks. “China makes children work (author’s note: millions of people in this country are interned in concentration camps for their beliefs). “At the French level you do not have the means to negotiate; at the European level, you have”, implying you can impose your ethical choices, your social model…. “Provided we have good negotiators… we do not have them!” concludes Jean-Michel Karam under the public applause.
For this company manager, a strong foreign policy of the EU is absolutely necessary, vital, to build and perpetuate an innovating European industry.

“Big Business Act” or the monopoly of big companies

Pierre de Fouquet, the President of the AFIC Venture Commission, denounces humorously the “Big Business Act”. According to him, the large public markets are monopolized by big companies. In the competitiveness hubs, the SME share remains weak. Help systems exist, but are too complicated in their organization, not always accessible to companies which invest their time, a rare commodity, in an innovative enterprise. Take the example of Israel which concentrated the means in the hands of one organization, under the supervision of “Chief Syndic Officer” with the will “to work fast and strike hard”.
“Risk capital is the poor parent of capital investment which on the other hand remains weak. France is the second market in Europe; it has overtaken Germany, but this competition appears insignificant when compared to true players such as the Americans, Chinese or Israelis. His reason for concern: the competitive gap is increasing. But there are some encouraging signs for the businesses and the economy of the country. One sees more and more entrepreneurs who know how to create, to manage, and develop a company, “serial entrepreneurs who at the age of 45 have already created several companies. They can accelerate the journey towards success…”

Edwige is desperately seeking companies

For Edwige Alice, they have not yet succeeded in making the Anvar work, “which is highly competent”, with other public financers. “Each of them closely guard its secrets”, and the result of the race is: “there are three chickpeas in a clear gruel”, which can be understood as “that one does not have enough dossiers”. Where are the companies? Gerard Mezin agrees with Edwige Avice and indicates the weakness of SMEs: “On average, a French SME at the end of 5 years employs 6 people. This is unbelievable! The blame falls on the big industrial groups. A dramatic example is that of a splendid French SME sold to Americans because no French company was willing to support it. A technology was mastered that the others did not master, as well as a market which the Americans did not control… As far as France is concerned, we did not know how to help this company. Not even at the European level. And it was not even a problem of financing! Businesses remain too small; the big French industrial groups do not have the state of mind which one finds elsewhere to support the growth of business. It is time to pop the cork; to say that the market is not Grenoble, but Europe. At high school already, one must inculcate the ambition to create a sizeable company: not with just ten employees (even if it takes 5 years) but with 10,000 employees…”

“Excellent research leads to economic development… except in France!”

Edwige Avice quotes a report of the Inspection des Finances on government aid: “In all European countries, excellent research leads to economic development… except in France!” This means that “stocks are not reduced” and dossiers are closed.
“A meeting organized by the Caisse des Dépôts et Consignation with investors showed that many companies want to preserve their family inheritance… but to transmit it to whom?”
“In the Rhône-Alpes Region, the second French region with a European dimension (three world competitive poles and 18% of FCI), the starting funds (except one) had not established any links between the hubs and the financiers who were waiting, ready to fund proposals to be put forward.”. The European adviser would like to see more coordination between the Public Authorities and the financiers…

Growing success of the technology showcase

An attractive exchange space between researchers, economic players and investors, the technological showcase has a growing success with each passing year. The technological showcase presents the very latest innovations emanating from research laboratories of the Rhône-Alpes. Designed in collaboration with the Centre de Culture Scientifique Technique and Industrielle (Industrial, Technical and Scientific Culture Centre) of Grenoble, the showcase is a testimony of the vitality of research in the Rhône-Alpes, of multidisciplinary efforts and of its presence in the areas of innovation. Beautiful projects are presented such as that of the Smart Tablet of Frédéric Serre whose Société Supertec developed two products which are already on the market: the iScreen and the Smart Display Unit. The Smart Tablet is intended to replace the traditional racks at points of sale. These racks are equipped with small screens and integrate RFID technology making it possible to deliver advice, advertisement and promotions as well as a merchandizing control intended for the back office of the user point of sale. American companies, some of the leading ones, are currently paying to test the Smart Tablet.

Grenoble, the city of excellence

The Community Service for Information on Research and Development (CORDIS), financed by the European Commission, published at the end of 2006 its annual list of most innovative regions in Europe. The list is an innovation index for the European regions. The index is calculated on the basis of RRSII (Revealed Regional Summary Innovation Index), which takes into account the budgets of public or private research and development, the number of employees in the advanced technology industries, or the number of patents filed. In the 2006 classification, the team of French regions is ranked 9th out of 168, with a score slightly above the European average. Three French regions raise the national average and are very clearly ahead of the group. The Ile-de-France region is ranked 9th, ahead of Berlin (11th), but behind Stockholm (1st) or Stuttgart (6th). The Midi-Pyrénées is ranked 30th just ahead of the Comunidad de Madrid, the Vlaams Gewest (Belgium)… and the Rhône-Alpes is ranked 33rd thanks to Grenoble.
The city on the banks of the Drac literally bathes in an environment favorable for innovation: it is the first French research center after the Ile-de-France. More than 61,000 students including 12% of foreign origin; prestigious universities, 10 engineering schools; 2 management schools, one Institute of Political Sciences; more than 20,000 public and private researchers. Not counting large international facilities: ESRF, Institute Laüe Langevin… Do not be surprised if 1 out of 6 is employed in research!
This enthusiasm which accompanies the exceptional success of Forum 4i is due to the unfailing support granted from the beginning by the charismatic mayor of Grenoble, Alain Destot, whose background and professional record are totally exemplary. This true mountaineer aims to reach the tops of the mountains while pursuing excellence… You will be the judge! A graduate of the École nationale supérieure des arts and métiers, he has a Doctorate in Engineering in Physique Nucléaire (thesis supported under the supervision of the Nobel Prize Louis Néel)… He was a research engineer at the Commissariat à l' Énergie Atomique… and the founder and owner of the high technology company Corys, until he became the Mayor of Grenoble in 1995 (Corys still exists and this company has now more than a hundred employees). This dynamic mayor and entrepreneur also knew how to form a team of gifted and efficient collaborators, like Geneviève Fioraso, deputy in charge of economic development, innovation, commerce and the craft industry, first vice-president of the SEM, Minatec Entreprises, and president of the Institute of Administration of Enterprises of the Pierre Mendès France University. A team who opens and shows the pathway to success in France.