Five challenges for the Swiss innovation ecosystem

Over the last 10 years (as precise as a Swiss watch) you could see the Swiss economy at the top of the World Economic Forum list of most innovative countries in the world. Zürich and Geneva are in the top innovative regions of the world, depending on the criteria even worldwide. But if you asked the people inside the ecosystem they will point out that there still is room for improvement.

Last week I had the amazing opportunity to help Christina Rangen & Daniel Harbach running a scale-up & ecosystem builder simulation with the “crème de la crème” of the Swiss Innovation Ecosystem. People from Innosuisse, DigitalSwitzerland, several accelerator programs from all over the country and some “outsiders”.

Five challenges

Before we started the simulation we asked the 16 participants: “What are the biggest challenges for the Swiss (innovation) ecosystem?”. This is a summary of the answers:

1 Little sense of urgency

Most of the Swiss companies and inhabitants are very comfortable. The economy is growing, there is (almost) no unemployment. Most companies are really busy running their current business models. They are making enough money, or making money with money. As one participant pointed out: “The so called ‘opportunity costs‘ to change are just too high.”.

Although there is maybe no obvious "burning platform", there surely are (weak) signals that things are changing. Companies should look at the industries shifts which are taken place, the new technological opportunities and most of all new market opportunities.

2. Mindset & culture

People in Switzerland are very, very risk averse.  Insurance companies love them because they are pretty much the best insured inhabitants worldwide. “The society is ‘rule based’, as one participant pointed out. The Swiss are great at planning and at “contingency planning”. All the i’s are dotted and all the t’s are crossed. But this doesn’t help at taking risks. Failure is not an option for Swiss people. In society, the participants said, failing is seen as a failure, rather than as a step to success. This makes it hard to go out of the comfort zone and learn. This results in a slow, maybe even predictable (but steady) progression. So, no extreme exponential growth curves.

When the circumstances change, like the freeing of the CHF-EUR exchange rate in 2015, the Swiss companies have shown to be very agile, adapt rather quickly and – in spite of the harsh situation – live up to the challenge. Why is it so difficult to make that step without being forced?

There is nothing wrong with steady & predictable growth. But if you are trying to create an ecosystem for scale-ups & unicorns, you should change your perspective. Identify the key regulations, investors, accelerators programs, (corporate)venture funds, local & global market mechanics, top educational organizations, research programs and so on. After identifying the players, the next step could be create so called superclusters to truly help the startups turn into scale ups. 

3. Support & skills

There is a lot of money in Switzerland. But most of the money is invested in traditional assets. For scale-ups there is relatively little money. There are some good examples of soft funds, startup investors, in pre-seed, angel & seed stages. But it’s hard for them to keep being involved in second or third (B-, C- and beyond) investor rounds.
Another topic, according to one of the participants, was the lack of in-depth technology knowledge at the corporate board level : “Board members know the ‘buzz words’ and talk about blockchain, AI & IoT. But they don’t know anything about the business consequences.” There are a lot of specialists & techguys & -girls. So, it would be really key to connect the executive and board people to entrepreneurs and make sure this knowledge is being distributed better.
Another participant told the group that he saw “a lot of ideas within the country, but there is a lack of entrepreneurial skills and good entrepreneurs. to execute on those ideas.” I’m sure some would argue there is, but it’s interesting to hear these statements, which could indicate that there is still a shift necessary.

Educate startups, accelerators, investors, family funds in the dynamics of scale up investing. How do you grow 20% or more each year? How can you build a long-term funding roadmap? How do you identify your top 100 potential investors? How do you scale up your market, product, finance & of course your team?

4. Vision

Some of the participants talked about a lack of broad vision of the startup founders. Most of the Swiss startups “just” want to scale in Switzerland and then expand to Germany and Austria before thinking beyond that. However, to become a real scale up, you should grow fast outside the borders of this lovely country, go Europe, go Global. The Swiss also need to open up: To look beyond the borders of their companies, cities, cantons & country. Open innovation in combination with the trusted Swiss brand can be really powerful.

Investors & other key-players must know the technics and metrics of the different funding rounds.  How to cross the famous chasm? How to achieve growth rates over 20% per year? How can you do long term funding? How do you build your global scale up strategy on team, financial, product & market level?

5. Infrastructure

Finally a lot of comments on typical infrastructure stuff. The level of transparency in the ecosystem is improving due to reports by organizations such as DigitalSwitzerland, InnoSuisse & SICTIC. But there is definitely room for improvement, not only in innovation topics, but especially when money/funding and investments comes into the equation. Swiss companies and investors are holding their cards tight to themselves. Another comment of one of the participants: “The innovation ecosystem has not enough key-players.” This makes it harder to find good partners and to scale fast using multiple investors and startups.

Bringing the key-players together, showing them the advantages of a more open & transparent ecosystem would help. Can we define the building blocks of such an infrastructure? Building blocks like: ambitions, joint commitments, targets, roles, resources, market access, talent development, capital, industry shifts. The government (InnoSuisse) has to play a key role in this.

Government
The participants also talked about the way the government was handling innovation. Organizations like Innosuisse are really appreciated and they make the road to succes for innovative companies & startups much easier. But there is also a suggestion to spend much more (investing/venture) money in the startups and scale ups of Switzerland to remain the most innovative ecosystem for the next 10 years. And making shifts to the tax system to be more founder and startup friendly was another important point to encourage entrepreneurship and with this job creation.

What about the solutions?

Switzerland is still one the most innovative countries in the world. Mainly because of a huge amount of patents, intellectual property receipts and manufacturing of high-tech products. This is a perfect basis for the next step: become the trusted scale-up innovation ecosystem of Europe & the world.

Read all about possible solutions in my other blogpost.

Want to learn more?

Read Christian Rangen’s reflections on the Swiss innovation ecosystem.

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