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For innovation and export: Switzerland needs its own path

Swiss SMEs account for more than 99 percent of all enterprises in Switzerland. Many of them are exporters. Innovative Swiss enterprises are among the world’s market leaders in many industries. Stephan Sigrist, founder and head of the think tank W.I.R.E., thinks that Switzerland can position itself in international competition. At the same time, however, he warns about becoming complacent.

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Swiss SMEs should drive innovation despite top rankings.

Mr. Sigrist, Swiss SMEs regularly occupy the top positions in international competitiveness rankings. How relevant are these rankings in terms of future innovative capacity in Switzerland?

The crucial question is about what indicators are used to measure innovative capacity. It is much more difficult with this topic compared to the topic of economic growth. In general, I consider these rankings to be adequate for a rough assessment. There is, however, the risk of becoming too self-congratulatory. According to rankings, we are the world leader in innovation and have a great many Nobel Prize winners. However, innovation is ultimately difficult to measure, and basic research alone is not a guarantee of competitiveness. This is why we have to consider what roll the Swiss economy can and will play in this globalized and increasingly digital economy over the next ten years.

How can Swiss SMEs push innovation forward?

There is no magic formula for all industries. If we work on the premise that we find ourselves in the midst of a transformation process, the core of which is digitization, the first step is to understand what is happening: what are the underlying reasons for the automation of processes, for smart algorithms and new virtualization models? And where can these technologies benefit customers?  SMEs must also identify their own strengths in the context of digitization. Ultimately, it is about developing and pursuing a strategy for your own business model, even if it doesn’t conform to the mainstream. The prerequisites for this are to change one's own corporate culture, to sensitize employees, to be open but also critical and to develop new solutions or products with courage. On the one hand, this requires speed, but it can also mean not adhering to specific trends. Getting ready for digitalization also means becoming resilient.

Is innovation always connected with technical progress?

No. The term innovation is currently strongly linked to technology. Of course, these advances are the basis for new products or services. However, technology only finds a market if it creates a real benefit; not just a benefit for the customer, but also a benefit for society in the long term. A concept of innovation prevails today, however, that is strongly driven by technology; it often focusses on what is feasible and ultimately less on what offers a real benefit. It’s great when I can kit my house out with smart devices, but if this results in a different device beeping every 10 minutes when it has finished its work, then this results in rather more stress than convenience for the resident. The same applies to access to data; today we no longer have the problem of too little, but too much information that nobody can process anymore. Understanding future customer requirements is the key. This is not new, but it remains relevant for the future.

And what does this mean in terms of the increasing tendency to outsource?

Put simply, any task that is repetitive is outsourced. This includes entering data into Excel sheets as well as stacking shelves in the supermarket. There are, however, a variety of activities that do not follow repetitive patterns – and this is true across all educational levels. When I look at service professions such as hairstyling, I don’t believe that there will soon be an algorithm for new or original hairstyles that really suit a face.

What do SMEs need to consider when they setake t on updating their business models?

Understanding the needs of the customer also means positioning your business model in a society. Uber or Airbnb have created incredibly efficient platforms and business models, but they haven’t taken into account the fact that these platforms are embedded in a social structure. Now they risk being thwarted by regulation. In my opinion, this didn’t have to be the case, and it has also had a negative impact on innovation. An ecosystem consisting of companies, science and administration is needed to jointly create the framework conditions for innovation.  

What can Swiss SMEs learn from this?

I see a huge opportunity for Switzerland here. We can keep up with Silicon Valley, both in terms of speed and venture capital. We can be inspired by Silicon Valley, but a Switzerland that is trying to copy Silicon Valley is on the wrong track. We need to take our own path, and our find own definition of innovation. And this can be found in just such networks or ecosystems. We have proximity between all the players and thus have an opportunity to deliver higher quality and, depending on the situation, to be even faster because we interface well.  

Are there any general factors that can make a business model successful?

I am skeptical about formulas. Innovation requires thought, passion and the courage to approach the market with new solutions. The main factor in success is the benefit for the customer.  

Will existing forms of organization disappear? And are there new ones that will crop up, which you are already beginning to see?

Yes, of course, we are living in times when much is changing. That’s exactly why stable framework conditions are a key prerequisite for success. As far as companies are concerned, we won’t be able to avoid delegating tasks. In a more complex world, it is principally not possible for a manager to stay informed about an organization as a whole. Employees need free space to develop their own ways to implement objectives. The future forms of organization will be defined by the fact that responsibility is given, distributed and directed more towards coordination. Trust plays a very important role here. At the same time, however, organizations still need one or more people to set a clear path as far as vision is concerned. I don’t really believe in the crowd approach here.

This idea of cooperation is also reflected in the trend of network partnerships. Should SMEs maintain this trend?

I believe that it is particularly worthwhile for small businesses to build such networks. One of the advantages of our present time is being able to do something with moderate means; this was not possible in the past.

And what are the dangers for exporting SMEs?

The complexity increases with exporting SMEs, because they have to export to local ecosystems on top of varying national framework conditions. Here, however, I also see opportunities in more transparency and a harmonization of standards coming out of digitization. But the fundamental challenges remain.

What issues do SMEs need to tackle today in order to keep up?

The basis is a systematic and early examination of future framework conditions – with a focus on digitization. At the same time, it is important to build up a picture of long-term relevant developments and to focus on them. And then – and this is not new – the strategy has to be implemented. In contrast to the past, however, it is no longer sufficient to pursue these without looking either left or right; it means regularly stepping back  to get an idea of where you are at. In software development, this is referred to as agile planning. There are also similar iterative models so that SMEs can implement their strategies; they ultimately have to be able to react quickly and, as I said, consciously put up resistance and give themselves time.

 

ABOUT STEPHAN SIGRIST

Dr. Stephan Sigrist is the founder and director of the think tank W.I.R.E.. For many years, he has analyzed developments in the economy and society across disciplines, and is concerned with trends in the health system and life sciences as well as with topics such as digitization, urbanization or new forms of production. After studying biochemistry at ETH Zurich, he initially worked in Hoffman-La Roche's medical research department. He then functioned as a corporate consultant at Roland Berger Strategy Consultants and at the Gottlieb Duttweiler Institute. He is a member of the Board of Trustees of the Swiss Allergy Center AHA as well as Science & Cité.

ABOUT WIRE

W.I.R.E. is an interdisciplinary think tank that has been engaged with global developments in business, science and society for more than ten years. The Swiss think tank focuses on the early recognition of new trends and their translation into strategies and fields of action for companies and public institutions.

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