Pascal Marmier: Innovation is a global game

Pascal Marmier / Executive director of swissnex China, Vice Consul General, Consulate of Switzerland in Shanghai / 2015-01-13

Switzerland impresses neither with its size nor with its population of only 8 million (a quarter of Shanghai’s population). It also lacks natural resources. Nevertheless Switzerland is a global leader in terms of R&D investment. It ranks highly on the Global Innovation Index and is one of the most competitive nations, ahead of countries like Canada, Australia, the United States and Sweden.

The factors accounting for this success domestically include a supportive public funding and promotion policy system, as well as an innovation friendly ecosystem for the private sector. Outwardly, a long tradition of ambitious international cooperation has helped the country. This strategy actually resembles a typical model for small countries with advanced economies, such as Singapore and Israel.

As China has risen as an important stakeholder in the world economy, it has also become a target partner, if not a competitor yet, that can’t be ignored by the “Swiss Science Diplomacy”. In 2008, swissnex China, a public-private partnership acting as a science broker and matchmaker, was created in Shanghai. “Together with Swiss trade offices, swissnex provides answers for all types of questions ranging from fundamental research cooperation to market opportunities for young, science-driven start-ups.” (“Swiss Science Diplomacy”, Flavia Schlegel, published in Science & Diplomacy).

Mr. Pascal Marmier, Founder and CEO of swissnex China, recently shared his observations with SJTU ParisTech Review on related issues.

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SJTU ParisTech Review: Regarding international collaboration and communication in science and technology, how do you view the progress of the past 20- 30 years?

Pascal Marmier / Executive Director of swissnex China, Vice Consul General, Consulate of Switzerland in Shanghai

Pascal Marmier: If looking at the past few decades, what we’ve had for long time is individual contact and collaboration across science sectors. But if you look now, the big picture is that science has become a global game. For example, Switzerland is one of the most globalized players when it comes to science; the numbers of papers published with international co-authors in Switzerland is always very high. This is a new development in the last 15 years. Secondly, it has been more and more supported by institutions, especially universities. Governments remain a key player as well. In China, joint ventures and bilateral research programs are taking place at both provincial and central levels. Scientific collaborations become part of the diplomatic agenda and can easily be supported by authorities.

I would like to contrast a little bit with the fact that innovation is still pretty much local at this point. Lots of innovation still happens in Silicon Valley before it gets out, sets up a company and starts opening offices globally. However, what we will witness will be the emergence of start-ups having two or three co-founders from different parts of the world in the same way it works for science collaboration now. It will be an exciting development to come.

With a combination of globalization and digitalization allowing people to connect easily and freely, is government effort still a better choice compared to civil collaboration both in business and academia?

 The role of government is very often misunderstood or underestimated. Government is still the key driving factor in scientific collaboration, especially when it comes to funding issues. Open any science magazine sold in the US, and you will find stories about the deficiency of getting funding. People are always chasing funding for their research, teams and equipment. Ground-breaking discoveries can hardly happen without government support.

 Another reason relates to what we call “big science” or “big project”. Take the Human Brain Project, a 1 billion EUR consortium project led by EPFL (Swiss Federal Institute of Technology) for instance. In Europe, it is driven by the EU commission by setting up frameworks and rules thorough diplomacy to smoothen the collaboration among countries. Again we should not forget that governments are responsible for infrastructure like satellites and GPS.

As an expert in the field of government support for innovation with swissnex, can you tell us how the Swiss Confederation helps universities and other institutions innovate and how the government facilitates the sharing of advances in innovation?

 In Switzerland, tasks regarding research and innovation are divided between the private and public sectors. The former bears over two-thirds of the R&D cost, which currently amounts to 3% of the national GDP. The Confederation is responsible for providing fertile ground for innovation at all political levels, of which an excellent system of education is the most fundamental part.

Government also invests directly in research and innovation. Two crucial institutions, the Swiss National Science Foundation (SNSF) and the Commission for Technology and Innovation (CTI), were established early back in 1943. They fund university-based research, while applied R&D and idea commercialization largely remain the domain of private sectors and universities of applied sciences (UAS).

The public research funding policy follows a bottom up approach by which funds are awarded on a competitive basis and a peer review process. Full accessibility to the whole public system—facilities and funding—is ensured and safeguarded by a reliable and stable political and legal environment.

Furthermore there are strong links and interactions between public and private sectors. For example, the CTI encourages higher education institutions and enterprises working together to create more new products and services that contribute to economic growth. CTI also offers coaching, financial resources and professionals to SMEs and start-ups–particularly in high-tech industries. Promising start-ups will get a CTI certified label, which means they are credible in terms of future potential and ready for investment.

Why start-ups?

Start-up companies play a vital role in the creation of jobs and the renewal of economic structures. More than 20,000 jobs in Switzerland can be attributed just to the first year establishment of start-up companies. For this reason the Swiss government, at all levels, put a lot of effort into the formulation of a solid ecosystem to guarantee the development of start-ups. Gaps in innovation, information or the funding process cannot be afforded. Research has to focus on market needs while the usage of the products has to be assured as well. Investors need to be informed about projects and start-ups in regards to sources of funding to accomplish successful market entry.

In this aspect, swissnex , through its network around the world, works with CTI organizing Market Entry Camps offering support to start-ups in funding, global market validation and market entry. Another program called Venture Leaders targets proven entrepreneurs that started their business 1-3 years ago and are ready to secure and export a solid IP. They will be taken to counties like the US and China to network with local entrepreneurs and professionals and explore market opportunities.

A start-up that profited from both of these programs is PlusMat, providing cost-effective technology to recover the lost Si from the PV sawing process for direct re-application in the production line. With the help of swissnex China, they already found one manufacturing partner to upscale the technology. A Chinese Venture and a French research institute showed interest in investing as well.

Venture Leaders China 2014 / Photo credit goes to swissnex China

Is it a good idea to bring start-ups or SMEs abroad? When Swiss start-ups try to find their footholds in China’s market, how can they overcome the cultural and social obstacles?

Successful stories like PlusMAT can act as role models to attract more Swiss start-ups to come to China, which is a very attractive market thanks to the mutual benefit between a technology provider like Switzerland and a vast market like China. Nevertheless the Chinese market still represents a very new terrain for tech companies to explore.

Diplomatic agreements like SSSTC (the Sino-Swiss Science and Technology Cooperation 2013–2016) and FTA (Free Trade Agreement) signed in 2013, and efforts made by stakeholders like swissnex China have all pointed to one single fact: The world’s second largest economy has become one of Switzerland’s most important economic partners, with great potential in innovation collaboration.

For SMEs or start-ups seeking green pastures globally, it definitely remains challenging. China is a big market and thus a good place to scale up your business. However, how exactly do you reconcile small start-ups with limited resources and the large market and demand? The main difficulty always lies in finding the right people and partners. This can make all the difference when you are from an industry with thousands of players like lighting. Can you find someone with the potential contract for you? Conversely, if you have no distributors who can put your products on the shelf, your business will never grow. Unlike big companies, it is a completely new topic for us and we have no experience at hand. So start-ups should have products adapted to local needs and try to offer what people here are looking for.

Practically speaking, it would be better for them to focus on either a specialized market based on solutions or a part of the value chain that can be applied across an industry. A good example is a ScanTrust, which empowers consumers or other stakeholders to check a product’s authenticity or learn about its origin with their mobile phone.

You can also bet on the market with enormous consumer demands, but make sure you won’t end up with cheap solutions and price war. Take the e-commerce industry as an example. It is big, and you can catch that trend if you want. The hard part is that you need to identify the industry where you have pricing power and thus can enjoy a higher profit margin.

Small countries like Switzerland, Israel and Singapore have successfully developed similarly unique models in terms of economic growth and innovation. To what extent can their models be borrowed by emerging countries like China and India, considering the specific weakness of the two countries in public support for innovation?

The situation in China has changed a lot over the past few decades, and it cannot be regarded only as the ‘world factory’ now. The government has recognized the great potential in information and communications technology (ICT) for the country’s transition to a knowledge-based economy. They made medium and long-term plans to improve innovation capability and promote social development. The effects are now beginning to show. For instance, China’s domestic R&D expenditure in 2013 reached 11,906 billion Yuan, which means an annual growth rate of over 20%.

However, considering the fragmentation and in-transparency of the Chinese market, it poses many challenges for domestic start-ups. In comparison to Switzerland, the Chinese system is very top-down and the government plays a crucial role, providing funding for different innovation players. Although the VC industry is fledgling in China, it seems to prefer growth-stage over early-stage companies. Under such a context, increasing openness is the key.

I think experience provided by Switzerland and Singapore takes a lot of time to be put into practice. The innovation policy is something that cannot be done overnight. For me, the most important aspect is to create a solid platform that all players can work together on. You need to maximize the opportunities for people to connect, exchange, collaborate and learn from each other. Switzerland is doing well in finding ways to connect industries with universities where government has played an important role. In this way, the learning process accelerates and the entire industry benefits.

While collaborations are always necessary, how do you secure a competitive advantage with latecomers like China and India increasing their innovation capacities very quickly?

It is indeed a challenge. Opening, sharing, bringing in people, technology and knowledge are one side, and then you need to keep a certain competitive edge to develop and even survive. In the case of Switzerland, the bottom line is that we are on top of the innovation index because we don’t have any other choice. We need to become the high-added value element of any industry that we are in. That’s why you can find lots of large Swiss companies operating abroad and doing very advanced activities.

However, when it comes to working with large countries like China, the gap in size and also the maturity of technology is still there. So platforms are very useful to offer something catering to both interests. For example, China is still on the way to fully realizing its manufacturing potential. At the same time, we can keep some very highly advanced manufacturing in Switzerland to make sure that we don’t lose the edge in the future.

Finally, there is now the realization among Swiss citizens that we need to push strongly for SMEs, because they are important parts of the economy and need to continue innovating.

As a European who used to work as the head of swissnex Boston and now in Shanghai, from your observation, what has been the particular driving force for innovation and technology in China in the past few years?

I think China is amazing in two aspects: “hardware” and “software”. I’m impressed by the investment in all kinds of infrastructure, not only in the cities, but we are also seeing things like incubators and accelerators where innovations can really flourish and develop very quickly. There is also innovative small scale manufacturing in Shenzhen with new organizations like Seeed Studio, for example.

More interesting is on the software side; we can see a strong desire from young people to become entrepreneurs and do start-ups. Actually, this is starting everywhere here in a way, forming a real community and climate. I’m also impressed by the competence Chinese entrepreneurs are bringing into innovation. From companies like Huawei, we see the industrialization of innovation. They invest their profits to develop innovation based on the manufacturing competence they have and experience they learned from traditional manufacturing. Reconsideration of innovation like this is very interesting.