In Domenico Scala, former CEO of Nobel Biocare, CFO at Syngenta and Group Treasurer of Roche, i-net appointed an experienced top manager from the life sciences industry as its president at the beginning of 2015. In an interview with «i-net Innovation report» Scala explains why Northwest Switzerland as an innovation hub for the life sciences should do more on its own account – and not only in terms of communication.
When it comes to innovation, US companies and startups leave the rest of the world standing. Why is this?
Domenico Scala: Is that really true? I’m not a fan of sweeping statements. I also don’t believe that we in Switzerland or in Europe are less innovative than the USA. But the fact is that the USA is very much more successful in the commercialization of innovation and, above all, also in self-presentation. The list of technical achievements developed in Europe but successfully launched on the market in the USA is long. Just think of the World Wide Web. And in medical technology it is largely American companies that are dominant today. This looked completely different ten years ago. Plant gene technology is also no longer a topic in Europe today, although we once led the world here.
The last example you mention has to do mainly with stricter regulations. An innovation killer?
Regulatory factors of course play a role. Plant gene technology was rejected in Europe. Today more than 80 percent of global soya and maize production is genetically modified. These products are also consumed by Europeans. When you look at it like this, people have quite clearly been cutting off their nose to spite their face. But the main difference between the USA and Europe is to be found elsewhere: historically, Europe’s economy has been built on debt ever since the Second World War. On the other hand, the USA has always set great store by entrepreneurship and venture capital.
Can you be more explicit?
The cantonal banks in Switzerland were founded in the 19th century to finance the development of infrastructure. What do the cantonal banks do today? They provide mortgages and that’s it. The venture capital function virtually no longer exists. In the pension funds, 60 percent of the money is invested in bonds and 40 percent in the stocks of listed companies. But in the USA, a much higher proportion of assets is invested in the establishment of new companies through venture funds.
The consequence of this system is that it supports the structure-preserving forces in Europe, from which mainly established companies benefit. And these companies less innovative. Is that also how you see it?
I’m constantly hearing that big companies are not innovative. But is that true? The perception in Basel should actually be quite different. We still have two mega-companies here today that have been among the most successful pharmaceutical companies in the world for decades thanks to their innovativeness. Most innovations in chemistry were driven by European companies, including also major companies from Northwest Switzerland. I don’t believe the size of a company alone is decisive – Apple and Google are also big companies. It is rather a question of mentality. Large companies are also more likely to take risks.
Does this mean we’ve lost our culture of innovation in Europe?
Yes, and this is drummed in at an early age. In the USA, it already begins with education: Americans largely have to pay for their education themselves. So for them even the university degree represents an investment that they somehow have to finance and that should eventually also pay off. And it does not stop there. The universities, too, are constantly seeking funds to finance their projects. Every president of a private US university gets up in the morning and tells himself: «Today I have to find ten million dollars.» There are no blank checks. This creates pressure, of course, and ultimately leads to innovators having to be very much more consistent in the commercial focus of their projects. This is lacking here. The Federal Institute of Technology and the Biozentrum of Basel University can match up to the best in the world academically. But when it comes to the number of spin-offs, then they are mediocre at most. Both systems have their pros and cons. The fact is simply that, in this way, more startups emerge from universities in the USA than here with us.
Universities are not the only resource of new companies. Basilea and Actelion are examples of very successful spin-offs of large companies. Should we not focus there instead?
That’s certainly an interesting idea. Innovations in established structures do indeed have a difficult time of it. There’s a lot of truth in the view that if you have a really innovative idea in a big corporation, you should push ahead with it unnoticed for as long as possible. In many large companies, more innovations are shot down than are driven forwards. For me, Kodak is the most striking example: They had all the patents for digital photography and still they let themselves get wrong-footed.
How can this be prevented? What can state-run innovation promotion organization like i-net do?
The question is whether a big corporation even allows the spin-off of an idea that it does not want to pursue further or not. Ultimately they never know whether the project might not perhaps be of benefit and at the same time they don’t want to create a potential competitor. So there are far fewer spin-offs from big companies than you might actually expect and would probably also be possible. When it comes down to it, such spin-offs also have to be decided and implemented top down. This is exactly how it happened with Actelion and Basilea. Bottom-up is much less feasible.
Unless there is sufficient venture capital and a suitable infrastructure, as well as other support services for entrepreneurs, such as coaching. This is precisely one of the objectives behind promoting start-ups. Do you see a conflict of interests with big industry?
An economist would say the state should keep its nose out of it and leave such developments to the market. But there is also a reservation: The market is focused on the short term; innovations on the other hand need the long-term view. New things don’t emerge from one day to the next. From the idea through proof of concept and funding to market launch quite often takes more than a decade. To this extent it is certainly not wrong if state institutions get involved here with the injection of appropriate resources in the right place.
And where will you apply the levers in future as president of i-net?
Basically, i-net is well positioned. I find it right, for example, that the emphasis is on the thematic promotion of innovation. And the choice of technology fields is right as well. The focus of i-net is on the networking of people and topics; this is an important service that cannot be provided in this form by the private sector. Many innovations today occur at the interface between the various technology fields. By offering a neutral platform here for the exchange of ideas and stimulating cooperation, i-net can make an important contribution to the future development of our economic region.
To some extent, Basel is something of a «one-trick Pony» and largely dependent on the life sciences.
How important do you think it is for a business center to strive for a certain diversification in this respect?
You can see the focus as a course or as a blessing. On the one hand the two big corporations absorb a lot of resources and talents. On the other they also create a lot of value and prestige from which our economic region can profit. I think we should look to this strength and use it as a springboard to new fields. For example, Roche employs more than a thousand ICT specialists in this region alone. That is already an outstanding basis for further development at the interface between life sciences and ICT. I believe there are dozens of such interesting fields that it would be worth advancing.
And how do you see Northwest Switzerland positioned in the global competition for inward investment?
The region is clearly undersold. Basel is not widely perceived as an innovation hotspot for the life sciences. The fact that we are should be much better communicated. In this, too, the Americans are unfortunately a step ahead. But it doesn’t have to stay that way.