Belgium is in a very favourable position when it comes to ManuTech start-ups and scale-ups. The brand-new study on the ManuTech start-up landscape in Belgium and Europe conducted by Agoria and Sirris shows this is the case. Why does the report raise quite a few eyebrows? And what should we do to make the most of this unique opportunity? We visited Ben Van Roose, Agoria's Head of Manufacturing Industries, and Omar Mohout, Entrepreneurship Fellow at Sirris, to find out all we could on this topic.
Agoria and Sirris have kept an eye on the start-up and scale-up ecosystem for a while. Sirris has researched this topic for the past five years and has collected data on approximately one thousand companies. Enough material to be able to deduce trends and to create a benchmark to compare Belgium to other European countries. Agoria sets up collaborations between start-ups and larger and smaller companies based on a variety of topics. The main focus is on ManuTech (digital start-ups and scale-ups working in manufacturing industries). Manufacturing companies, after all, form the core of the sector federation. Agoria's knowledge of this landscape and the data collected by Sirris were combined into an innovative study: The Manufacturing Tech Report.
Let's start at the end. What are the main conclusions of this report?
Omar: In short, we are boxing in the wrong weight class. We should move up. This is true for Belgium and for Europe. The gap between the talk and the walk on Industry 4.0 in Europe is substantial.
Ben: We also have a section of the industry that's a little outdated. Newer technologies raise the bar, such as FinTech (Financial Technologies), or MadTech (Marketing & Advertising). These technologies are more popular and have more sex appeal. Compared to these new industries, ManuTech is falling behind.
Omar: The manufacturing industry is still one of the cornerstones of our society. The problem is that there is too little innovation.
"We shouldn't be focussing on FinTech. It's not going to happen, Belgium will not become a financial hub. We're not New York, London, Hong Kong, Dubai or Singapore. But we can be Hong Kong or London in terms of ManuTech. We don't see this opportunity as much as we should."
Omar Mohout, Entrepreneurship Fellow at Sirris
The report shows it is high time to breathe life into ManuTech. What should be done to promote innovation?
Ben: Our main goal is to increase awareness. In spite of all the negative press, the future of the manufacturing industry is actually bright. And ManuTech will play a major part in realising that future. I completely agree with Omar that a healthy manufacturing industry forms the backbone of a healthy economic system. It provides ample opportunities for start-ups to invest in the future. On the other hand, companies but also governments have to become aware that start-ups provide advantages. Start-up businesses are very agile and work with flexible employees and freelancers, keeping their overhead to a minimum. Many innovative companies have still to implement flexibility. The potential is great.
Omar: That's right! The 'Blue Banana' urbanisation corridor is a good example. It starts in North Wales and runs through Greater London, BeNeLux (Belgium, the Netherlands and Luxembourg), Germany and Switzerland down to Northern Italy. This is the richest industrial area in the world, with the highest income per capita worldwide. Everything comes together in this corridor. As a young B2B ManuTech start-up company you cannot find a better location. This is an opportunity which too many are not aware of, because it is not sexy enough or because the manufacturing industry does not work on creating enough awareness.
In Europe two thirds of the start-up companies are B2B companies, as opposed to the trend in Silicon Valley. The figures for ManuTech are even higher and within Europe Belgium is the most B2B-focused country. For the manufacturing industry, Belgium and Europe are the place to be. Our heads up to young entrepreneurs: this is the land of opportunity. You don't have to go to either the USA or Asia: it's happening here.
On the other hand, the manufacturing industry does have to implement changes. I read an article in De Tijd (Belgian newspaper), stating that Barco will shift their focus towards the development of software. For almost a century, they were a traditional hardware manufacturer. They will now focus on software development. That is exactly what young companies provide within the manufacturing industry: digitisation. This shift clearly creates collaboration opportunities.
You need ingredients to cook with and ingredients require investments. We need to provide more resources to this type of company.
But isn't funding the core issue in Belgium?
Omar: We have to put that into perspective. During the last thirty years about three to three and a half billion euros was invested in new and innovative companies. Uber, the archetype among start-ups, single-handedly raised 21 billion. One company raised more than seven times the amount injected into the Belgian ecosystem in thirty years. In terms of investments, Belgium invests only a drop in the ocean. This does not make sense for a country as wealthy as Belgium. All the cards are on the table, but we need to combine all the ingredients to cook up a storm.
"We have the know-how, but the advantage can be increased through brain gain and intelligent migration. We need to invest in the future. If and when only the assembly work is carried out in Belgium and we no longer invest in development, the challenge is significantly bigger which is not in the interest of the manufacturing industry."
Ben Van Roose, Head Manufacturing Industries at Agoria
Ben: In terms of money invested in Europe during the last two and a half years Belgium is lagging behind. Scandinavian countries, France and Germany are at the top in terms of investments. These last two countries are, of course, also much bigger. But Finland, a country that is smaller than Belgium, invests four times as much as Belgium. There is plenty of room for improvement.
Omar: The government could play a role in increasing investments, in Brussels, Flanders and Wallonia. One of the most active investors is the government. But the gap is still too big. We need to increase the actual resources invested in all companies. Especially in ManuTech companies, because their position within Europe is unique. For example, we shouldn't be focussing on FinTech. It's not going to happen, Belgium will not become a financial hub. We're not New York, London, Hong Kong, Dubai or Singapore. But we can be Hong Kong or London in terms of ManuTech. We don't see this opportunity as much as we should.
It is important to keep the manufacturing industry in Belgium, but it is hard because of the high labour costs, especially when compared to Southern or Eastern Europe. Does Belgium not have a significant advantage in terms of know-how with regards to new technology?
Ben: Keeping the manufacturing industry in Belgium is important. Agoria and Sirris help companies through their Made Different programme and to transform into Factories of the Future. We distinguish between companies with their own development programme and companies that purely assemble products. The latter companies are facing a double challenge. These companies are not as strong because they do not have their own products. We have to invest in processes to keep them in Belgium. The life cycle of a vehicle, for example, is seven years. If you calculate a difference in labour costs of just one euro, this yields a difference of 100 million euro in seven years for all cars produced.
On the other hand, companies that handle their own product development can benefit from the strength of their own product. Start-up companies need companies that provide new challenges and innovation opportunities.
Omar: I can only agree to what you are saying, Ben. Not everyone realises that the middle class depends on the manufacturing industry. Cutting away the manufacturing industry is cutting away the middle class, which is detrimental for society as a whole. The manufacturing industry employees earn well, even on the factory floor. What I am saying is, we should not stress the labour costs time and again. Yes, we need to be competitive, but we should not join the race to the bottom. On the contrary. The difference in labour costs means we have to innovate and automate. That we have to be better than the others. In Vietnam a labourer costs 100 dollars a month, which means that there is no incentive to automate. It provides the opportunity for us to innovate. The report makes it very clear that innovation and automation are our way forward. Clearly, labour costs can be an issue for Europe and the neighbouring countries. But it can also be seen as a lever to innovate, to invest in added value.
Ben: The manufacturing industry in Belgium has the required know-how and needs to keep up to speed. Take Daikin, world leader in heat pumps and a large international group. Daikin is importing the required know-how from India and other countries. They just fly people in. They come to work here in order to make sure we will have the know-how in the future too. Within a group of this size, keeping R&D and production together is an additional strategic asset. We have the know-how, but the advantage can be increased through brain gain and intelligent migration. We need to invest in the future. If and when only the assembly work is carried out in Belgium and we no longer invest in development, the challenge is significantly bigger which is not in the interest of the manufacturing industry.
Omar: The migration of manufacturing from the US to China started in the nineties. The current movement is to bring the work back home. But the research and required education and training courses have disappeared. Once the ecosystem is gone, it is hard to reconstruct it. Keeping knowledge within the country is extremely important. The value of knowledge and know-how should not be underestimated.
Which role do start-ups and scale-ups play in development and the digital transformation of manufacturing companies?
Omar: The transformation of large companies creates opportunities for start-ups. Start-ups ensure that large companies innovate. There is a lot of interaction between start-ups and large companies.
Ben: The metaphor included in the book by Omar and co-author Dado on corporate venturing is a good example. They compare a large company and start-ups to a fleet consisting of a mother ship and many nimble and agile (speed)boats. Every boat decides where to go, under the guidance of the mother ship. There are many examples of companies that work according to this principle.
Omar: Everything is moving faster and faster nowadays. Technology developments are very fast: IoT in 20 varieties, 3D printing, artificial intelligence, etc. No company can manage to try out every type of business model and technology. There is more knowledge outside a company than within a single company. Collaboration is the solution when you cannot do everything yourself. Collaboration comes in a variety of shapes and sizes: co-creation, a take-over, customer relations, etc. This has become the norm. More and more companies are understanding this. Large, slow tankers put fast agile boats to good use to find solutions to a specific problem. Pick-it, for example, work on robots and export to China. A small company from Heverlee, no less, is helping to make robots smarter in China. This can be seen as validation. Bigger companies are not necessarily less smart, have fewer resources or fewer ideas. These companies are just not as agile. Smaller businesses are. Combining agility with the sturdiness of a larger company creates great opportunities.
Ben: Smaller SMEs also cooperate with start-ups. This combination also creates various opportunities for both parties, for example, through co-creation or refining the final proof of concept.
Omar: We need to stress this: Belgium is a country of SME. We have many SME which excel in their specific area of expertise, their niche, they are 'hidden champions'. Renson, for example, is working on creating smarter systems based on the IoT. Renson acquired Openmotics in Ghent for this purpose. A take-over is also a move towards collaboration. More and more SMEs believe this to be a viable option. This is relevant as it is the backbone of our economy.
Ben: This is an example of a take-over but there are also many examples of collaboration and co-creation between start-ups and SMEs.
Omar: I agree! Being modest is part of our cultural heritage. It is often an asset but sometimes it stands in our way. The achievements of companies such as Yazzoom and Robovision should be known worldwide. In their sector, these companies are top of the bill. If these were American companies, everyone would know about them. But in Belgium this type of achievement does not make it into the news.
"Our cultural heritage impedes blowing our own trumpets. We, therefore, do not advertise our manufacturing or any other industry for that matter, often enough! Our 'Made different' story is truly different: it is being publicised throughout Europe because it is very successful."
Ben Van Roose, Head Manufacturing Industries at Agoria
Ben: Our cultural heritage impedes blowing our own trumpets. We, therefore, do not advertise our manufacturing or any other industry for that matter, often enough! Our 'Made different' story is truly different: it is being publicised throughout Europe because it is very successful.
Omar: We should be proud of our companies, both our young and our more established companies.
Germany and Scandinavian countries are way ahead of us. Should we aim to close the gap?
Ben: We should always strive to match these countries. The power of numbers is significant. It is good to know that Antwerp takes eighth place in Europe in the number of deals closed. This is nice, but it would be even better to achieve the same level as Scandinavian countries. The government should share this ambition. There are quite a few projects, such as Scaleup.Vlaanderen and also a series of private initiatives such as BEyond. But government bodies could do more.
"I am sure we can achieve the same level as the Scandinavian countries. I'd be very disappointed if we do not aspire to do just that. When it comes to performance, size does not matter."
Omar Mohout, Entrepreneurship Fellow at Sirris
Omar: I agree. I am sure we can achieve the same level as the Scandinavian countries. I'd be very disappointed if we do not aspire to do just that. When it comes to performance, size does not matter.
Do you have any recommendations for the government, for entrepreneurs and for stakeholders?
Ben: Dare to chase your dreams with all that ManuTech can be. I am addressing everyone, from youths, students, scale-ups, research centres, universities as well as manufacturing companies, large and small. Believe in yourself, in the challenges, the opportunities for co-creation and collaboration with ManuTech start-ups and scale-ups and allow them to create their own identity. With regard to government bodies I would like to stress what Omar just said: everything is going well, not much is required to be able to become the Hong Kong of ManuTech. We have great research centres, many options are already available, we just need to dare rely on these more.
Omar: Policymakers need to make unequivocal decisions. You can't hedge your bets and win. We are already very good in certain areas, such as manufacturing or healthcare, we need to invest further in these areas. Again, I'm not talking about enormous sums of money. As I mentioned before, the entire ecosystem has raised 3.5 billion euro in 30 years, whereas Uber collected 21 billion in one. The required amount is not huge.
We need to create awareness on the importance of the manufacturing industry and knowledge-based industry for the middle class. Jobs in the services industry, a job at McDonald's, for example, will not sustain or create a middle class, but only create a new type of poverty. The middle class is extremely important in every society. The manufacturing industry and a knowledge-based economy are two cornerstones of the middle class. 1+1=4. 4 is the new 3.
The manufacturing industry is changing rapidly. Do you want to turn this challenge into an opportunity and follow in the footsteps of those working on important breakthrough areas? Thanks to this Manufacturing Community, you will learn everything about the various breakthroughs, about the ones who already went before you and about the ecosystem you have access to. Visit our Manufacturing Community: https://www.agoria.be/manufacturingcommunity/