GOING DIGITAL
AI and Europe’s medium-sized firms: How to overcome an Achilles heel oe.cd/obs/2R8
©Alamy/Unsplash/Fernanda Sapina
Benoît Bergeret, Founder, CEO, indust.ai; Founding Board Member, Hub France IA
Artificial intelligence could become very real in the world of business. But funding needs to be corrected first for mediumsized firms, where millions of jobs are at stake. Modern technologies collectively known as artificial intelligence (AI) have demonstrated their ability to help companies decide faster and operate better. With the promise of further and more impactful applications, business leaders in all sectors are starting to embrace AI technologies. This includes medium sized firms, which face particular challenges. McKinsey estimates that the potential impact of AI in Europe could exceed 20% of gross value added in 2030, if widely diffused and properly used. Because of its enormous potential impact on the EU workforce and economy, AI has been embraced by public organisations and governments, generating a flurry of initiatives and large
public budget allocations to support its spread. Funding of AI adoption in Europe mainly comes from three sources. Public funding is the first source, either top-down or at the local level. The second is self-funding of large enterprises’ internal projects, which can in some cases be supported by public funding. And the third is venture capital funding of AI start-ups, totalling upwards of US$7.4 billion world wide in the second quarter of 2019 alone. Funders, both public and private, operate under the assumption that investing at the top of value chains—such as Horizon 2020’s €1.5 billion investment in R&D— will ultimately benefit all of the economy—the famous “trickle-down” effect. However, there are structural limits inherent to these funding mechanisms, creating a significant blind spot when it comes to medium-sized enterprises (MSEs). By MSEs, we mean companies employing between 250 and upwards of
5,000 staff and generating turnover between €50 and €6 billion. Current funding mechanisms exclude many MSEs, especially those whose primary activity is not centered on data, such as businesses that produce goods or services relying on the exploitation of a tangible asset. These MSEs are found in the manufacturing, transportation, and energy production sectors, among others. From our estimates, MSEs in these sectors (collectively referred to here as “industrial MSEs”) together represent about 20 million jobs in Europe, and 50 to 60% of gross value added. MSEs do not benefit fully from these incentive mechanisms for three reasons. First, public support often comes in the form of financial incentives distributed as part of “top-down” programmes that operate via trickle-down mechanisms, all the way down to narrow segments of the industrial fabric. The groups targeted by these programmes often only feel their impact some time later. When this public
OECD Observer No 319-320 Q3-Q4 2019
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