Small companies are Europe’s ‘hidden champions’, digital SME alliance chief says

Smaller technology companies are Europe’s “hidden champions” that need to be connected to develop alternative solutions to the big tech companies, Secretary General of the European DIGITAL SME Alliance Sebastiano Toffaletti told Euractiv.

For Toffaletti, there is a misconception that everything is owned and invented by Google, Amazon, Microsoft, and other Big Tech companies.

But “the reality is that, if not all but many of the innovations do not come from those companies. What they have done is integrating whatever has been invented by others” and “packaging them under their brands, making sure they we were working seamlessly”.

While Toffaletti believes that the services users get from these companies through such technologies work well,  despite the impression that “they are the only ones who can control technology, this is not the reality”, he said.

“Technology is something developed by a multitude of players”. That is the case of open source, for example, where “we are talking probably hundreds of thousands of developers”, he said.

The DIGITAL SME Alliance wants to show that “Europe has thousands of hidden champions, smaller companies, which are at the top of innovation in their small niches”, Toffaletti said.

In his view, they are not as visible because they do not have goods for consumers “which are completely integrated and give a seamless experience that you can have when you have an iPhone,” for example.

Matchmaking

According to Toffaletti, “Unless they have a high degree of horizontal and vertical integration among them”, smaller companies “will never be able to go to the market with solutions that work for the consumers as well as for Big Tech.”

He believes that most tech companies follow interoperability standards, which “make it technically possible for data to flow from one solution to another and not to have a complete integration” and to make the consumer experience good.

However, in Toffaletti’s view, this is only possible “if the companies can collaborate and work together”. But a “sufficiently neutral” technology is also needed for companies to connect, Toffaletti noted.

If smaller companies connect, he pointed out that they can “work out interoperable solutions which can all together be an alternative to the dominant players” in an inclusive ecosystem. In his view, this can only happen by helping these companies to do so.

The Secretary General of the European DIGITAL SME Alliance also mentioned their matchmaking platform developed on behalf of the European Commission’s Directorate General for Internal Market (DG GROW).

“DG GROW had the same vision we had,” he said about connecting companies with each other.

The DIGITAL SME Summit organised by the DIGITAL SME Alliance on 13 November and taking place in Brussels also aimed to connect SMEs with political leaders working on the relevant files.

Platformisation, digitalisation, and the Digital Markets Act

Toffaletti talked about the “platformisation of economy” and the companies being on the list of gatekeepers of the EU’s Digital Markets Act (DMA). He said the phenomenon is “not good for Europe in general because we see our value being sucked by these companies.”

For example, “anytime anyone books a hotel, they pay 20 per cent to Booking.com. This is happening in many different sectors and on many different platforms. […] None of these platforms are essentially European. Therefore, a lot of value is moving from here to there. And this can only get worse,” he said.

Toffaletti said they “are convinced that this [the DMA] is the best legislation Europe has been putting forward in the last five years because this is the only piece of legislation addressing the market problem.”

He also pointed out that being digital is about more than using Zoom or selling something on Amazon, as he put it. Company digitalisation is the process of reinventing its business model to generate value through technology. This is a very different thing than accessing digital tools, Toffaletti stressed.

“I have to invent technology to generate value”, he explained. “If you are an SME and you are surrounded, in an ecosystem, by local tech vendors and software developers, they will help you develop technology and adopt technology. It is not going to be off the shelf.”

“This is the real digitalisation process, ” he said, adding, “This is when you become unique, you become really digital. And this is what we believe that Digital SMEs can do for the rest of the SMEs. That is why we like to call them the digital enablers. Those who bring the digitalisation to the other SMEs”, Toffaletti concluded.

[Edited by Luca Bertuzzi/Alice Taylor]