This post was written by Manuel Ramalho Eanes, Executive Board Member at NOS.
Europe lacks collective scale. It remains a sum of very different parts, specific and different in cultural, political and economic terms. It remains partitioned and rigid. A challenge for European companies and for those moving to Europe.
This context has led some to reach out for familiar cultural environments in past colonies, some others to specialize in multinational industries and others still to focus on innovation as the only viable means for survival or material growth.
In Portugal, my homeland, for example, we are stuck with a very small scale and little room for differentiation in this front. Location is almost irrelevant for many industries, distribution is easily matched and coverage and capillarity are factors of very little differential impact. The only chance to differentiate-for a while-is to innovate. This is probably the reason the country makes for such a cheap and interesting laboratory for new business: cheap qualified labor, good transport and technology infrastructure, first-world consumer habits and a great quality of life frame the environment for innovative business concepts.
Others have pursued financial service hubs to attain a scale impossible to grasp internally, producing the fiscal and transactional environments necessary to thrive in these arenas. A questionable path in the long run. But in the long run, if long enough, we will not be here to tell the story and the benefits in between have proven relevant enough.
This makes for a very different corporate environment, where local knowledge and influence are as relevant as operational excellence, where local brands survive and thrive despite globalization, where family firms are powerful and long lasting economic forces.
Perhaps the lens is not duly adjusted. Maybe US states are each their own reality and global US companies-as EU's-an exception. It would certainly require further and deeper analysis.
Nevertheless, the hypothesis remains: "local" scale makes a difference for US firms and entails differentiation potential; this leads to a very different business fabric-of less family and more public businesses, of more specialized and operationally focused businesses, of less potential for conglomerates to thrive-and certainly to a different pressure on innovation vs. scale.
A final note on innovation: It does not mean that, overall, there is not a more fertile environment for new horizon innovation in the US. History has proven the opposite. Scale also makes for that. It just means that within an industry's fabric, it is less likely for the same company to diversify its growth axis, as building scale is in most cases a sounder and easier path. And that for sure should produce different companies.
So what's in it for an American Company? A different lens. A lens that may recommend each European market to be considered its own laboratory, with potential for same-base-culture expansion. A lens that may recommend experimentation in the smaller of these markets. A lens that may recommend senior leadership in taking them over-at least in the first stage of expansion. A flexible, senior lens, to sum it all up. Be ready to innovate in your European expansion.