Connecting Commerce Business Confidence in France’S Digital Environment a Report from the Economist Intelligence Unit

Connecting Commerce Business confidence in France’s digital environment A report from The Economist Intelligence Unit

Written by France

The challenge of change There is a tangible sense of digital barometer reading of 6.63 out of 10 As important as the external environment Mr Luyt agrees that resistance to change optimism in Paris, at both the start-up places the city 20th in the global table is, the hard work of digital transformation hinders the digital transformation efforts and corporate ends of the business of 45 cities. Marseilles finds itself 10 happens within each organisation’s walls. of many of France’s larger and more spectrum. Although not shared entirely places lower in the overall table, but its Judging by the survey results, French established companies. At the same in Marseilles, in both French cities digital executives strike a confident note about companies have a keener sense than time, he sees genuine interest on the part transformation is clearly on the agenda, individual elements of the ecosystem, most of how difficult that work is. When of corporates to engage with the digital and ecosystems are taking shape that such as support for digital innovation asked the toughest challenges they ecosystem and collaborate with start- are providing individual innovators and entrepreneurship as well as face in pursuing their transformation ups. Their purpose, he believes, is not just as well as small, mid-size and large ICT infrastructure. initiatives, internal cultural resistance to adapt new technologies but to bring in businesses with support for their digital tops the list in both cities. (In only one new ideas that could help spark internal initiatives. In Paris, 85% of participants Bertier Luyt, managing director of other city in the survey, Johannesburg, is change. The existence of Techstars in the Economist Intelligence Unit survey, Techstars Paris, launched in 2017 as resistance to change cited as the biggest Paris itself, Mr Luyt adds, is due to the and 80% in Marseilles, say that digital the local branch of a US-headquartered hindrance.) French business executives aspirations of its corporate partners transformation will be important to their accelerator network, shares the are clearly looking for some outside (which include Air Liquide, Groupama, organisations over the next three years. optimism of his Paris business peers. assistance to erode that resistance. Eight Renault and Total, amongst others) to tap (In Paris, one-third say it will be “very” The city’s digital ecosystem “has been in 10 Paris respondents and nearly nine into the innovative drive and knowledge of important.) The goals they hope to achieve buzzing for several years,” he says, “but in 10 (87%) in Marseilles say they look to digital start-ups. through transformation in one sense developments in the past 12 months have factors in the external environment to seem unambitious: improved operational done even more to boost the spirits of its help break down internal resistance to efficiency and cost savings are at or technology entrepreneurs.” Investment digital change. near the top of list in both cities. In Paris, volumes in digital start-ups in France however, over half (53%) of respondents overall are on a steep rise, says Mr Luyt. say that they aim through transformation He notes that networking events are to deliver better support for their growing in frequency and size, and Paris Figure 2: The toughest challenges organisations face in pursuing their digital customers. Another third aim to use has been further buoyed by the launch of transformation initiatives digital technology to reach new customer Station F—reportedly the world’s largest segments. For these companies, digital accelerator—with space to house over transformation is 1,000 start-ups (see page six, “Innovation Internal cultural 30% more than a cost-saving exercise. networks”). Mr Luyt adds that the resistance to change 27% election of Emmanuel Macron, a young Paris-based executives are relatively and technology-savvy president, in Government policies 25% upbeat about the capacity of the local May 2017 has added to the enthusiasm or regulations 10% digital ecosystem to help them achieve amongst digital professionals. their objectives. An overall Digital Cities Cyber security 23% concerns 27%

Lack of access to a strong 20% Figure 1: Overall barometer readings—French cities technology ecosystem 13%

Score (out of 10) Rank (out of 45) Talent/skills 20% shortages 27%

Paris 6.63 20th Paris Marseilles

Marseilles 6.40 30th

2 Telstra — Connecting Commerce © The Economist Intelligence Unit Limited 2017 3 The digital skills agenda The previous section helps explain why Figure 3: Digital skills most needed by organisations to support their digital Paris businesses have a strong need for transformation initiatives talent with change management skills. After cyber security, change management 38% is mentioned by respondents as Digital security frequently as advanced data analysis 17% skills. Marseilles executives, by contrast, emphasise their need for talent with Business change 20% 38% expertise in product development, as well management 10% as for analytics specialists and people with business network skills. 20% Big data analytics 27% Executives in both cities are relatively positive about the ability of local 18% Business network educational institutions to train future 27% employees in these skills. In Paris, 58% hold the view that educational institutions 18% are effective in this regard, and 60% say Mobile technologies 17% the same in Marseilles. Mr Luyt is highly Coders of the complimentary of local polytechnics and 18% other educational institutes, which, he Cloud computing claims, “train some of the best engineers 7% future today in the world”. Silicon Valley has been draining such talent from France for Paris Marseilles years, he says—an indicator of the strength of French technical education— but much digital talent is now remaining in Paris and other French cities to launch or work in new ventures. When asked about the digital expertise ages of 18 and 30—ready to enter or and Le Wagon have both established they most need today, 10% of both Paris- already in the workforce. (According overseas branches, including in Silicon based and Marseilles-based executives to the school, 100% have jobs by the Valley.) École 42, he says, has provided cite general coding skills. This points to a time they complete the programme, a creative model for delivering training concern that France’s younger students and four-fifths find work while still in programming not just to engineers, are not receiving sufficient training in a studying.1) Second, the school employs but to all types of digital specialists. core skill for the digital economy that is no teachers; the students are required This reflects the reality that different taking shape. They are likely to be taking to organise their own training in groups. levels of coding skills will be needed by a heart, then, in the progress of École The approach is designed to develop the greater variety of professionals than was 42, a tuition-free programming school collaborative and critical thinking skills previously the case. established in the French capital in that businesses today complain are 2013 by serial entrepreneur Xavier Niel. lacking in their IT workforce. (A branch of the school has since been opened in Silicon Valley.) Mr Luyt observes that École 42 has spawned numerous other coding schools Two features in particular make the in recent years within Paris and its school relevant for today’s business suburbs. Examples include Le Wagon needs. First, the students accepted and Simplon, and others springing up into each programme are between the elsewhere in France as well. (École 42

1 “A free, teacher-less university in France is schooling thousands of future-proof programmers”, Quartz, September 4, 2017.

4 Telstra — Connecting Commerce © The Economist Intelligence Unit Limited 2017 5 Innovation networks Paris’s digital ecosystem is buzzing with Executives in both cities say their firms activity. Startup Genome, a think-tank, use local accelerators, incubators and ranks Paris 11th in its latest analysis of innovation labs, as well as business the world’s leading hubs for technology associations and university networks, entrepreneurs.2 Aside from the large for advice on dealing with technology number of active tech start-ups in the challenges they are facing. Through the city (estimated to be between 2,000 same resources, they get to learn about and 2,600), the report takes note of the new ideas for products and services, plethora of accelerators, incubators and and also to meet, or obtain referrals to, co-working spaces. The launch of Station potential recruits. Techstars, according F, another brainchild of entrepreneur to Mr Luyt, plans to launch a “corporate Xavier Niel (see page five, “Coders of the innovation bootcamp” in 2018. This is future today”), in June 2017 has created a designed to provide training to employees particular stir. Mr Luyt’s Techstars is of its corporate partners in methods of also a major addition to the city’s legion collaborative digital innovation. of accelerators.

The survey suggests that Paris-based businesses will benefit from such accelerators’ work, as the respondents Figure 4: The most helpful external groups in assisting firms’ digital point to these (along with incubators) transformation efforts as the most valuable resources in the city when it comes to getting advice and 28% ideas for their own digital initiatives. Incubators/accelerators Interestingly, businesses are able to 17% utilise these structures more frequently than banks or government programmes Innovation labs 23% to obtain financial assistance for their and centres 30% Maintaining momentum digital programmes. Innovation labs are another important source of help, in both Business associations 23% Paris, more so than Marseilles, has they face (second only to internal Paris and Marseilles. and events 43% caught the attention of technology resistance to change) in pursuing their innovators from within and outside of transformation programmes. In both University networks 20% France, as well as the venture funds cities respondents are not effusive about and events 17% that finance start-ups’ growth. Larger, the role played by local government in established businesses within the their respective digital ecosystems. 18% city have also clearly benefitted from Yet they overwhelmingly agree with the Hackathons the growth of its digital ecosystem. premise that the role of city support for 3% Companies are mobile, however, and the digital transformation, at organisations survey suggests that they would shift such as theirs, will grow in importance. their base elsewhere should they find a Ecosystems do not emerge and grow Paris Marseilles more conducive environment in which to because of government policies, but realise their digital ambitions. As many as ecosystem growth can certainly be 45% of executives in Paris say their firms constrained by them. have considered this option in the past three years.

Amongst other indicators, businesses are hopeful that their city governments will become more supportive of a positive digital environment. Paris executives in particular point to government policies and regulations as a challenge

2 Startup Genome, Global Startup Ecosystem Report 2017.