The word competitiveness is emerging as a theme for the new European Commission, a guiding principle for economic development, and an alarm bell to spur political leaders across Europe’s capitals to action. It is right, and the report by Mario Draghi couldn’t be more timely: Europe must take bold steps to sharpen its competitive edge in an increasingly fierce global environment.

Working for Booking.com, one of Europe’s tech champions, has given me a front-row seat to both the limitless potential and the many challenges European businesses face. Draghi’s report underscores many truths, but one quote stands out for me:

“The problem is not that Europe lacks ideas or ambition. We have many talented researchers and entrepreneurs filing patents. But innovation is blocked at the next stage: we are failing to translate innovation into commercialization, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations.”

Innovation Gap: Booking.com’s Story

A European tech leader in its DNA, Booking.com grew up from a tiny startup in the Netherlands into a major tech platform with a global reach. We scaled at the dawn of the internet age, and our success owes much to the entrepreneurial culture of the Netherlands. But even then, we faced challenges, especially accessing risk capital and navigating the fragmented regulatory landscape, as we grew.

The innovation gap Draghi highlights vis-a-vis the US or China is real. Many European startups struggle to make the leap from idea to implementation. Bigger problem still is reaching global scale and entering a €100B+ valuation club. Ambitious midsize or even large European companies are slowed down by the lack of harmonized market access.

Productivity and Global Competition: Empowering SMEs through Digitalization

One of the key themes in Draghi’s report is the need for Europe to boost productivity, especially among SMEs, which are crucial to the economy but often lack the resources and managerial bandwidth to compete globally. At Booking.com, we’ve seen firsthand how empowering small accommodations with digital tools and a global audience has transformed the travel industry.

Draghi’s call aligns closely with our experience. By using open platforms like ours, SMEs can focus on delivering high-value services, such as personalized guest experiences, while benefiting from advanced technology and global reach. Partnership with digital platforms helps small businesses solve one of their biggest headaches — customer acquisition — in a risk-free format without the need for upfront investment. This synergy between small businesses and large tech platforms is exactly what Draghi advocates for, and what independent research from McKinsey also highlights.

The ECB identified technology as a key driver of productivity, noting that slow tech diffusion in services — where SMEs dominate — explains much of the EU’s productivity gap with the US. However, the accommodation industry has been an exception, where within-firm productivity has increased, coinciding with the rise of online platforms.

This isn’t about big vs. small or old vs. new — it’s about creating value through collaboration and fostering the diffusion of tech across all sectors

The Need for Skills and Digital Competencies

Draghi’s emphasis on skills development is another point we can’t ignore. At Booking.com, we have made significant investments in digital skills training, both within our company and for the thousands of SMEs that use our platform. Digital competencies are the currency of the modern economy, and it is vital that we equip the European workforce with necessary skills.

Our experience has shown that when hospitality SMEs are given the right tools and training, their productivity goes up, and can even match that of global hotel chains. We’ve seen this transformation take place across Europe, from boutique hotels in Spain to family-run B&Bs in the Netherlands. With the right support, be it from partnership with platforms like ours or a nurturing regulatory environment these businesses can not only compete but excel on a global stage.

A Call to Action: The Future of European Competitiveness

At present, the valuation of the top 5 biggest European tech companies — ASML, SAP, Booking.com, Adyen, and Spotify — add up to around $600–700 billion, whereas the combined valuation of the U.S. top 5 tech giants — Apple, Microsoft, Alphabet (Google), Amazon, and Nvidia — exceed $9 trillion. With greater alignment between governments and businesses, we can foster an ecosystem where innovation thrives and companies can scale more easily across borders.

The European competitiveness Draghi envisions is what we embody at Booking.com. Our success is a testament to what is possible when global ambition, innovation, and collaboration come together. But Europe must do more to foster the conditions that will allow its businesses — large and small — to compete on a global stage.

Mario Draghi’s recommendations are only as good as the meaningful actions we take together across European institutions, national governments, and the business community. By embracing innovation, supporting SMEs to better adopt technology, and at the same time recognizing the contributions of larger businesses, the EU can secure its place among the global leaders in the digital economy. Preserving Europe’s diverse landscape of local enterprises hinges on the ability of SMEs to adopt and integrate new technologies. This isn’t about big vs. small or old vs. new — it’s about creating value through collaboration and fostering the diffusion of tech across all sectors.

A shorter version of this article first appeared in Euractiv on 23 Oct 2024.

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