Are innovation clusters local or global?

Social media has, it seems, taken over the world. Partly as a result of this ‘connectedness’, it is possible in this modern world to collaborate and create businesses more easily across international borders.  So are tech hubs and clusters really relevant, or is the whole world one big tech cluster?

Attending Social Media Week last week in New York, one would have got the impression that New York is the centre of the tech universe. In particular, during one keynote, venture investor Jalak Jobanputra quipped that Silicon Valley entrepreneurs from San Francisco were asking her ‘how do I get to New York?’, referring to the fact that more was happening in ‘Silicon Alley’ (New York) than in ‘Silicon Valley’. Apart from the obvious answer that came from someone in the room (fly JetBlue), it seemed to be that panel of speakers were all convinced that New York now had more going for it than the Valley.

When you look at deals, the volume of deals is still higher in Silicon Valley (by about five times more than New York), but when comparing 2011 numbers to 2010 numbers, VC investments in New York rose 64.3 percent in terms of dollars and 10.2 percent in terms of deals, while investment in California rose only 24.4 percent in terms of dollars and 5.0 percent in terms of deals (see ‘Venture capitalists favor Silicon Valley, but Silicon Alley is rising fast’). So one can see where the New York tech community representatives were coming from.

Silicon Valley also saw significant jobs and wealth growth – according to the 2012 Silicon Valley Index, more than 42,000 jobs were created in the region in 2011, and Silicon Valley’s per capita income in 2011 expanded by four percent to reach $66,000. The index also revealed that patent registrations leapt by 30 percent over 2009 with 13,311 new patents registered in 2010, largely in computers, data processing and information storage.

Given the title of this publication, we often get asked “Where is the next Silicon Valley”.  Actually as we have established above, Silicon Valley might set the global benchmark, but given the question posed at the beginning of the article, it might not actually be a relevant question, given that it is possible to collaborate using social and online collaboration tools. What seems more relevant is whether a good innovation ecosystem can be formed locally that can connect with the global network.

In this scenario, and it already happens extensively, start-up and fast growing tech (and non-tech) companies are building teams in the relevant locations where there is expertise and where the customers are located – these are increasingly in different and multiple locations – and then exploiting the benefits of online tools and social media to build globally dispersed teams from the outset.

And some investors are beginning to recognize the fact that they need to venture to other innovation hubs (for example Dave McClure going to New York and various parts of South America last year) and not just in their back yard.

So the question is not about whether you should be in Silicon Valley vs Silicon Alley, or Bangalore vs Recife: the question is more about how you can build across multiple innovation hubs simultaneously. Innovation is now global not just local.

Innovation goes beyond just technology at Davos

While Facebook’s IPO filing was the major news last week, young technology leaders were also influencing the global economic and political agenda at the World Economic Forum at Davos, including executives from Facebook and other major technology companies. A key topic of debate was innovation and how it needs to be considered beyond just innovation in technology.

In fact the word ‘innovation’ actually appeared 35 times in the 100-page agenda of the World Economic Forum – compared to 14 mentions of ‘governance’, 24 mentions of ‘war’, and five mentions of ‘poverty’.

It seems Davos was trying to make itself more relevant – according to The Washington Post, it must counter popular perception that it is largely an event for out-of-touch global elite and assorted celebrities to determine the fates of the other 99%.  As part of this objective, this year’s participants include new voices from the Arab world as and ‘global shapers between the ages of 20 and 30’ (see below) who can inject new energy into finding a solution to the world’s most critical issues. The event also had a significant online presence, on Facebook, YouTube and Twitter.

In the ‘shaping new models’ session, the leaders explored how organizations build creative, engaging and energizing workplaces.
 Participants addressed ‘designing creative environments’, ‘creating a culture of successful failure’ and ‘managing energy and time for resilience and performance’. All are key indications of success of an innovation hub. It also led a conversation around the question of how ‘art and science of creativity’ will change in a century of engineering – in other words, looking at how to build creative ecosystems; and a conversation on how ‘informed and connected consumers’ are reshaping product and service innovation.

Leadership and innovation models

At the leadership and innovation models session, they debated the scope of innovation: “We think of innovation as involving technology,” said Johanna Mair, professor, Stanford University, USA, global agenda council on social innovation. “We need to shift gears and reboot to look at innovation as not limited to physical technology, but involving social technology as well.”

The session concluded that the business world is trying to keep pace with new technology, and the political world is trying to catch up to the business world. The public sees all of this as a kind of creative chaos, and is calling on a new generation of leaders to make sense of it all, and do it quickly. New leaders will need to have a much broader scope than those of the past. To avoid being overtaken, they will need to closely monitor a far more diverse range of social factors and groups than ever before.

Youth – global shapers

Recognizing that youth drive the technological-cum-social change the world is going through, the World Economic Forum invited 70 young ‘global shapers’ to the 2012 annual meeting. According to the official web site, since half of the world’s population is under the age of 27, it was vital that young voices were heard. This group came from 44 city-based ‘hubs’ established by the forum in 36 countries, including China, Egypt, India, Israel, Mexico, the Palestinian Territories, Russia, Switzerland and the USA. The community has an average age of 27 and its representation included 20 chief executive officers, a 24-year-old mayor from the Philippines, a bioengineer who created a cardiac surgery simulator used by over 3,000 surgeons worldwide, and a professor of nanotechnology from Zurich.

“Once, the best indication of success was an individual’s past experience. Now, with the world as interconnected as it is, we find the old models are no longer working and we need fresh approaches to solving the world’s most pressing problems,” said Professor Klaus Schwab, founder and executive chairman of the World Economic Forum.  “The Global Shapers are ‘digital natives’ who grew up with the Internet. They have vision, think laterally, act quickly and make connections across networks in order to successfully solve problems. This community is of vital importance and we see tremendous opportunities for shapers and today’s leaders to learn from one another.”

“Young people don’t need today’s leaders to empower them. They are already empowered through their passion, ideas and access to information and technology. That’s true whether they live in Berlin, Bamako or Ulaanbaatar,” says David Aikman, Head of the Global Shapers Community at the World Economic Forum.

In summary, innovation has become a key theme on the economic and political agenda, and the debate has moved on considerably from just innovation in technology. In this age of social media and a generally young global demographic, it’s also recognized that the young global shapers will increasingly influence much of this global innovation both in terms of business as well as governments – as we have seen both in the likes of Facebook and the changes being effected by the Arab Spring.