At the recent World Economic Forum, Eric Schmidt, chairman of Google, said that, “On a net basis, more jobs were created by small companies and therefore entrepreneurs needed more support, otherwise the situation would get worse.” Hence the growing consensus in many economic quarters that entrepreneurial-driven business formation may be the best way to improve the state of the world (see article).
As noted in my article on technology changing economic development, this is indeed the focus of economic development agencies looking to grow their entrepreneur ecosystems within their location, and drive jobs and economic growth. In 2012, we took part as a media partner at the first Global Innovation Summit, and saw the appetite for government agencies and NGOs around the world to make this happen – our team, of Richard Wallace, Nishant Dahad, and myself were immersed during the conference in the debates and workshops and learned of example of various initiatives around the world to nurture their innovation ecosystems including in Africa and India.
At the 2012 summit, Victor Hwang of T2 Venture Capital and responsible for creating the Global Innovation Summit, said, “We see it as the start of a movement that seeks nothing less than the transformation of the way we think about economic development.” As noted then, the world “has squandered untold resources in funding technoparks, incubators, clusters, scientific research, technical training, and venture capital that have not yielded the expected results.” Today’s process of innovation depends on the vibrancy of entire systems, not just the strength of isolated, individual components.
It’s not just about Khosla’s passionate entrepreneurs, but it is equally crucial to have communities of investors, scientists, engineers, advisers, executives, lawyers, bankers, accountants, landlords, artists and other professionals that support and nurture the full life-cycle of innovation, a complex human network akin to biological ecosystems. Read the original article, A Tale of Two (Silicon) Valleys published in 2012 here.
One of the other key takeaways from the 2012 summit was related to the characteristics of Silicon Valley that made it successful – that in Silicon Valley, social, cultural, ethnical or language barriers were overcome by a prevailing sense of trust within and between communities that allowed exchanges of ideas, and paved the way towards a number of collaborations that may not occur in other places in the world (read GIS 2012 Day 2: Trust is Key to Collaboration).
So energetic was this conference that in follow up discussions, even we encouraged the organizers to create a Global Innovation Week for their next conference, very similar in nature to the Global Entrepreneurship Week that happens in the fall every year (this year during 18-24 November). This is exactly what has happened, and the Global Innovation Summit embraces a series of events, ranging from the summit conference itself, to sideline events like ‘the art of innovation’, ‘the innovative life science incubator experience’, ‘technology transfer models and impact on innovation: an international discussion’, ‘the women in innovation lab’, and ‘creativity and innovation in Brazil’. The event details for the week (17-21 February 2014) are all available on the web site.
Creating and nurturing innovation ecosystems and people who can create companies that create jobs and growth is a major ambition for many governments and development agencies around the world. What started many years ago in some countries as ‘we want to be like Silicon Valley’ has now become an international passion, with several cities around the world having created their own recipe for success (London, Berlin, Tel Aviv, New York, to name but a few). With this global passion for innovation, we are sure to see many more such successful innovation ecosystems or ‘Silicon Valley’- like places around the world in months and years to come.
Around the world, governments are making huge investments in creating their own version of Silicon Valley, in the hope it stimulates innovation-based growth in their economies, and hence generating wealth. This money is often spent in developing ecosystems of science parks, incubators, accelerators and fostering industry-academia links.
A new book aims to make the creation of these innovation ecosystems more of a science – a short 66-page book entitled, “The Rainforest Blueprint: How to design your own Silicon Valley”, claims to be a practical guide for putting the lessons learned from Silicon Valley to work in businesses, organizations, and communities around the world.
It’s written by Victor Hwang, who was also co-author of the Rainforest book which formed the foundation for last year’s Global Innovation Summit, for which The Next Silicon Valley was an official media partner (see ‘Creating successful innovation ecosystems – the rainforest analogy’). In that first book, it covered the theory of the biology of innovation and the social and cultural fabric that is an essential part of the success of Silicon Valley. It uses the rainforest analogy to describe the creation of the right environment and conditions for producing a thriving Silicon Valley-like innovation ecosystem.
Writing in Forbes magazine, Victor Hwang says, “The Rainforest Blueprint fills a practical need, not a theoretical one. It helps people engage collaborators and partners with diverse experiences and expertise. It helps them create shared understanding and provides some common tools. And it can be applied in corporations and nonprofits, not just geographic regions. What, after all, was the legendary Bell Labs, if not a mini-precursor of Silicon Valley?”
“Whether in a corporation, organization, or community, the challenge is to create an ecosystem, not just an infrastructure. Yes, it’s tempting to focus on infrastructure—as so many companies, cities, universities, and startup incubators do. Gathering the office space, the equipment, the money, and the labor is like starting a farm. It’s tempting in part because they are hard assets; you can prove that the work has been accomplished based on visible evidence.”
“But an innovation ecosystem is a Rainforest, not a farm. It doesn’t produce the crops that were intended. It produces crops that could never have been imagined. It comes from a serendipitous environment in which the cross-pollination of diverse ideas can thrive on trust, sharing, a willingness to fail, and a readiness to start over. With the right framework, we believe that such an ecosystem can be blueprinted. Everywhere.”
The book contains two parts – one is the foundation, recapping on the rainforest concept and the foundational structure of innovation ecosystems, and the second part, the ‘frame’ details the ‘how to’: how to seed, cultivate and nourish the innovation ecosystem.
Innovations are like weeds
To understand the rainforest analogy used by the author, this extract should explain the concept:
“Innovation is basically the opposite of mass production. We don’t want predictable crops. We want weeds. And weeds are birthed from uncontrolled environments. We call such places—like Silicon Valley—Rainforests.
Think about some of the hottest companies today: Facebook, Twitter, Google. Not that long ago, these companies were like weeds. They were little sprouts, and no one knew for sure if they would grow bigger. In Rainforests, we seek to nurture the growth of weeds. So we end up with this interesting paradox… Plants are harvested most efficiently on farms, but weeds sprout best in Rainforests.
To grow Rainforests, instead of trying to count individual weeds or the flowers they create, what matters is the quality of the soil. Flowers come and go. Good soil, however, will sprout good weeds. And their flowers will continue to bloom, season after season.”
In the book, it also explains the culture of trust and collaboration needed in successful ‘rainforests’ (see “Trust is key to collaboration”).
The second part of the book provides the tools that people can use to identify values and create their own blueprints for building an innovation ecosystem. For example, there’s the initial ‘Rainforest canvas’ for planning, and then delving down into the rainforest tools (for example, tool number three is ‘Celebrate role models and peer interaction’). After goals have been defined, then there is the rainforest timeline, which is effectively a project planner, followed by the rainforest scorecard.
The new book is an interesting approach with common sense tools to help focus thinking on the key elements of building an innovation ecosystem, using the rainforest analogy. The analogy is a good one, in that a Silicon Valley cannot be mass produced but needs all the right ingredients in terms of people, culture and assets (infrastructure). It helps create the thinking for an iterative process in nurturing the right environment for a Silicon Valley-like culture to evolve.
In many places around the world, the topics of innovation, start-up ecosystems and entrepreneurship have become common and fashionable areas of discussion. Almost everyone has debates around how to encourage innovation, how to grow the start-up ecosystem, how entrepreneurship can be encouraged and how entrepreneurial activities can be nurtured to grow. Having just spent some time in India talking to some of the players in this ecosystem and attending conferences, India is no different.
There’s no shortage of daily news on these subjects, with some activity or another that moves its tech cities like Bangalore, Pune, Hyderabad and others closer to emulating Silicon Valley in some ways (see the Mashable article on Pune). Just in the last week, mobile start-up accelerator Tandem Capital announced it was launching in Bangalore, India, and will back up to 20 early stage ventures with seed capital of US $200k each. Last year, Startup Village was opened in the city of Kochi, in Kerala state, an incubator with 1Gbps internet connectivity, to encourage telecoms and IT start-ups.
Startup Village aims to incubate 1,000 telecoms product start-ups over 10 years, with at least one being a $1 billion company started from a college campus. Dreaming of being a ‘Silicon Coast’, Startup Village will create an ecosystem and provide a platform for start-ups to create breakthrough technologies for the global telecommunications industry, focusing primarily on student start-ups from college campuses. The village provides several incentives, including a three-year service tax exemption, its own angel fund, and many other services on reduced or no fee basis – like IP strategy, infrastructure, and legal services.
While there’s lots of momentum in India, there are still gaps in the ecosystem. According to Paula Mariwala of Seedfund, speaking at a seminar on entrepreneurs and opportunities in India at Stanford University earlier this year, she said early stage investing is still far from mainstream, and there are several roadblocks – like lack of early adopters of products and services, access to technology and talent, and lack of a support system due to being a risk averse culture. On the latter point, it’s widely known that Indian students are invariably encouraged to study engineering, medicine, law, and commerce, and then get ‘safe’ jobs rather than go into business.
Mariwala says they can only replicate Silicon Valley in India by fixing the education system in India, since there are currently poor links between industry and academia across various sectors. The country also needs more role models and M&As. Good examples of Indian-born start-ups for the Indian market include Flipkart, Redbus, Inmobi, Makemytrip.com, naukri.com, and several others. These are hence providing some role models for other would-be entrepreneurs, but more are needed.
Beyond the quick exits
While the investors are chasing entrepreneurs and start-ups in the internet and cloud space for potential quick returns or exits, long-term vision on innovation is also being looked at. India’s president, Pranab Mukherjee, said last month that India needed to spend more money on innovation. He said that both public and private sector spending on innovation should be comparable to the levels spent in countries such USA, China, Japan, South Korea, Israel and the UK.
Quoted in The Hindu newspaper, he said “India spends only 0.9 per cent of GDP on research and development,” and that, in a globally competitive world, India had to unleash its innovation potential to increase capacity, productivity, efficiency, and inclusive growth. “The spirit of innovation has to permeate all sectors of economy from universities, business and government to people at all levels.”
The lack of technology innovation in India could be the reason why Indian conglomerates like Tata look overseas to invest in ground breaking technology research for commercialization and to produce the ‘next big thing’. Tata recently invested US $5 million into a fund at Israel’s Tel Aviv University, in its technology transfer company. According to the university, a Tata delegation of 13 scientists visited to see more than 70 technologies in the process of evaluation, and concluded that the structure would fit well with their innovation strategy.
While technology innovation might not be India’s forte, it does not necessarily mean India doesn’t have its own areas of innovation – for example, just last month, an Indian scientist made a major breakthrough in developing a $1 vaccine for the prevention of diarrhea. This could save the lives of thousands of children all over the world, as the current vaccine is available only at almost 20 times that price.
In summary, India’s new tech cities like Bangalore, Pune, and Hyderabad are emerging as thriving tech start-up ecosystems, but lack some of the innovative thinking and role models needed to make them really successful start-up ecosystems on the global stage. The examples of investment in real innovation potential, as we’ve seen from Tandem Capital and Kochi’s Startup Village, means that there are initiatives that would potentially lead to some parts of India generating a thriving Silicon Valley-like ecosystem.
The focus of many western governments is very single-minded: to reduce public expenditure in order to reduce financial deficits, resulting in sever cuts in public services. They should therefore take note of the latest ‘Bright Ideas’ from Harvard University, which actually shows how governments can deliver more from less.
“Government innovation does not require endless resources and generous budgets,” said Stephen Goldsmith, director of the Innovations in Government Program at the Ash Center for Democratic Governance and Innovation at the John F. Kennedy School of Government, Harvard University. “As exemplified by this year’s Bright Ideas, some of our country’s smartest innovations can in fact reduce government’s size while serving our citizens more efficiently and effectively.”
This is a far cry from the ability to spend by the governments of the emerging economies and BRIC countries, where they appear to be spending more to kick-start their innovation ecosystems. This is definitely the case in India for example, where Sam Pitroda recently opened a two-day national innovation conference. Speaking at the conference, he also spoke of the telecoms infrastructure investments to boost innovation in the country. “No government across the world has such a huge fund dedicated to facilitate public infrastructure,” Pitroda said. The Indian government is said to have earmarked around US$ 3.5 billion to the national optic fiber network (NOFN) project which envisages connecting 250,000 villages (more information at this link).
And in Brazil, the government recently announced a US$250 million program to boost its software and information technology sectors, plus tax incentives to enhance technology innovation.
Bright Ideas – 111 innovative government initiatives in the USA
The Ash Center at Harvard recognized 111 innovative government initiatives as Bright Ideas. Now in its third year, the Bright Ideas program recognizes and promotes creative government initiatives to encourage innovative ideas to be proposed. This year, a range of solutions address issues such as urban and rural degradation, environmental problems, and the academic achievement of students.
There are many innovations as outlined here on the Harvard Kennedy School web site, with a full list of the 2012 Bright Ideas here. One example of one of these ideas is from Sacramento County – its Department of Human Assistance developed an automated system that matches the welfare system against data sources from local, state, and federal entities to help detect and prevent welfare assistance fraud and overpayments. This system has saved millions of dollars annually by preventing and reducing welfare assistance overpayments.
Another example is from the city of South Bend, IN, USA, where it installed real-time monitoring and control using “smart valves” technology to meet federal environmental mandates on combined storm and sanitary sewer overflows. Through the use of distributed sensing and control logic which optimizes performance of infrastructure already in place, the city can save an estimated US$114 million over a conventional approach.
Another of the showcased 111 initiatives is a health and human services video interviewing scheme launched in San Diego County, CA. In conjunction with community partners to improve customer service, it enhances access to public assistance, and increases the efficiency of service delivery for clients who face transportation challenges or other barriers. Targeted populations include pregnant women, migrant farm workers, homeless clients, residents of battered women’s shelters and transitional housing, and both tribal and rural clients.
Innovation and entrepreneurship happening across America
The Harvard Bright Idea is indicative of the innovation going on across America to boost local economies and jobs. This was illustrated by Rebekah Iliff in an article earlier this year entitled, “Silicon America: 5 start-up economies keeping it real and bringing it back”. She argues that it’s not just major tech markets like New York, San Francisco, Boston and Los Angeles that are the centers of innovation and entrepreneurship, but almost every region across America is now growing their ecosystems and economies – from Austin to Detroit to Minneapolis to Columbus to Chicago. She quotes Scott Case of the Startup America Partnership who said, “There are amazing startups in every single state in the US focused on solving big problems and growing their companies. Whether it’s Denver, Des Moines or Dallas, founders are building their businesses in their hometowns, establishing vibrant local startup economies and creating jobs.”
EU 2020 initiative to stay globally competitive
The European Commission has taken a more collaborative approach on the global stage to enhance Europe’s position as a global destination for research and innovation. Climate change, food security and fighting diseases are the issues which increasingly require a concerted international research effort. Europe can contribute to it with its science base and innovative industries by being open to international co-operation.
The EU strategy proposes to further focus co-operation on EU strategic priorities while maintaining the tradition of openness to third country participation in EU research. This includes addressing global challenges, but also making Europe more attractive as a location for research and innovation, and boosting industrial competitiveness.
Máire Geoghegan-Quinn, European Commissioner for Research, Innovation and Science, said: “Going it alone is not an option in research and innovation. It is critical that Europe reaches out to international partners to access new sources of knowledge and address global challenges.” To this effect, Horizon 2020 is the EU’s programme for research and innovation aimed at securing Europe’s global competitiveness. It will be open to participation from across the globe. Running from 2014 to 2020 with an €80 billion budget, this program for research and innovation is part of the drive to create new growth and jobs in Europe.
Summary – innovation from different perspectives around the world
We are seeing different stances from different governments around the world. In some countries in Europe, there is a hard-line government rhetoric on cuts and more cuts, without much policy to enhance innovation and creation of jobs – it is almost pushing itself on a downward spiral out of which there is no way to emerge with any growth. True there are EU-wide programs like Horizon 2020, but that seems focused on blue-sky research which doesn’t yield immediate returns on jobs or economic growth. On the other hand we are seeing innovation across America being showcased by Harvard University, and we are seeing how state governments are proving that technology and innovation can deliver more, save money and create new jobs.
We are also seeing that emerging economies and BRICs are able to invest and potentially create many new jobs for their aspiring youth and populations. It will only be a question of time before the investments start producing results and these economies start becoming the hotbeds of innovation and jobs for the rest of the world.
We seem to hear more and more about innovation being the key to economic growth around the world. And everyone is talking about how to create successful innovation systems. Not only do we have the IASP 2012 event next month in Tallinn, Estonia, celebrating science parks around the world (where The Next Silicon Valley is the strategic media partner), but following that is the Global Innovation Summit in July in California.
The opportunity from both emerging markets and innovation is indeed a key agenda on the minds of many governments with troubled low-growth home markets. While the BRIC countries continue to be a focus for European and American companies with flat or negative growth, governments are continually asking themselves, ‘How do we create the next Silicon Valley’. But this hasn’t just sprung up now – even when I joined the board of a regional development agency in the UK a few years ago, they were asking that same question then, and agencies keep asking that question now.
Our magazine, The Next Silicon Valley, was created over two years ago to both address the need for more awareness among this global innovation community of best practices, business models, technologies and key players, as well as create a channel and voice for the global innovation ecosystem.
Global innovation is on a growth curve again, if you look at the recent data published by the World Intellectual Property Organization (WIPO). It noted there were a record of 181,900 new patent applications filed in 2011 – a growth of 10.7% on 2010 and the fastest growth since 2005.
It’s interesting to see that Far East companies dominate the top five patent applicants globally, but the USA still has the largest number of applicants globally. In the top five, ZTE Corporation of China had 2,826 published applications, followed by Panasonic Corporation of Japan (2,463), Huawei Technologies, Co. of China (1,831), Sharp Kabushiki Kaisha (1,755) of Japan and Robert Bosch Corporation (1,518) of Germany. Each of the top five applicants saw double-digit growth in published applications. Five Japanese companies – Panasonic, Sharp, Toyota, NEC, and Mitsubishi – feature in the top 15-list.
How to create successful innovation ecosystems
Innovation ecosystems around the world all want to emulate Silicon Valley in some way. But how do they do it? The focus should be on culture, say Victor W. Hwang and Greg Horowitt (pictured below) of T2 Venture Capital. Many innovation clusters focus primarily on the ingredients — the obvious assets, like venture capital, skilled workers and universities. But what they have largely ignored is its recipe — the social interactions that turn those ingredients into vibrant companies. Learning the right lessons of Silicon Valley can empower entrepreneurs, as well as cities and regions, and take them to new heights of innovation and productivity.
This is the subject of their book, The Rainforest: The Secret to Building the Next Silicon Valley. This talks about the biology of innovation and the social and cultural fabric that is an essential part of the success of Silicon Valley, not just about putting all the ingredients in one place. To quote from the book, “We argue that the pillars of innovation’s conventional wisdom – free markets and clusters – are unable to provide comprehensive answers to the mystery of systemic innovation. Where innovation is concerned, markets are largely inefficient”.
The biological science of innovation in this book is fascinating, again quoting from the book, “Innovation happens in an analogous way [referring to biological researcher Stanley Miller’s paper published in Science in 1953, about the thinking behind the creation of life]. Individual people are the atoms swimming in the complex biological system of human society. Innovation can be sparked to life by a particular combination of people who happen to have ideas, talent, and capital in the prebiotic soup of humanity. But those elements must be mixed in just the right way for them to find and connect with one another. When viewed from high above, humans are just particles moving around and bumping into each other. Rainforests – whether in Silicon Valley or elsewhere – are environments that encourage disconnected people to self-organize into greater forms of biological life.”
This is absolutely the point about creating successful innovation ecosystems like Silicon Valley – that you can have the right ingredients, but you need to have the right recipe to make the interactions work to create value.
The authors of this book are also behind the Global Innovation Summit – an invitation-only event with a gathering of hundreds of ‘thoughtful, iconoclastic doers’ from around the world who share a common interest in practical solutions for sustainable development through global innovation. The event will focus on one of the biggest development challenges of our time: how do we create innovation ecosystems worldwide?
The partners for this summit include the World Bank, the OECD, the African Development Bank, the Inter-American Development Bank, and many other organizations. Additionally, the event will feature leading companies, venture capital firms, academic institutions, NGOs, and startups from Africa, Asia, Latin America, and the OECD.
Our paper at IASP 2012: The Next Silicon Valley – Now a Global Quest
We will of course be at the IASP 2012 event in Tallinn next month and our editor Richard Wallace will be presenting a paper entitled, “The Next Silicon Valley – Now a Global Quest”, which takes an inside look at five emerging innovation metro areas around the world, and the interests, networks and connections that sustain them. He’ll take a look at New York (USA), Flanders (Belgium), Bangalore (India), Dresden (Germany), and Wellington (New Zealand). For more information on the conference, click here.
We look forward to meeting you in Tallinn and hearing about your cluster, ecosystem, innovation, or organization.
Nitin Dahad, CEO & Publisher, The Next Silicon Valley