I just returned from a week in London, about half of it spent at Imperial College. I gave a couple of seminars to MBA students, and spent time with faculty and research members of the Innovation and Entrepreneurship Group, arguably one of the foremost such academic groups in the world. A main focus of my conversations was the Design-London initiative, which was launched earlier this year as a multidisciplinary effort between the engineering and business schools at Imperial College and the Royal College of Art.
Design-London aims to "create an innovation triangle between design (represented by the Royal College of Art), engineering and technology (represented by the Imperial College Faculty of Engineering), and business and management (represented by Imperial's Tanaka Business School)." It brings together these multiple disciplines to address jointly the challenges of innovation in an increasingly global, competitive economy. Its main objective is to make London an innovation leader that would enable it to thrive in such a world by building on the historical strengths of the city - its history, culture, infrastructure, diversity and talent base.
I am intrigued by the efforts around the world to make cities, regions and nations centers of innovation. They all see major opportunities, as well as fear being left behind as the world transitions from the industrial economies of the past two hundred years to wherever it is we are heading in the knowledge or information age. Such fears are quite rational, if not downright primal. Becoming the equivalent of a ghost town, as the global economy passes you by, is something none of us wants for our families and communities.
Throughout history, certain cities and the regions around them have been the major centers of innovation in a variety of different fields as a result of their unique accumulation of talent and wealth. Innovation is very susceptible to network effects - that is, the more talented people you have in close proximity, the more their ideas and their work influence each other and stimulate them to innovate. While talent is necessary to becoming an innovation hub, it is not sufficient. You need wealth, in order to support the talented people and bring their work to market. You also need an open culture that values a diversity of ideas and experiences.
These are the kinds of qualities you generally find in urban centers. The lucky few that have been able to achieve a critical mass of innovation in their specific areas of endeavor continue to attract more and more talented people, as well as the managers and investors to support them. After a while, these innovation network effects become formidable barriers to entry for competing regions. Think of Venice and Florence in the transition from the Middle Ages to the Renaissance. Think of London and New York in the transition from the agricultural to the industrial age.
Given the prominence of information technologies in the transition from the industrial to the knowledge age, over the last thirty years we have seen the rise to prominence of Silicon Valley and a few other technology-based innovation hubs, like Boston, built around the great engineering universities in their midst – Stanford and UC Berkeley, and MIT, respectively. We have also seen a number of places around the world try to become “the next Silicon Valley,” hoping to attain the magical brew of technologists, entrepreneurs and venture capitalists to propel their region forward. Most such efforts fall short of their goals, many ending up in outright failure. Why is this so?
Over the years, Silicon Valley has achieved an incredible network effect of innovation that gives it an advantage in scale that is almost impossible to replicate. The region has brought together a large and fluid community of technologists and entrepreneurs who share ideas as they move from company to company - as founders, employees, managers, board members or investors. It nurtures such communities of technologists and entrepreneurs through a number of organizations aimed at bringing them together to create the right innovation brew.
In an excellent New York Times article last week, Steve Lohr writes that “a look at the microclusters within Silicon Valley demonstrates the business relationships, the social connections and the seamless communication that animate the region’s economy. It also suggests the human nuance behind the Valley’s success and shows why that success is not easy to copy, export or outsource.” A number of organizations within the region work hard to develop this sense of community, SDForum, - "The emerging technology connection" - and The Churchill Club - "Silicon Valley's premier business and technology forum" - being among the most prominent.
For decades now, one has the feeling that great cities like London and New York have also suffered from their own case of Silicon Valley envy, in spite of their own talent, communities and leadership in so many areas, such as finance, media, entertainment, advertising, fashion, retail, theater and publishing. These cities have seen Silicon Valley and other technology hubs become major engines of growth for jobs and wealth, while they themselves were losing jobs, especially the manufacturing base they had built up over the years.
But, something interesting is now happening. While information technology is very much the engine driving the knowledge age, the bulk of innovation and ensuing economic growth going forward is less likely to be driven by the technologies and products coming from labs than from their applications outside the laboratory - in particular in those activities that are market-facing and that involve people, either as providers or consumers of services.
This means that the greater opportunities for innovation, productivity, job creation and economic growth can now be found as we apply the huge advances in IT, the Internet and related technologies to address problems in the marketplace and society at large, in industry after industry, from healthcare to finance to distribution, entertainment and media. I believe that such IT-based marketplace and societal transformations are going to be the essence of the knowledge economy.
As has happened throughout history during similar, major transitions, there will be winners and losers. Cities and regions around the world will compete for leadership in the various industries in the knowledge economy, a competition that is likely to be even more intense than in the past, given our increasingly global, integrated world.
In principle, cities like London and New York - with strong talent bases and economic positions in key industries that IT is now transforming - should do quite well, if they embrace technology and engineering into the mix as Design-London promises to do.
And it may be Silicon Valley, the Boston area and other key technology-based innovation hubs that find themselves playing catch-up. While their open cultures and generation of opportunity will continue to attract talented people and investors from all over the world, they may need to become more urban-like – that is, more complex and diverse in their cultural and industrial base – in order to capture the kinds of innovation that will be driving the most growth and societal benefit in the years ahead.
In other words, it may not be enough to build social networks of techies and entrepreneurs. The economic and cultural palette may need to be broader.
One thing is certain: The competition will be fierce, and nothing is guaranteed. The stakes are very high. It will be truly fascinating to see how it all develops.