Location matters when crafting innovation ecosystems

One of the key “lessons learned” from our Innovation Tours to Silicon Valley is that the network of capabilities available in specific areas provide them with a tangible advantage when it comes to delivering on the promise of major technological advances. The combination of a highly educated labor force, access to investment capital, research capabilities, and the correct legal framework are all contributors to creating an environment that fosters both calculated risk taking, portfolios of opportunities, and a willingness to press the envelope on what can be considered possible. The combination of these factors creates a unique ecosystem in Silicon Valley that can be best described as delivering on the promise of two degrees of separation.

In the current era, we hear frequently about other regions looking to build out their own forms of “innovation” centers.” With a focus on factors that they believe will create a draw to boost the local economic prospects the civic concept is that these centers may replace industrial bases that have matured or moved on. While this is great in concept, the reality is that it takes time, potentially significant time, to actually move the innovation needle in a significant way. After all, Silicon Valley traces its roots to 1938. Research Triangle Park in NC dates to 1955. The 128 Corridor in the Boston area reflects back to at least the 1940s. Clearly these places do not evolve overnight, but with the right nurturing their impact on the local economy can be both persistent and far reaching.

Also see: Lessons for insurers from Microsoft and Amazon

Which brings us to one of the most celebrated, and hyped, corporate real estate hunts of all time. Amazon has made quite the splash in their ongoing effort to locate HQ-2. The list of possible sites was recently narrowed to 20 and, as the Washington Post reported, the writing of a big subsidy check “probably won’t tip the scales.” Instead what these cities have is “a common interest in university research, science education and accessible neighborhoods.” These are not assets that were created overnight, but rather the result of a demonstrated long-term commitment to building out these environments. In the study conducted by WaPo, which interestingly enough, is owned by Amazon’s Jeff Bezos, they concluded that all of the current cities in the competition are building competitive tech economies (i.e., ecosystems) that they will benefit from irrespective of Amazon’s eventual decision. Joseph Parilla, of the Brookings Institution, notes that creating these ecosystems is really hard work that “has to be built up over decades. You can actually make the types of investments in innovation and collaboration that will benefit your community — and by the way they are things that Amazon and other companies like, too.”

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Which of course highlights other decisions that companies have made recently in terms of their own focus on locating technology organizations to leverage access to resources and the ecosystems that can support their own aspirations for growth. MetLife recently opened a Global Technology Office in RTP, MassMutual is moving additional assets into Boston, and Prudential has opened an innovation center in Silicon Valley. Each presumably expects to create competitive advantage by being in a place where there’s a reasonable chance that a rising tide can lift all ships.

One of the fascinating conversations we recently had with the new CIO at Salesforce (SFDC), Jo-ann Olsovsky, was that one of the critical realizations that she needed to drive across her management team while at BNSF was that they needed to transform themselves from a transportation company into a technology enterprise. For insurance carriers that realize that this is also a differentiating aspiration, thinking about what ecosystem they want to be a part of may be a fair first question to answer.

This article was reprinted with permission from Novarica