March 03, 2009

Innovation: the usual suspects?

Where do startups find a fertile ground? Where will they find themselves in an environment that not only supports what they're doing but also offers them abundant services and products that they need to make it through their young and fragile lives?

Ask the question to an American and he'll probably point out that the only real place to start a new technology company is Silicon Valley. Ask that same question to a European and... he'll probably tell you the same. Europe might have places like Sophia-Antipolis, Kista or Belgium's very own IMEC, but the attractiveness of Silicon Valley remains almost legendary.

Aren't we blind to the alternatives and overlooking some factors where the Valley has fallen behind? Apparently not, if McKinsey and the WEF (World Economic Forum) are to be believed. Their innovation roadmap claims to include no less than 700 innovation-linked factors. In fact, they notice three distinct strategies when dealing with innovation, leading to three types of innovation clusters:

"Our data indicate that, depending on the strategy, mature innovation clusters will evolve toward one of the following categories:

  • Dynamic oceans: large and vibrant innovation ecosystems with continuous creation and destruction of new businesses. Leading innovators and primary sectors change organically as the hub frequently reinvents itself through significant breakthrough innovations.
  • Silent lakes: slow-growing innovation ecosystems backed by a narrow range of very large established companies that operate in a handful of sectors. These clusters are frequently the source of a steady stream of “evolutionary” innovations and step-wise improvements.
  • Shrinking pools: innovation hubs that are unable to broaden their areas of activity or increase their lists of innovators and so find themselves slowly migrating down the value chain, as their narrow sector becomes less innovation driven and increasingly commoditized.

Fascinating stuff, except for the fact that the results of all this hard work remains unpublished. All McKinsey provides us is the following graph with only a handful of places identified:

Click to see full size

54t

But even with this very fragmented picture, the big trends are clear: Silicon Valley in particular and the US in general, remains the place to be. Or is it? Does it really matter for a Web 2.0 startup who its physical neighbours are. Is it important that you can drop by on your host or your payment processor? Haven't sites like Odesk successfully proved that providers can be anywhere. In fact, for a lot of startups this way of working helps them to keep the costs low. Most of all though, isn't the best place to be the spot where most of your customers are?

Raphael Cockx

Comments

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Does it matter who the neighbors are in the physical space? Yes, I think so, though I am puzzled by it. I am a strong believer in telepresence technologies, such as virtual environments, yet I must admit that physical clustering of activities in major sectors such as software and finance cannot be denied.
The financial sector has been electronically connected for a long time now, yet Wall Street and the City remain the places to be.
Silicon Valley is a famous example for software and internet of course. One could say that clusters can emerge elsewhere (for instance in and around Seattle), but we still talk about clusters: companies active in the same very broadly defined sectors, paying happily higher rents in order to be in the physical proximity of each other.
I guess Professor Richard Florida has a point when he describes megaregions where activities cluster, and which have more success if they celebrate diversity and tolerance.

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