Building innovation clusters: Smelling the coffee

There was a time when countries and cities rushed out to build their silicon something. After many failures and dead-end real estate, this tendency has now sobered. Silicon valley has remained where it was, and its ecosystem proved impossible to replicate. So, where does the thinking about innovation as redemption go from here?

Despite the spectacular failure of some of the fêted projects, there should not be doom-and-gloom in the innovationland. There are some notable successes too, and useful lessons. As governments look to rebuild after the pandemic - and before a new urge to replicate takes hold - it's worth reflecting on what separates success from failure.

It's useful to start at first principles: Innovation cluster is a zero-sum game! Silicon valley is difficult to replicate because it exists, because it vacuums out money and talent from all other places. It's not enough to ask whether one can replicate Silicon Valley, but whether one can compete with it. Without answering that first, all efforts to get something going may end in failure.

This does not mean that no innovation cluster can be built: Just that the innovation clusters have to have their own logic fully worked out, rather than following one formula. There are more inventors in the world than Silicon Valley can accommodate. Besides, some very smart people may make a conscious choice not to go to Silicon Valley; some others may focus on solving local problems. These people will thrive elsewhere in the world, as long as they can be enabled to do so.

This enabling is the key to building innovation clusters. One should avoid wasting energy on prime-time television promulgating plans to build silicon something, but rather by getting real about creating innovation ecosystems. Here, silicon valley offers some lessons; it would not have happened without the government spending some money. As the valley history will attest, the crucial difference, from the other doomed efforts which we know so well, was perhaps in the fact that at the valley, they grew by serving the government as the customer, rather than as the grant-making master. I think this is a significant difference: Government as a customer creates competition, whereas government as a grant-maker creates cronyism. Not that some grants are not needed; but market creation, which the government as customer does, is far more important.

This should also highlight another related point. Before going on to conquer the world, Silicon Valley was built on solving problems and servicing customers locally. Too much attention gets paid to what Silicon Valley does today and futile attempts to copy it follow; we don't study its history nearly enough to know how it came about. For innovation cluster builders, this is a useful place to start, and perhaps the lessons are obvious. Stanford, military industry, nearby atomic research - all the disparate elements may make sense together if we do. No government official announced the founding of the valley on television; it came about as the building blocks fell in place.

Finally, while there is no other Silicon Valley, it will be wrong to say that there are no other successful innovation clusters. There indeed are the software industry clusters in Texas and East Coast, in Europe, Japan and lately in China. There are interesting ones in unexpected places: Video game industry in Nairobi, Agritech in Israel, Spacetech in different places - many examples abound! This is another important point: That these clusters came about responding to unique local opportunities and leveraging local strengths. As other countries search for innovation-led growth, a beginning must be made by seizing the local opportunity.

Instinctively, it's easy to know how it starts: A great university (or an ecosystem of higher education), research labs, government funding preferably in the form of procurement, a society that welcomes outsiders, good urban infrastructure (but not purpose-built ones - remember Jane Jacobs' point that new ideas need old buildings!) etc. But it is extremely difficult to achieve, because there is no political brownie point in making this happen. However, in the aftermath of Covid19, when city economies have to be kickstarted and new forms of economic activity have to be found, it is perhaps time to smell the coffee!