Innovation ecosystems Empowering … ecosystems Empowering entrepreneurs and powering ... and to...
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Innovation ecosystems Empowering entrepreneurs and powering economies Search
Transcript of Innovation ecosystems Empowering … ecosystems Empowering entrepreneurs and powering ... and to...
Innovation ecosystemsEmpowering entrepreneurs and powering economies
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3 Introduction
4 Evolutionoflabourmarkets
8 Revolutionoflabourmarkets?
10 Mappinginnovation
13 Nurturinginnovation
15 Fosteringinnovationfortheglobalcommunity
17 Recommendationsforcreatingsuccessfulinnovationecosystems
18 Aboutthisreport
Contents
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ThisreportwaswrittenbyAnnaLawlorandeditedbyMonicaWoodleyofTheEconomistIntelligenceUnit.
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Theriseof‘micro-multinationals’–start-upswhichoperateacrosshigh-andlow-costlocations,deliveringtoaninternationalcustomerbase–exemplifiestheopportunitieswroughtbyglobalisation,digitalcommunicationsandtheinternet.Thechallengesforbusinessleadersandpolicymakersaretoempowersuchopportunitiesforentrepreneursandtofosterdomesticandinternationalinnovationecosystems,whilemitigatinganincreasinglydysfunctionalgloballabourmarket.
Global economies are on the cusp of a ‘third-wave industrial revolution’1 in which enterprising, young innovators will play a central role.
Introduction
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1Basedoncommentsfromthefourcasestudies,citing:http://en.wikipedia.org/wiki/Alvin_Toffler
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2002 2012
12%
6%
2002 2012
5%
7%
2002 2012
8%
10%
2002 2012
10%9%
2002 2012
5%
8%
2002 2012
6%
8%
2002 2012
7%
13%
India**Brazil China* France IsraelUK United States
Evolution of labour markets
Mechanisationandtechnologicaladaptionbycompaniesarespeedingupprocessesandincreasingunemploymentandunder-employment–somethingtheUSwriterand‘futurist’AlvinToffler2hasdescribedasapost-industrial‘thirdwave’ofsocioeconomicorganisation.
Recordedofficialunemploymentasapercentageoftotallabourforce
The global labour market is undergoing massive structural changes that will have potentially far-reaching implications for the workforces of the future.
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*China’s2002=2012figuresestimated.**India’s2012figuresestimated.Source:TheEconomistIntelligenceUnit.Pleasenote:datanotavailableforNigeria.
Thetypeofworkpeopleacrosstheworldaredoingisshifting.WhileagriculturestilldominatesinemergingmarketssuchasIndiaandNigeriaandmanufacturinghastakenholdinslightlymoreadvancedeconomiessuchasChina,theproliferationoftheservicesectorsindevelopedeconomiessuchastheUS,theUKandFrance(accountingforalmost80%ofGDP3ineach)standsinstarkcontrast.4
2http://en.wikipedia.org/wiki/Alvin_Toffler3https://www.cia.gov/library/publications/the-world-factbook/fields/2012.html4https://www.cia.gov/library/publications/the-world-factbook/fields/2012.html
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growthin2011yethadalabourparticipationrateof47.9%;fewerthanhalfofitscitizensofworkingageareemployed.Equally,Indiaproduced6.3%GDPgrowthin2011andhadalabourparticipationrateof55.6%.Chinabucksthetrend,with9.3%GDPin2011andthehighestlabourparticipationrateoftheeightcountriesexaminedinthisreport,at74.1%.
Brazil2000 68%2011 70%
Nigeria2000 45%2011 48%
India2000 60%2011 56%
China2000 77%2011 74%
Israel2000 54%2011 57%United States
2000 66%2011 64%
UK2000 62%2011 62%
France2000 55%2011 56%
Source:TheEconomistIntelligenceUnit.
Source:TheEconomistIntelligenceUnit.
DealingwithdysfunctionallabourmarketsIntheWest,thelongeconomicslowdownhasreduceddemandforlabouracrosstheboard,makingitsignificantlymoredifficultforpeopletofindwork.Perversely,infaster-growingeconomiestherearealsosignsofdysfunctionallabourmarkets.Nigeria,forexample,produced7.4%GDP
25
20
15
10
5
0
-5
-10 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Brazil
China
France
India
Israel
Nigeria
United Kingdom
United States
25
20
15
10
5
0
-5
-10 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Brazil
China
France
India
Israel
Nigeria
United Kingdom
United States
However,astheInternationalLabourOrganisation(ILO)considersapersontobeemployediftheyhaveworkedatleastonehourin‘gainful’employmentinthemostrecentweek,suchfigurescouldconsiderablyunderestimatetheunderemploymentrateinmanycountries.
Labourparticipationrate,total(%oftotalpopulationages15+)PercentagechangeinrealGDPoverpreviousyear
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Matureeconomieswhereeconomicgrowthhasbeenlessrobustarealsodealingwithgrowingageingpopulations–makingthemtop-heavyandproducingfeweryoungpeopletoreplacethegenerationswhoareapproachingretirementorarealreadyretired.
FranceandtheUKhavethehighestproportionofover-65sintheirpopulation(oftheeightcountriesexaminedforthisreport),whereasinfast-growingcountriessuchasNigeriaandBrazilthoseagedover65accountforasignificantlysmallershare–lessthanhalfthatofFranceandtheUK.
Thisposesaproblem,andidentifiesapotentialopportunityforfast-growingcountries;theireconomiesarenotmaximisingtheyounganddynamicpopulationavailabletotheworkforce,asdemonstratedbythelowlabourparticipationrates.
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38
52
1961
Nigeria
2011
42
66
1961
India
2011
55
73
1961
Brazil
2011
44
75
1961
China
2011
70
1961
France
2011
72
8282
1961
Israel
2011
71
81
1961
UK
2011
70
79
1961
United States
2011
Lifeexpectancyatbirth,total(years)
Source:WorldBank.
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Populationages0-14(%oftotal)
NigeriaIndia
42% 41% 42% 44%
24% 26% 28%29% 31% 36%
1961
Brazil
2012 1961 2012 1961 2012 1961 2012 1961 2012 1961 2012 1961 2012 1961 2012
40%
18% 18% 20%23%
18%
China France IsraelUK United States
Source:WorldBank.
Populationages65andabove(%oftotal)
NigeriaIndia
3%
7%
3% 3% 3%5%5%
1961
Brazil
2012 1961 2012 1961 2012 1961 2012 1961 2012 1961 2012 1961 2012 1961 2012
4%
9% 9%
17%
12% 11%12%14%
17%
China France IsraelUK United States
Source:WorldBank.
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‘Zero-hourscontracts’,forexample,giveemployersflexibilitytoemploycasuallabourasandwhenrequired,withnoneoftheresponsibilitiesassociatedwithhiringemployees.Companiescanthereforekeepoverheadsandcorporateliabilities(suchasemployeebenefits)low,makingthemcompetitivelynimble,advocateswouldargue.Thistrendhasswollentheranksoftheself-employedfreelancerorcontractorindevelopedeconomies,ostensiblygivingthemtheflexibilitytoacceptordeclineworkastheychooseandtooperateinthelabourmarketunrestrictedbyacontractualobligationtooneemployer–butalsounsupportedandwithoutasafetynet.
TheinternethasfacilitatedaboominonlinelabourexchangessuchasElance,oDeskandPeoplePerHour,marketplaceswhichconnectself-employedworkerswithemployersofferingone-offworkprojectsorzero-hourscontracts.5Youngpeople(aged18-24)andthoseagedover55aretwiceaslikelytohaveastheirmainsourceofemploymentazero-hourscontractthananyotheragegroup,accordingtotheCharteredInstituteofPersonnelandDevelopment(CIPD).6
Arethesedevelopmentssignsthatthelabourmarketisevolving,creatinganinternet-enabledmarketplaceofself-employed,entrepreneurialindividualswhochoosewhenandhowtheyworkforcorporations?TylerCowen,ProfessorofEconomicsatGeorgeMasonUniversityintheUS,saysthattheriseofself-employedfreelancersdoesnotconstituteasubsequentriseinentrepreneurialactivity.
One aspect of the structural changes to labour markets, particularly in developed economies such as the UK and US, is the shift to flexible and remote working arrangements.
Revolution of labour markets?
Instead,“itisevidenceofsomesocialandeconomicdysfunction”;heexplainsthat“they’rekindofcheaplabouratthefringe”,whichenablesthe‘real’entrepreneurialcreatorswhoareabletodrawfromthisemploymentpoolquicklyandeasily.
Morethan75millionyoungpeoplearenowunemployedglobally,withsomeofthehighestyouthunemploymentratesfoundindevelopedeconomies.Beforethefinancialcrisis,youthunemployment(ofthoseaged15-24)inEuropewasalreadydoublethatoftherestofthepopulation,7andthisgrouphasbeenhithardestduringtherecession;bytheendof2012theyouthunemploymentratewas2.6timesthetotalrate,accordingtotheEUstatisticaloffice,Eurostat.8Emergingmarketsfarecomparativelybetter.IndiahashalftheyouthunemploymentrateofFrance,forexample.AlthoughNigeriahasayouthunemploymentrateof38%,afarlargerproportionofmanyemergingeconomiesare‘informal’–‘cash-in-hand’,untaxed,unmonitoredandunaccountedforworkandeconomicproductivitythatoperatesoutsideofthe
‘formal’economy.Thiscanobscure–orskew–thetrueeconomicpicture.ItisestimatedthathalfofIndia’seconomyandasmuchas90%ofitslabourforcefallundertheinformaleconomy,9secondonlytoSub-SaharanAfrica,whichhasthelargestinformaleconomyintheworld.
Schumpeter’screativedestructionForJaideepPrabhu,JawaharlalNehruProfessorofBusinessandEnterpriseattheJudgeUniversityofCambridgeJudgeBusinessSchool,UK,thisistheresultof‘Schumpeter’screativedestruction’–thewayinwhichcapitalisteconomicdevelopmentarisesoutofthedestructionofsomeprioreconomicorder.“Whatwe’reseeing,it’sreallytheneweconomyoftheinternetthathasmadetheworldflat,butonlyincertainsectorsandonlyforcertainpeople–peoplewhohaveaccesstothoseglobalecosystemsandglobalnetworks,”hesays.“PeopleinvolvedinmanufacturingintheWest,forinstance,haveseentheirincomesdeclineoverthepast20yearsorsoastheChinese,inparticular,addverylargenumbersofpeopletotheglobalworkforceinthosesectors,andWesterncompetitivenesshasnotkeptup.”
AsWesterneconomiesshiftfurtherintosectorssuchastechnicalservicesandIT,thereisadivergencebetweenthosewiththerelevantknowledgeandexperienceinsuchhigh-demandareaswhogainemployment–evenifitisinanon-traditionalandmoreflexibleform–andthosewithmoretraditionalskillsandknowledgewhohavelimitedaccesstoemployment.Itisnotjustchangesinlabourmarkets,butthewayinwhichpeopleworkisshiftingaswell.
>75millionThenumberofyoungpeoplewhoarenowunemployedglobally.Source:Eurostat.
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0 10 20 30 40
17.8%Brazil
5.8%China*
22.6%France
10.5%India
38%Nigeria**
18.9%UK
17.6%United States
14.7%Israel
0 10 20 30 40
17.8%Brazil
5.8%China*
22.6%France
10.5%India
38%Nigeria**
18.9%UK
17.6%United States
14.7%Israel
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Sources:CIAWorldFactbook.10*OECD.11**WorldBank.12
Source:CIAWorldFactbook-Unlessotherwisenoted,informationinthepageisaccurateasofjanuary1,2012
*Youthunemploymentrate,aged15-24,bothsexes.Source:MillenniumDevelopmentGoalsDatabase1UnitedNationsStatisticsDivision.**WorldBankstatistics.
Youthunemployment(aged15-24),2012
Youthunemployment(aged15-24),2011
5http://www.economist.com/news/business/21578658-talent-exchanges-web-are-starting-transform-world-work-workforce6http://www.cipd.co.uk/pressoffice/press-releases/zero-hours-contracts-more-widespread-thought-050813.aspx7YouthUnemploymentTrends:http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics#Youth_unemployment_trends8YouthUnemploymentTrends:http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics#Youth_unemployment_trends9https://www.credit-suisse.com/newsletter/doc/apac/aic2013/20130712_indiamkt.pdf10http://www.indexmundi.com/g/r.aspx?v=222911https://skills.oecd.org/informationbycountry/chinapeoplesrepublicof.html12http://businessdayonline.com/2013/11/addressing-youth-unemployment-in-nigeria/
ProfessorPrabhubelievesthenextgeneration’sapproachtoworkwilltransformpartsofthegloballabourmarket:“Wewillstarttoseeaverydifferenttypeofemployment,whereyoungpeoplearenotlookingtobigcompaniestoemploythembutwillincreasinglystartbeingtheirownemployer,havetheirownbusiness.”Hebelievesthatthe‘democratisationofinnovation’isunderway.
“Inthe20thcentury,innovationwasthepreserveoflargecorporationswithaccesstoresources,largeteamsandR&D(researchanddevelopment)budgets,”heexplains.“Bothindevelopinganddevelopedeconomies,we’restartingtoseesomethingofarevolutionwhere,increasingly,smallerteamswithfewerresourcescandothingsthattheycouldn’tdoeventenyearsago.Thisisbecauseoftheneweconomy.”This,hesays,isfacilitatedbyopenaccesstoknowledgethroughfreeonlinecourses(knownasMassiveOpenOnlineCourses,orMOOCs),accesstonon-traditionalfundingsourceslikecrowdfunding,theabilitytoquicklyandaffordablycreateprototypeswith3Dprinters,andaccesstosocialmediaandinternet-enablednetworksthathelpyoungentrepreneurstocommercialisetheirinnovationsandsourcenewmarkets.
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USA92,595
UK26,998
China25,326
Nigeria2,150
Brazil7,400
Israel7,500 India
15,509
France11,910
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DavidGill,ManagingDirectorofStJohn’sInnovationCentre(establishedbyStJohn’sCollege,partoftheUniversityofCambridge,UK),says:“Ithinktheparadoxoftheconnectedworldisthat,yes,itiseasierandeasierforsomebodyintheUKtobecollaboratingwithsomeoneinPolandorSiliconValley,butyoustillfindyougetgeographicconcentrationsofpeople.Partly,Ithink,becauseit’stodowithhowyoubuilduptrustandculturestostartwith.”
DevelopinginnovationecosystemsTheterm‘innovationecosystem’describestheroleofindependentfactorsworkingtogethertoenableentrepreneursandallowinnovationtooccurinasustainedwayinaparticularlocation.However,analysinghowtheydevelopdifferentlyindifferentplacescanenablepolicymakersandbusinessleaderstoprovideamoresupportiveenvironment.
While the internet allows this development anywhere, ‘innovation ecosystems’ have emerged in multiple locations around the world – hubs or hotspots of entrepreneurial activity that form a geographic cluster, for example in Silicon Valley in the United States.
Mapping innovation
Mappingtheconversationsaroundinnovationecosystems–newsvolume
Source:Quidresearch;RelativenewsvolumesurroundinginnovationandentrepreneurshipfordistinctgeographiesasextractedfromopeninformationstreamsbytheQuidnaturallanguageprocessingandconversationmappingengine.
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Inordertoinvestigatethedevelopmentofinnovationecosystemsaroundtheworld,TheEconomistIntelligenceUnitturnedtoSiliconValleystart-upQuidInc.Astheinternethaschangedlabourmarkets,soithasalsochangedresearch.Byminingtensofthousandsofnewsandblogsourcesonline,13Quidwasabletomapconversationsineightdiversegeographieswithidentifiedinnovationecosystems:theUS,UK,France,China,India,Israel,BrazilandNigeria.
DiscussingentrepreneurshipTheresearchprovidesintriguinginsightsintohowpeoplewithinthosegeographies14discussbusinessinnovationandentrepreneurship,whichnon-domesticlocationstheyassociatewithinnovationecosystemsofinterest,andhintsattheculturalnuancesatplayinlocationsaroundtheworld.Itisbyinterpretingdatasuchasthesethatgovernmentsandbusinessleaderscanunderstandthekindsofinterventionsthatmightencourageinnovationecosystemstotakeroot,ortonurtureentrepreneursandinnovationwheresuchasystemisalreadyinplace.
Quidfoundthatinsome–largelyWestern–nationsonlineconversationsandpresscoverageweredominatedbydomestic-focusedgovernmentpolicyanddataaboutentrepreneurialactivity.ThiswasthecaseintheUK,whichalsotendedtowardsbroaderconversationsabout‘smallbusinesses’ratherthan‘start-ups’and‘entrepreneurs’,whichweremoreprevalenttermsintheUS.DiscussionsinFrancealsoconcentratedondomesticcompanies,butratherthangovernmentpolicy,itwasawardprogrammes,
Toptenlocationsmostfrequentlymentionedininnovationcontentclusters,accordingtoQuid’sresearch
Source:Quid.Pleasenote:thedomesticecosystemsidentifiedineachoftheeightgeographiesaremarkedinpaleblue.
13Between18August2013and5December2013.14Caveat:ThosewhohappentopublishtheirviewsonlinebetweentheperiodQuidexamined;somesources(suchasaveryprolificbloggerorjournalist)couldpotentiallyskewthedatafindingsbasedontheterminologytheyprefer.TheQuiddataalsodonottakeintoaccountdifferencesinjournalisticstyle/preferenceacrossthedifferentregions,whichcouldaccountforcertainwords(‘smallbusiness’versus‘start-up’)beingmoreprevalentincertaingeographies.Thedataalsodonottakeintoaccounttheproportionofthepopulationineachoftheeightcountrieswhohaveaccesstopublishingontheinternet,whichmeansthattheresultsmaynotbetrulyrepresentativeoftheviewsanddiscussionsofthoseoperatinginthenation’sinnovationecosystem.
incubators,investmentsandpartnershipsthatdominated.Inthiscontext,China’sinnovationecosystem(basedontheQuiddata)wasasintrovertedanddomesticallyfocusedastheWesternecosystems.
Theinnovationecosystemsofdevelopingcountries–particularlyBrazil,IsraelandNigeria–weretypicallylessintrospective,focusingonglobaltradeandstrategicregionalorglobalpartnerships.Toalesserextent,India’stoptencontentclustersincludedinternationalpartnershipstofosterentrepreneurialcollaboration(withAustraliaandCambridgeUniversityintheUK,respectively).
ConnectingecosystemsByamalgamatingthelocationsnamedincontentclustersabouteachoftheeightinnovationecosystemsexamined,amapemergesoftheconnectionsbetweenthem.Thechartbelowidentifiesnotonlydomesticinnovationecosystems–suchasChicago,NewYork,SanFranciscoandLosAngeles,inadditiontoSiliconValley,intheUS–butalsotheotherecosystemsdiscussedineachcountry’snews.TheUS’soveralldominanceofnewspertainingtoinnovation,entrepreneurialismandstart-upbusinessesisclear,asisthemutuallyfavourablerelationshipbetweentheUSandIsraelwithregardtoinnovation.
Domestic
United States
Israel
India
Europe
China
Silicon Valley
Chicago
New York
San Francisco
Los Angeles
US
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Region
United Kingdom
United States
London
Europe
Britain
India
Northern Ireland
Australia
Israel
China
UK
France
United States
Europe
Paris
London
United Kingdom
India
New York City
China
San Francisco
France
China
United States
Taiwan
Hong Kong
Beijing
India
Singapore
Shanghai
Israel
Asia
China
India
Bangalore
United States
Mumbai
New Delhi
Asia
Singapore
China
United Kingdom
Europe
India
Israel
United States
New York City
Tel Aviv
Europe
India
London
Silicon Valley
China
Singapore
Israel
United States
Brazil
Europe
China
India
United Kingdom
Latin America
Asia
North America
Africa
Brazil
Nigeria
Africa
Lagos
South Africa
United States
Sub-Saharan Africa
Ghana
Abuja
West Africa
India
Nigeria
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AvnerWarner,DirectorofInternationalEconomicDevelopmentatTelAvivGlobalCityAdministration,explainsthecloseties:“TheIsraeliecosystemhasnolocalmarkets(forproducts),soourlocalentrepreneursleapfrogtheIsraelimarketstraighttotheUS.AlotofthemconsideropeningtheirheadquartersintheUSinordertomarkettheirproductsthere,sowecertainlylosepartofthevaluethatwecreate.Welosealsosomeofourlocaltalent,butwe’relivinginaglobalworld,andpeopleleavingdoescreatenetworks.”
Headds:“We’veacceptedthatIsraelistart-upshavetogoabroadtogotomarket,andnowthepolicyI’musingistoattractentrepreneursfromEuropetoourearly-stageecosystem,playingtoourstrengths.”
OvercomingchallengesQuid’sfindingsappeartosupporttheideathatecosystemsareplayingtotheirstrengths,aswellasProfessorPrabhu’sassertionthat“inemergingeconomies,alotoftheingenuityisreallyaresponsetoscarcity,andpeopleinnovatingsolutionstounmetneeds”.AkeythemeforNigeriaisovercominginfrastructurechallenges—alsoseeninmanyotheremergingmarkets.Butchallengecanfostergreatercreativity.“Thesuccessofmobiletelephonyintheemergingworldisreallybecauseofthelackoflandlinesandhasbeenaveryremarkableleapfrog,”ProfessorPrabhusays.“Mobilephoneshaveprettymuchcoveredmostofthecountries,anddonesomuchmorecheaplyandquickerthan[through]landline[infrastructure].”
Three-quartersofthe6billionmobilephonesbeingusedaroundtheworldareindevelopingeconomies,15andsuchproliferationinmobiletechnologyissupporting‘micro-entrepreneurs’(thesmallestofsmallbusinesses,withlowseedcapitalandahandfulofemployees).16AstudybytheLondonBusinessSchool1718foundthatwithinmonthsofhavingreceivedmobilenetworkcoverage,80%offishermeninKerala,southernIndia,hadpurchasedamobilephone.Theyusedthemobiledevicestocalleachfishmarketwhilestillatsea,whichenabledthemtoselltheircatchwheretheywereofferedthebestprice,makingthemarketmoreefficient:thefishermen’sprofitsincreasedby8%,consumerpriceswerereducedby4%,andthedumpingofunsoldfish(whichhadpreviouslymadeup5-8%ofthedailycatch)waseradicated.
15http://www.worldbank.org/en/news/press-release/2012/07/17/mobile-phone-access-reaches-three-quarters-planets-population16http://en.wikipedia.org/wiki/Micro-enterprise17http://innovation.london.edu/resource/99/index.html18TheDigitalProvide:Information(Technology),MarketPerformance,andWelfareintheSouthIndianFisheriesSector:http://qje.oxfordjournals.org/content/122/3/879.abstract19http://www.reutersmarketlight.com/index.html20http://www.reutersmarketlight.com/about_us.html
Takingadvantageoftheproliferationofmobiles,ReutersMarketLight(RML)19provideslocalandinternationalweather,cropandmarketinginformationineightlanguagesthroughSMSto1.3millionregisteredfarmersin50,000Indianvillages(althoughitisestimatedtoreach4millionfarmersthroughinformation-sharing).Suchinformationhelpsfarmersdecidewhentoplantseeds,whentoharvestandhowbesttomarkettheirproduceandatwhatprice,resultingina5.2%reductioninpricedispersion.20
InnovatingforimpactWhiletherearewell-knownexamplesofinnovationsolvingemergingproblems,toooften,MrWarnernotes,“toomanyofourentrepreneursaretryingtosolve‘first-world’problems,andpotentiallymissingoutonmassiveopportunitiesindevelopingcountries.Thequestionis:Whatkindofinnovationishappening?Wewouldliketogetthosemindsinvolvedtomakeagreaterimpact.”4million
ThenumberoffarmersinIndianvillageswhobenefitfromweather,cropandmarketinginformationfromReutersMarketLight,viaSMS.Source:Reuters.
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Theroleofgovernment,theneedforbetteraccesstocapitalandstart-up‘culture’wereallprevalent.Educationandinfrastructurewereoftenmentionedasbarriersto,ratherthancatalystsfor,innovation.Thisissomewhatsurprising,giventhatproximitytoauniversityorresearchfacilityisconsideredtobeanimportantingredientforinnovationecosystems.
CultureofcollaborationMrGillsaysthisprovides“acommunityofpeoplewhounderstandnewideas,understandresearch”anda“built-incultureofcollaboration”.Headds:“Themissingpieceifyouareauniversityorresearchfacilityishavingtheapplicationorcommercialfocus.Whatworkswelliswhereyouhavegatekeeperswhounderstandtheneedsofbothsides.”
Thisiswhereprovidinginnovationcentres,suchasStJohn’sinCambridge,isbeneficialinsupportingentrepreneurs,accordingtoMrGill.“Weareafacilitatorfortheinnovationsofothers,”hesays,providingflexibleworkspaceand“accesstoadvice,guidance,introductions,networks–asmuchoraslittleastheyneed–sothattheycangettotherightpeople,therightresources,recruitnewstaffandfindcustomersaloteasierthaniftheyweredoingitontheirown.”
In order to understand the challenges facing innovators, as well as where they are receiving support, the research identified ‘high-level topic’ themes discussed across all eight ecosystems.
Nurturing innovation
Innovationfactoraverageprevalenceacrossallnations Topthreegeographics
Source:Quid.
Agriculture 21%
Trade 50%
Start up 57%
Infrastructure 51%
Finance 38%
Health 27%
Education 52%
Gender equality 14%
Government 39%
Environment 31%
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Buildingculturalself-confidenceOne-fifthofthebusinesseshousedinStJohn’sInnovationCentre–whichwasthefirstaccreditedEuropeanBusinessandInnovationCentre(BIC)intheeastofEnglandandisoneofeightintheUK–providerelevantservicestoinnovators,suchaspatentandotherlegaladvice,accountancyservicesandmarketingservices.TherearesimilarBICschemesinplaceacrossFrance,Spain,Italy,Portugal,Ireland,Germany,BelgiumandAustria.21
MessrsPrabhu,CowenandGillbelievethatinnovationecosystemsemergewherelikeminded,visionaryyoungpeople(andtheyseeinnovationasintrinsicallyyouth-led)congregate,wheretheyhavewhatMrCowencallsthe‘culturalself-confidence’toturnideasintoaction.Whiletechnologyhasenabledcheap(orfree)communicationaroundtheworld,democratisingvoiceandvideoconferencecalling,eachexpertsayssuccessfulinnovationcannotflourishwithoutface-to-faceinteraction.
SuccessfactorsBeyondtheabilitytomakeconnectionsfacetoface,whataretheelementsofasuccessfulecosystem?MrCowenlists:“Accesstocapital,abilitytofail,amixofarroganceandrivalry,culturalself-confidence,andthenbeingattherightplaceattherighttime.Youneedadecentregulatoryenvironmentthatwon’tblocktoomanythings,andthen
peopleonthefundingsidewhohavevision,andthat’sprettyrarebecausefunders,bynature,arerisk-averse.”
MrWarneragreesthatgovernmentscanhelpto‘lowerbarriers’toinnovationbyencouraging‘balancedrisk-taking’andprovidingfinancialincentivestoentrepreneurialism,suchasmatchingprivateinvestmentinstart-ups’researchanddevelopmentandprovidingtaxincentivesforfundingstart-ups.
Whileaccesstocapitalanddifferentfundingvehiclesisessential,combiningfinancingwithsomeformofcommercialmentorshipwoulddomoretoensurethatitisusedwiselyandthatpastmistakesbypreviousstart-upsarenotrepeated.
“Oneofthebasiccharacteristicsofayoungentrepreneuristhattheyhavehadnoexperience,”saysMrWarner.“TakeMarkZuckerberg,Imeanheisauniquecase,butheneverranacompanybeforeFacebook;hisentry-levelpositionisrunningamulti-million-dollarcompany.Tofostermentorshipandcommunity,tosupportco-workingspaces,clusters,whereentrepreneurscaninteractwithoneanotherandexchangeideasandtalkaboutmistakesthatthey’vemadeisreallyuseful.”
21http://www.ebn.be/DisplayPage.aspx?pid=10
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ImplicationsforgovernmentsMrGilladdsthatgovernmentsmustlearntorecognisewhichentrepreneursaremostlikelytoflourishandtochannelresourcestothem.“Thetrickforgovernments–andIfullyacceptit’sareallydifficultone–istostrikethebalancebetweentryingtoletasmanyflowersbloomaspossibleandrecognisingthosewhicharereallynotgoingtobloomandtostopfeedingthatpotplant,”hesays.
Theissueoflabourconcentrationisalsoapressingone,asMrCowenbelievesinnovationecosystemswillremainthepreserveofcities,with‘moresatelliterelationships’fromentrepreneurswhoarebasedoutsideofcitiesbutreliantonthem.Heexplains:“It’llbeaprettysmallnumberof[innovation]hubsinmostcountries,andpeoplewillhave
asatelliteexistence,perhapsbecauseit’scheaper,butthat’sonlypossibleonceyou’vereallybuiltupyourtiestothedominant[innovationecosystem]centre.”Thishasseriousimplicationsforcityandtownplanners,withissuesrelatingto‘urbansprawl’–suchashigh-densityliving,infrastructureoverloadandincreasedcrimerates–alreadypresentinmanycountries.Thiscouldalsocauseissuesoftalentconcentration,withsomecitiesdeprivingotherareasinthecountryofworkerswithnecessaryskillsandintensifyinginequalitybetweendomesticpopulations.
CollaboratingbeyondbordersGettingtheconditionsrightwithinanecosystemisvital,butMrWarnersayspolicymakersalsoneedtothinkbeyondtheirborders.Theriseof‘micro-multinationals’–start-upsbuilttotargetaglobalratherthandomesticorregionalmarket–necessitatesgreatercollaborationbetweeninnovationecosystemsaroundtheworld,hesays,whichiswhyheisattemptingtoestablishaChamberofCommerceforInnovationEcosystems.
“Whenastart-upisfoundedandhasitsR&DinTelAvivbutwithinsixmonthsitsheadquartersinNewYorkorEuropeandsuppliesaglobalmarket,thencertainlywehavetothinkbig.Essentiallytheseentrepreneursareworkingonaglobalscale(soweshouldtoo),”headds.
The‘flatworld’istheconnectedworld,whichhighlightstheimportanceofpolicymakersbridgingthedividebetweendigital-richanddigital-poorlocationsandcommunitieswheretheyexist.
Byloweringbarrierstoentry,nurturinginnovationandcollaborationwhereitorganicallyoccursandbypromotingthesuccessesofdomesticentrepreneurs,countriescanfosteranentrepreneurialculture.Withthisinplace,thepotentialfortransformingthehighnumbersofunemployedintoproductive,engagedmarketparticipantsishigh.
Ofcourse,educationpoliciesneedtokeeppacewiththeknowledgeandskillsrequiredforyoungpeopletoparticipateintheemerging‘third-waveindustrialrevolution’.Tosomeextent,MrGillsays,thesectorsdrivingeconomiesreflecttheeducationsystems–andtypesoflearning–ineachcountry.TheWestern‘ideaseconomy’arguablyreflectsthesubtleshiftawayfromroteandtick-boxlearningtowardsmorecreativeandproblem-solvinglearning.However,changingeducationpoliciesmaypromptpoliticallydifficultdecisionswithanageingelectorate.Tosomeextent,businessleadersandrolemodelentrepreneurscanlendsupporttogovernmentsintheirambitiontocreateamodernworkforceforthefuture.
The proliferation of global communication networks is a huge enabler for entrepreneurs and their employees across the world, with the potential to affect the capacities and productivity of companies in all sectors, be they agriculture, manufacturing or professional services.
Fostering innovation for the global community
“Thetrickforgovernmentsistostrikethebalancebetweentryingtoletasmanyflowersbloomaspossibleandrecognisingthosewhicharereallynotgoingtobloomandtostopfeedingthatpotplant.”David Gill, ManagingDirectorofStJohn’sInnovationCentre
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AvirtuouscircleofinnovationAsidefromtheeconomicgainsofsupportingentrepreneursandincreasingcross-bordercollaboration,thesoftpowerbenefitsofathrivingdomesticinnovationecosystemcanbuoyMrCowen’s‘culturalself-confidence’andbecomeavirtuouscircleofinnovationtomeetthecurrentandfutureneedsoftheglobalcommunity.
Theeconomicpotentialofentrepreneursistremendous,sounderstandinghowandwhyinnovationecosystemsemergeandwhatcanbedonetoensurethattheyflourishmustbeapriority.Asuiteofinterventions,deployedacrossthecyclefromeducationtoemployment,isneededtoachievelasting,substantivechange.Governments,businessandacademiamustworktogethertotacklethischallenge.Globaleconomieswillfailtoflourishunlessmoreentrepreneursareencouragedtobuildtheirideasintosuccessfulbusinesses.
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Policymakersshould:
• Increasecross-bordercollaboration
• Buildinnovationcentres(asopposedtoresearchfacilitieswhichtypicallylackcommercialfocus)thatfacilitatetheinnovationsofothers
• Createplaceswhereyoungpeoplefeeltheyhave‘culturalself-confidence’andwheretheycanmeetfacetoface,asexpertssaythatiswhensuccessfulinnovationsemerge
• Ensureafriendlyregulatoryenvironment
• Lowerbarrierstoinnovationbyencouraging‘balancedrisk-taking’andprovidingfinancialincentivestoentrepreneurialism(suchasmatchingprivateinvestmentinstart-ups’researchanddevelopmentandprovidingtaxincentivesforfundingstart-ups)
Recommendations for creating successful innovation ecosystems
• Reformeducationpoliciestokeeppacewiththeknowledgeandskillsrequiredforyoungpeopletoparticipateintheemerging‘third-waveindustrialrevolution’
• Promotethesuccessesofdomesticentrepreneurstofosteranentrepreneurialculture
• Recognisewhichstart-upsaremorelikelytosucceedandchanneltheresourcestotheminsteadoftryingtosupportasmanystart-upsaspossible.
Businessleadersandentrepreneursshould:
• Combinefinancingwithcommercialmentorship
• Supportthegovernmentincreatingamodernworkforceforthefuture
• Takeadvantageofopportunitiesindevelopingcountries,insteadoffocusingtoomuchontryingtosolve‘first-world’problems.
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David GillisManagingDirectorofStJohn’sInnovationCentreinCambridge,UK.HeisanacademiccollaboratorattheUniversityofCambridgeInstituteforManufacturing,anon-executivedirectorofUKBusinessIncubationLtdandamemberoftheDepartmentforBusinessAccesstoFinanceExpertGroup.Heisalsotheco-authorofanumberofanalysesofinnovation(intheUS,Israel,GermanyandtheUK),businessincubationandfinanceforgrowthfirms.
Avner WarnerisDirectorofInternationalEconomicDevelopmentatTelAvivGlobalCityAdministration,leadingstrategyandimplementationforstrengtheningthecity’spositioningasaglobalinnovationhub.Hisprofessionalexperienceisasanattorneyinthefieldofemergingandestablishedtechnologycompanies,M&Aandventurecapital.
About this report
BarclaysalsoconnectedtheEIUwithQuid.QuidisaSiliconValleystart-upthathascreatedaglobalintelligenceplatformusedbytheworld’sleadingorganisationsandgovernmentsforstrategicdecisionmaking.QuidisbackedbyinvestorsincludingPeterThielandNiklasZennstrom.
Quidsoftwarebringstogetherdata,algorithmsandvisualisationtoolsthatallowuserstouncoverhiddenrelationshipsandinsightsfromtheworld’sinformationstreams.
Inthecontextofthisstudy,Quidindexedandstructuredhundredsofthousandsofglobalnewsdocumentsonglobalinnovationineightgeographies–theUK,US,France,China,India,Nigeria,IsraelandBrazil.Byutilisingnaturallanguageprocessingandnetworktheory,Quidvisualisedthetopicsofconversation,extractedkeyentitiesandevents,torevealtrendsintheglobalconversationaroundinnovation.Byanalysinglanguage,Quidrevealedadata-drivencomparisonofthefootprintofinnovationfactorsandtheirsentimentineachecosystem.
SumonSadhu,DanielHoughton,DanielPedrazaandHamletAbayafromtheQuidIntelligenceTeamperformedthisanalysis.
Barclays approached The Economist Intelligence Unit (EIU) in November 2013 to investigate how innovation ecosystems have developed around the world and how policymakers and business leaders can support these ecosystems and remove barriers for entrepreneurs.
Tyler CowenistheHolbertC.HarrisChairofEconomicsandGeneralDirectoroftheMercatusCenter(auniversityresearchcentrethatfocusesonthemarketeconomy)atGeorgeMasonUniversityinFairfax,Virginia.HewritesregularlyfortheNewYorkTimes,isco-authorofthepopulareconomicsblogTheMarginalRevolutionandrecentlypublishedhislatestbook,AverageisOver.
Jaideep PrabhuisJawaharlalNehruProfessorofBusinessandEnterpriseattheJudgeBusinessSchooloftheUniversityofCambridge,UK.TheprofessorshipwasestablishedbythegovernmentofIndiawithanendowment.HeisalsotheDirectoroftheCentreforIndia&GlobalBusiness(CIGB).
Inadditiontowide-rangingdeskresearchandQuid’scontribution,thisreportisalsobasedonfourexpertinterviews.Ourthanksgotothefollowinginterviewees:
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BarclaysisatradingnameofBarclaysBankPLCanditssubsidiaries.BarclaysBankPLCisauthorisedbythePrudentialRegulationAuthorityandregulatedbytheFinancialConductAuthorityandthePrudentialRegulationAuthority(FinancialServicesRegisterNo.122702).RegisteredinEngland.Registerednumberis1026167withregisteredofficeat1ChurchillPlace,LondonE145HP.
January2014.
barclays.com/entrepreneurs
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