The Future of Cities

March 21st 2014

SILICON VALLEY

This name conjures up word and brand associations like high-tech, Facebook and big data. But think about the name in two parts. 

Firstly, silicon - the raw material for most commercial semiconductors, the backbone of the digital world. Next, valley - a physical description of a geological depression with predominant extent in one direction. 

Put the two words together and we have the metonym for the US high-tech industry. This physical, analogue place has been driving digital innovation and the creation of cyberspace for decades. There is a certain irony in this. 

One of the promises of digital innovation is that we can increasingly interact in digital cyberspace via globally diversified teams. Yet the history of digital innovation is one that has been consistently emerging from a specific geographical location - Silicon Valley. 

While the valley reminds me of a large business park, its cafes, campuses and educational institutions speak to the history of innovation, and provide the habitat where digital ideas can flourish. It's immersive and it's highly analogue. Why? Trust, introductions, morning bike rides, caffeinated idea exchanges, MBAs. This analogue stuff matters - particularly when it comes to digital innovation.

In his book, Who's Your City?, Richard Florida shows maps of population growth, economic activity, innovation (as demonstrated by patent registration) and scientific discovery (as demonstrated by residence of the most heavily cited scientists). Silicon Valley is one of the top talent clusters, or ‘spiky' regions, in the world - a world which, according to Florida, is far from ‘flat'. Instead, geographical spikes are created by talented individuals who tend to cluster with one another,

LET'S EXPLORE THIS ANALOGUE PLACE BY NUMBERS FOR A MOMENT:

  •  In 2006, the Wall Street Journal found that 12 of the 20 most inventive towns in America were in California, and 10 of those were in Silicon Valley.
  •  Silicon Valley has the highest concentration of high-tech workers of any metropolitan, with 285.9 out of every 1000 private-sector workers.
  •  Over 40 per cent of people in Silicon Valley have a Bachelor's degree or higher economic degree.

So what's the big takeaway from Silicon Valley's success? Increases in economic growth are only possible through innovation and innovation has a very simple source: new ideas. The success of Silicon Valley illustrates that face-to-face, informal, analogue networks that facilitate competition, team-work and the sharing of ideas are an essential part of cultivating innovation. In this region, analogue location has been driving digital innovation for decades. 

So how do we foster innovation led clusters?

We identified a number of ecosystem enablers which helped drive Silicon Valley forward into one of the most successful talent clusters ever formed.

  • HEALTHY DOSE OF GOVERNMENT OVERSIGHT

Although many advocate a "bottom up" approach to nurturing talent clusters, few successful talent clusters have succeeded with minimal government intervention. Take the case of Silicon Valley, which traces it roots back to the development of military funded research in World War II. Policymakers should aim to achieve the ‘sweet spot' in terms of both type and scale of government support.

  • CULTURE OF CO-OPERATION & COMPETITION

Within Silicon Valley, there can be a sense of ruthless "no holds barred" competition, however, there's also an attitude of cooperation and an informal culture of networks that bind firms, people, ideas, capital and technology together. "Coopetition" is popular strategy predominant in Silicon Valley. What results is a high degree of cross-fertilisation and innovation, across organisational borders. 

  • A MIX OF LOCAL & INTERNATIONAL TALENT

Attracting skilled foreign talent has been a key driver of Silicon Valley success. In a 2007 survey by Inc.com, first-generation immigrants were found to be on the founding teams of roughly 52% of all tech companies in Silicon Valley

  • EMBRACING A CULTURE OF LEARNING FROM FAILURE

According to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School, about 75 percent of venture backed firms in the U.S. fail. Despite this high failure rate, Silicon Valley has 35% more serial entrepreneurs, that is, entrepreneurs who continuously start new businesses.

The idea of innovation being spurred in talent clusters becomes more obvious when we move away from the idea of online networks and futuristic workplaces and onto old school networks formed around analogue locations. Long before the widespread adoption of telecommunications and social media, talented people have been flocking to, and flourishing in analogue networks. When they are encouraged, they become a hotbed of innovation.

Globoforce produced a great list of examples of groups of people within arts and culture who rose to prominence together just in the twentieth century: The Lost Generation, The Algonquin Round Table, The Bloomsbury Group, The Beat Generation, The Brill Building, Motown, The Silver Factory and the Cambridge Footlights Club just to name a few. It's no surprise that many of these people were rubbing shoulders long before their rise to stardom.

So what does the future hold for these analogue hotbeds of digital innovation – as long as this perfect balance remains, then it should only strengthen and grow. And if more analogue locations look for ways to attract and maintain a culture of innovation through new talent and infrastructure then there will soon be more than one Silicon Valley. 

For further information on Anders Sorman-Nilsson or to enquire about making a booking for your next conference or event please contact the friendly ODE team

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