Continuing the discussion from the last (real) post, Invest in the venture system, not venture capitalists…

Click on the graphic “Mapping Innovation Clusters” below to view larger.

CREDIT: McKinsey

A couple questions to start:

• Can governments create entrepreneurial hubs?
• What routes have governments taken to seed and direct innovation hubs?
• Is there a natural linkage between creating an environment for new ventures to creating innovation hubs?
• Typically entrepreneurial hubs require a base of entrepreneurs and venture capitalists to flourish; can governments replace venture capitalists?
• Will wee see a different kind of entrepreneurship hub (and innovation hub) emerge and flourish on its own terms in a world of a more distributed, collaborative and distributed system of value creation?

I have a feeling these themes are going to underline a lot of my upcoming thinking…

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Starting with three separate but related thoughts:

• Paul Graham, Can You Buy a Silicon Valley? Maybe.:

  A lot of cities look at Silicon Valley and ask “How could we make something like that happen here?” The organic way to do it is to establish a first-rate university in a place where rich people want to live. That’s how Silicon Valley happened. But could you shortcut the process by funding startups?

  Possibly.

  Read the rest of Paul’s thoughts for the concerns, processes, issues and practicalities.

  … I realize the chance of any city having the political will to carry out this plan is microscopically small. I just wanted to explore what it would take if one did. How hard would it be to jumpstart a silicon valley? It’s fascinating to think this prize might be within the reach of so many cities.

  Although Paul wrote specifically about US cities, the idea applies to any city around the world. Alan Patrick describes how the idea could apply to London; by his estimation, not easily, or cheaply.

• McKinsey: What Matters: Building an innovation nation:
  

  Our analysis of the world’s must successful clusters shows that they have first established themselves as world-class players in an emerging specialty before expanding. This focus allows locations to concentrate limited resources, such as labor and capital, on developing competence and credibility. When successful, the result of these first two steps is the emergence of what we call an “innovation hot spring”: a small and fast-growing hub that relies on a small number of companies to establish itself as a relevant world player in a narrow sector.

  McKinsey identified three primary paths, which essentially break down to the usual: build (direct and indirect), buy (import) and luck into (R&D -> commercial success). Yes, I’ve over-simplified; but still, McKinsey over-focuses on “big innovation” and neglects the kind of daily innovation that occurs throughout the world every day as people adapt and create solutions to address their unique, local opportunities and problems.

  The graphic at the top of this post comes from McKinsey; while it’s interesting, it’s possibly misleading (focusing on patents as measures of innovation) and more worryingly, focused on an incomplete view of what innovation can and will be.

  Curious why?

• John Hagel, John Seely Brown and Lang Davison, The Case of Institutional Innovation:
  

  … existing institutions, firmly rooted in the world of push, will require significant redesign in order to effectively harness the potential of pull. Institutional innovation – redesigning the roles, relationships and governance structures required to bring participants together in productive endeavors – will be a key requirement. In fact, institutional innovation will trump either product or process innovation in terms of potential for value creation.

  … pull institutions will need to re-orient completely with regards to talent as we re-imagine corporations and other institutions as places where talented individuals experiment, learn, perform, and thrive. This will in turn require far-reaching changes to strategy, organization, operations, and technology.

I’m becoming increasingly interested by the examples, best practices and case studies around the roles governments can play in creating innovation and entrepreneurship hubs (and yes, those are separate entities) through direct government intervention and indirect incentive and system structuring.

But are governments paying attention to the right kind of innovation?

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Aaron Chua (@aaronchua on Twitter) from Singapore’s Interactive Digital Media (IDM) Programme Office recently contributed to a great conversation on my recent post about the various ideas around a “entrepreneur / venture capital stimulus package” to jumpstart the US economy. Aaron has written extensively around the opportunities, challenges and processes behind government investing in startups in Singapore on his blog and has commented extensively on this blog; where are the examples from other governments throughout the world?

There are many, many opportunities for entrepreneurs, investors and innovators outside the US; where are the best places to read more about innovation and entrepreneurship outside the US echochamber?

I’m ready to dig in far, far more…

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Lastly, food for thought: Michael Lewis, Wall Street on the Tundra.