Innovation and Entrepreneurship go Mainstream

I recently had the occasion to review all the regional and statewide economic development plans, public and private, written for Maine in the last five years. The good news is that all of the plans identified some of the same challenges and opportunities for the state, and many agreed on the broad outlines of work to be done. For instance, nearly everyone now sees the demographic tsunami coming at us in the dual guises of an aging population and decreasing workforce. Another universal theme is the dearth of high-speed internet services, especially in rural areas.

For me, the shock was the also universal call for increased entrepreneurship and innovation. I wasn’t shocked at its inclusion: I’ve been calling for the same thing for literally decades. What was shocking was that these ideas are now mainstream. Unfortunately, the action and implementation plans associated with this goal are still weak and nebulous, leaving a lot to be desired.

Perhaps the reason for this is that it’s difficult to know exactly what to do, especially in rural areas, where entrepreneurs and innovators are far apart, and not particularly visible. I’m hosting a panel at the International Business Innovation Association (iNBIA) conference in late March to learn from people that are implementing programs to support entrepreneurs in innovation hubs in rural areas. As a group, the panelists seem undeterred by rural challenges. Just Do It seems to be their motto – maybe it’s time for Maine to do the same.

Unfortunately, the state budget currently being debated is looking in another direction. The Governor and his staff zeroed out funding for the state’s incubators, a grand savings of $170,000. We’re working on getting this put back or moved over to MTI who has the funds to support entrepreneurship programs. More later!

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Needed: A New Approach to Economic Development

Do you think it’s a coincidence that there’s a 1:1 correlation between states that rank in the bottom 50 percentile on the New Economy and states that voted for Trump? I don’t. It makes sense that the populist fervor is coming from places that feel left behind in our decades-long transition to the New Economy. I’m convinced, however, that neither of the current political narratives will turn things around. Neither small government and lower taxes, nor increased distribution of wealth will help.

What’s needed is a third approach—one that focuses on spurring innovation, boosting productivity and improving global competitiveness. We need to ensure that our workforce has the education and skills to have a place at the table – meaning STEM education, retraining AND importing workers from away to shore up places with diminishing populations. And it means a concerted investment in broadband infrastructure and R&D focused on value-added agriculture and aquaculture, and energy production.

For a detailed look at this strategy, visit the website for the Information Technology and Innovation Foundation (ITIF), the leading US Science and tech policy think tank, led by Rob Atkinson.

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The worst mistake ever: running economic development like a business

“I’m a smart guy (or gal). I can figure this out.” I heard this all summer as we recruited for the Executive Director of the Maine Center for Entrepreneurial Development. We’re seeing it now in the appointees to President-elect Trump’s cabinet. We’ve seen it for years in economic development, especially the appointment of successful entrepreneurs or venture capitalists to run incubators and other entrepreneurial support programs. The assumption that many people make is that being good in business is the same as being good in government.

I argue that business acumen is necessary, but not sufficient for economic development. The skills sets required to get anything done in government are in fact extremely different from business; Phillip Joyce’s recent commentary in Governing lists the ways:

• In government, we need to be accountable to the public interest. There is no equivalent in business.
• Private sector focuses on profitability, while government is about the achievement of specific outcomes.
• Compromise is fundamental to success in the public sector.
• Government must constantly confront competing values; efficiency isn’t the only one.
• Government has a short time horizon, usually two years (due to the election cycle).
• Government actions take place in public, with scrutiny from the press and the public.

To this list, I would add that the operations of economic development organizations also require a firm grasp of macroeconomics, fiscal and tax policy. Specialized entities like incubators and accelerators also have a well-defined set of best practices. While there is always room for innovation, there is no excuse for starting from scratch, recreating the wheel or whatever metaphor you like. And the lessons learned in a single business or startup may not extend to a broad range of startups.

So, if you want to get something done in a public sector setting, I recommend getting someone with experience in both the public and private sectors. Been there, done that, got the tee shirt.

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Innovation and entrepreneurship are core beliefs

I’ll admit it. I’m not a happy camper. I went to bed on election night with the realization that Trump was going to win, and when I woke up in the morning, it wasn’t just a bad dream. You can count me among the 64 million Americans who voted for a different outcome.

But, in my lifetime, I’ve been on the losing side about the same number of times as on the winning side, and somehow the country has survived, although I agree, this one feels different. I saw Senator Elizabeth Warren on television a few days after the election and she made sense to me. She suggested that we work with the President-Elect where his policies support things we think are important, and fight hard when they don’t. Isn’t that what we’ve always done? We all have core beliefs that we don’t compromise on. For me, that starts with basic human rights.

To that, I add the belief that innovation and creativity are the key underlying ingredients to our economy, and that can create prosperity for all of our neighbors, not just the elites. This means that we need to figure out how to make sure that we don’t just applaud new ideas, but also be mindful of how new ideas can leave people behind, and how to help those harmed by “creative destruction.”

Innovation and entrepreneurship aren’t partisan issues usually, but reasonable folks seem to disagree on how governments should best encourage them — invest or stay out of the way seem to be the two choices. The book The Entrepreneurial State, reviewed below, attacks this paradigm straight on, and debunks this myth, recounting in great detail the government investments behind most of the major innovations of our time, including the Internet and the iPhone. However, red tape does seem to be strangling many small businesses, and access to capital is more difficult now than ever before, largely due to banking regulations.

Let’s hope that supporting entrepreneurs is important enough for a bipartisan effort to unleash the economy in rural America, at the same time making transitions easier for those currently employed in jobs that are changing or going away.

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The Genie Is Not Going Back in the Bottle

I used to think that innovation was a non-partisan issue. After all, who can argue with economic growth? Turns out, lots of people. Recently, I’ve seen a spate of articles that are saying that it’s innovation that has left so many Americans behind; that productivity gains have been at the expense of the workers. I’m having a hard time wrapping my head around this.

True, a manufacturing plant with a lot of robots needs less manual laborers, and has replaced workers who performed repetitive, predictable jobs with machines. However, new jobs have been created for folks who can program the robots, maintain them, and create new products that weren’t possible before. And, the new jobs pay better, are less hazardous, and are less likely to be mechanized or outsourced.

However, some individuals cannot or have chosen not to make the transition from one job to another. We’re hearing a lot of frustration from this camp in this election cycle, with anger directed outward.

It’s true that all change creates winners and losers. As a country, we’ve sometimes helped individuals and communities affected by change, such as assistance for places affected by military base closures or by foreign competition (e.g. Pittsburgh steel industry). At other times, we invoke Horatio Alger and say, “It’s your problem.”

I don’t think that we’re going to put the genie back in the bottle. Innovation is here to stay. So the challenge in front of us is to provide the opportunity for everyone to participate in the upside, even if that means a lot of retraining and investment.

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Time to Get Rid of the Bushel

I recently had the good fortune to achieve recognition in one of my hobbies, and I shared the news with a few friends and family, starting with the statement, “Sorry to brag…” My brother-in-law, Thomas, wrote back, “Never be afraid to state the truth!” Out loud I thanked him, but inside I was thinking, “Well, more proof he wasn’t brought up in New England!” I was taught that it is rude to talk about your accomplishments, because they are only evidence of the gifts and opportunities you have that others don’t, rather than of any work on your part.

I suspect that I’m not the only one who “hides their light under a bushel.” It seems that a lot of us don’t want folks to know that we’re doing well. We also don’t want folks to know when we’re not doing well, when we have failed.

I encountered this feeling recently helping a client with a strategic planning exercise. We were using Innovation EngineeringTM tools and techniques, including those often summarized as “Fail Fast, Fail Cheap.” The senior manager said, “I don’t want to fail at all.” I totally got it. He’s new in his position, and doesn’t want to stumble.

I explained what “Fail Fast, Fail Cheap” really means. It means working through issues and challenges one piece at a time, by trying one approach, measuring the results, and using that knowledge to try another approach. Each cycle is a learning cycle. Learning cycles are usually not in public, but done with your team. So, if you have an idea for a new product, the first learning cycle might be to find out if the technology you need is already available, and could be licensed. If the answer is yes, then the next cycle is to call the person who owns the technology and learn more. If the answer is no, that’s not a failure, it’s just new information.

On the other hand, a friend of mine is in the process of closing down a promising entrepreneurial enterprise that he’s been working on for several years. I know he thinks this is a failure, because he’s been blogging about it. But I’m also impressed by how he’s taking the experience as an opportunity for growth and learning…it’s not an indictment of his worth as a human being at all.

Long story short, both accomplishment and failure are part of an ongoing learning exercise called life. Time to get rid of the bushel.

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Innovation Districts in the ‘Burbs

Next week, we’re going to Newton and Needham, MA to present our final report for the N2 Innovation Corridor. The client represents a group of stakeholders that want to redevelop a suburban area outside of Boston that is currently home to some of the original office parks into an innovation district. This is an admirable goal, as people all over the world are recognizing the power of consolidating workers, research facilities, entrepreneurs and sources of capital into urban districts. This captures the essence of what economists call agglomeration economics – that many good things come from places that encourage “happy collisions” in terms of creativity and innovation. These districts also appeal to baby boomers and Millennials who are developing preferences for integrated live, work and play experiences that are less dependent upon cars. On the other hand, suburban American is exactly what innovation districts are designed not to be, so how can the two be reconciled?

We think that the essence of an innovation district is simply a place that is denser than suburbia, with mixed used development (retail, office and residential), enabled by innovative transportation solutions. Where this can also be integrated with nature, such as the N2 Corridor’s opportunity along the Charles River, so much the better. With a highly educated, creative and culturally diverse population, Newton and Needham already have the type of workforce that will attract many entrepreneurs and growing companies.

All that is needed is a sense of themselves as an innovative place, and the ability to communicate that to the outside world, whether through marketing and social media, or through just doing it! After all, authenticity is the most crucial component. Be yourself, and tell your story, we are saying. And work toward the denser, yet integrated community with lots of relationships, networks and “happy collisions.”

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Change is not so bad, considering the alternative

Last month, I spent five days at the Eureka Ranch, getting current in my training as an Innovation Engineering Black Belt. While I was there, Doug’s team was working in real time on a new product that is truly extraordinary. They were going through very rapid learning cycles, and updating their concept on an almost hourly basis. We got to test some of their product (hint: it’s an adult beverage) and it’s truly amazing.

A few weeks later, I was in DC at a major federal agency. They have a data product that is in dire need of updating and revising in a big way, as technology has rendered their original approach obsolete. For two days, a big group of us provided them feedback. Their response was generally focused on what they couldn’t do – because of rules, regulations, reviews, and different systems in different agencies – a host of excuses. It was such a contrast to what was happening at the Ranch.

These two examples are at opposite ends of the spectrum, but they illustrate an important point. None of our organizations, whether governmental, nonprofit or for profit, are immune from the big changes happening in the market. Major demographic shifts, technological advances and globalization are affecting everyone. We all have a choice. Be proactive and get ahead of the changes, or be reactive, or worse, passive, and be run over.

Change isn’t fun for most people, but consider the alternative.

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Unsettling is an Understatement

While reading a new Deloitte study about the impact of technology on job creation, I came across this sentence: “While change is the driver of prosperity, it is also profoundly unsettling.” Wow. Talk about understatement. Yet, this simple thought may well explain the incredible political phenomenon that is unfolding in front of our eyes during this year’s presidential campaign. Blue-collar workers are angry, there is no question about that. And, they are likely to have been on the receiving end of the technology trends that are seeing less and less jobs in manufacturing, even as productivity and output is picking up. Perhaps a robot replaced their job, or their entire industry is out of favor (e.g., paper making in ME). And, especially for older workers, the education and training that ensured them a decent job 20 or 30 years ago is no longer sufficient for today’s technology-laden workplace. The transition to knowledge-worker for many of these folks is very, very difficult.

The oft-expressed fears of immigrants, too, make sense, but not in the way it’s portrayed in the media. The immigrants who are doing extremely well aren’t washing windows or doing construction. They are in our large companies and universities writing patents and contributing to our innovation economy at a rate much greater than native-born Americans, especially women and minorities.

The solution is more education and training to ease the transitions borne by those displaced by technology. This will make a much bigger difference than all the monies flung at companies to save dying industries, or building walls designed to stop the inevitable changes coming. Jobs will follow expertise, and worker excellence. It’s not sexy, ribbon-cutting economic development, but it works.

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Are Innovation Districts Remaking or Obsoleting University Research Parks?

When the grandfather of university research parks, the Research Triangle Park (RTP) near Raleigh, NC, is making major changes, you know something is afoot. After nearly 50 years, RTP is changing its approach, modifying its suburban campus’ auto-accessible layout to include a centralized “downtown.” Adding a new 400 acre new development will make RTP more like a city: stores, restaurants, condos and apartments “for a variety of incomes”—and of course, tech companies.

The motivation for this change is the rise of innovation districts across the country that are offering a new vision where anchor institutions like universities, large and small companies and the resources of the broader ecosystem co-exist to produce economic vitality and growth. And, these innovation districts are largely thriving in large metropolitan areas, challenging the suburban office park model.

What’s driving innovation districts? Millennials and Baby Boomers. The demographic shift, driven by aging Baby Boomers and Millennials, is causing population growth in metro areas after decades of flight to the suburbs. Both older workers and the youngest workers want to live, work and play in the same place, have lower car ownership levels and value an environmentally-friendly, low carbon footprint lifestyle.

While the 2015 census estimates seem to suggest that this pattern is slowing, there is no denying that large metro areas in the US are still gaining population as smaller, rural areas are losing. The salient fact is that the metro areas are not gaining simply because they are cities, but because of what they can offer: population densities that mean both larger and more diverse workforces and employment opportunities, cultural and entertainment options, and more transit options that environmentally conscious young people translate into a perceived lower carbon footprint.

Places where researchers, entrepreneurs and large companies employees rub shoulders on a day-to-day basis seem to have built-in opportunities for knowledge spillovers, an essential ingredient for economic growth. While older university research parks sought to create this type of interaction by isolating researchers together in campus-like settings, the new innovation districts feature more “happy collisions” where creativity intersects with diversity, yielding innovation. Places where creativity flourishes because there is a lot of new knowledge and where diversity of thought allows the transfer of ideas from one field to another will experience more innovation, than the older, isolated models of research parks where the collisions happen within the four walls of the individual laboratories. Compare the impressive results of a Bell Labs in suburban New Jersey, or the Xerox Palo Alto Research Center that yielded the essential elements of today’s computing experience, with the open innovation that is happening today in Kendall Square in Cambridge, or in Manhattan or Chicago.

The critical difference is the diversity of the broader innovation district, versus the uniformity prevalent in earlier research settings. Richard Florida, whose work on the Creative Economy first raised the idea of what the “creative class” can bring to a place, has looked systematically at what attributes are coincident with the attraction of venture capital. While you can easily see that there are some attributes that are naturally correlated, his observations strongly suggest the benefits of diversity to entrepreneurship and creativity. For instance, he finds that venture capital is highly correlated to higher education levels, foreign-born residents, the percentage of gay and lesbian residents, and levels of innovation as measured by patents and the location of high-technology industries.”

Steven Johnson also gives us some insights into the role of diversity. He notes that,

“Innovative environments are better at helping their inhabitants explore the adjacent possible, because they expose a wide a diverse sample of spare parts – mechanical or conceptual – and they encourage novel ways of recombining those parts. Environments that block or limit those new combinations – by punishing experimentation, by obscuring certain branches of possibility…will on average, generate and circulate few innovations than environments that encourage exploration.”

Johnson is saying that good ideas often come from areas of inquiry that are next to a known area, for instance, borrowing from shipbuilding to build a better airplane. And, he points out that if an organization or community lacks tolerance for borrowing or for new ideas, then it will be less successful.

Another element is the notion of information spillover – in dense environments, information spills over from one person to another – essentially people learn from one another more in regions where there is more density. More recent research suggests that the spillover effect is strongest within the first one-quarter of a mile, giving even more credence to the importance of geographical proximity.

All of the innovation districts, then, focus on creating dense urban places where people literally rub shoulders, creating “happy accidents” where knowledge is transferred, either formally through partnering and joint venturing, or informally, in an open innovation-style sharing of tacit knowledge. And, it’s the attitude towards this sharing that is important, whether it’s the paranoid, “someone is listening” attitudes common in the Boston area during the 1980s that ultimately resulted in the demise of the minicomputer businesses there, or the highly networked environment that propelled Silicon Valley during the same time period.

Some innovation districts, such as Kendall Square in Cambridge, MA and University City in Philadelphia, are urban versions of university research parks. Both feature one or more universities, plenty of large, innovative companies, as well as a rich entrepreneurial ecosystem, replete with venture capitalists, patent attorneys and other service providers necessary to growing innovative companies.

One big challenge for older, more rural or suburban university research parks is lack of mass transit or other “green” methods of transportation that link the parks back to their campuses and/or to the broader community. The lack of transit is a particular problem for getting younger workers to commit to jobs in these parks, and even the buses run by Google and others between their suburban locations and San Francisco are met with resistance by Millennial employees.

One area of disagreement among researchers is the role of universities and medical centers in innovation districts, the so-called Meds and Eds. Richard Florida, for one, flatly says that venture capital is negatively correlated with “Meds and Eds,” and suggests this is because commercialization of technology is not their primary purpose.

On the other hand, most of the examples of innovation districts cited by Brookings involve significant investment by major universities and university teaching hospitals. Indeed, Meds and Eds seem like great anchors for these districts, because they tend to be very stable, and don’t change location. It’s important, however, that these institutions be dedicated to supporting entrepreneurs both from the community and from their own ranks, and excellent at transferring their technology to the nimble, smaller companies that can successfully commercialize it. Simply building a new development near a university or teaching hospital and calling it a research park or an innovation district misses the point of the importance of the culture, workforce and synergy, not just the real estate. And, these sort of development run the risk of being innovative “in name only.”

Another caution is the risk of gentrification. Where these new districts are being superimposed on existing, lower-income neighborhoods, there is some effort being made to provide job opportunities. Where the partners are “meds and eds,” this is reasonably successful because there are a significant number of jobs in these institutions that do not require a 4-year degree. Workforce programs such as the one in University City, Philadelphia can help. There, the West Philadelphia Skills Initiative works in partnership with major employers to identify “real jobs with real vacancies” and then preparing unemployed West Philadelphians to excel in these jobs, putting them to work in their own community. –

However, caution should be exercised when considering an innovation district as an economic development strategy. Large tracts of land occupied by “meds and eds” may well bring urban vitality and redevelopment, but as nonprofits, likely contribute little to the tax base. Districts where “meds and eds” are tenants, versus owners, however, will contribute more to the property tax base.

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