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Wednesday, May 23, 2012
Is Silicon Valley an Intelligent Community? Not So Much.

I have been asked many times why the Intelligent Community Forum does not include the collection of cities and towns called Silicon Valley in its global list of Intelligent Communities.  After all, this small slice of California has probably given birth to more profitable technology innovation in fewer years than any other plot of land on the planet.  

It's a good question and I have had to devise a standard answer.  The Valley is not among our Intelligent Community examples because we focus on communities that develop a strategy and execute on it.  And there is nothing like that in the history of Silicon Valley.  Its growth was a series of unplanned events beginning with the formation of the Stanford University Park, early investments by wealthy individuals in start-up companies, and the rise of the venture capital industry with its base on Sand Hill Road.  Government played no role whatsoever – which is why the success of the Valley is marred by overcrowding, sky-high property prices, and uneconomic commuting patterns that are bad for the environment.  There have been attempts all around the world – from Silicon Glens and Silicon Fens to Silicon Alleys and Silicon Ditches – to repeat this pattern.  Some are pretty successful but none comes close to replicating the impact of the original Valley.  

To put it another way, there is little to learn from the Valley except that it would have been nice to buy real estate there in the 1970s.  At ICF, we demand something more from Intelligent Communities.  We want them to be teachers.  We want them to share useful lessons with the rest of the world about local economic and social success, often against great odds, in the 21st Century.  

And yet, the Valley does have one lesson to teach.  Humility.   The New York Times recently ran a story about a new class of successful ICT startups in Europe. ("Maker of Angry Birds Shows Way for European Start-Ups" by Eric Pfanner)  For decades, European tech companies have be renowned for underperforming their American cousins.   Those days appear, thank goodness, to be coming to an end.  Firms from Rovio (AngryBirds) to Spotify (online music) are figuring out how to build category leaders rather than also-rans.  But here was the big take-away from the article for me:

Another vibrant European startup center, Berlin, also shows it is sometimes the things that policy makers do not do that can be most effective in luring Internet entrepreneurs. While France and Britain, for example, have put in place tax breaks to support venture investments, Germany has not followed suit…
     Instead of financial incentives, Berlin has benefited from other factors, like an influx of engineers from Eastern Europe. Low rents have helped cash-strapped company founders eke out an existence. Meanwhile, analysts say Berlin has also benefited from tougher immigration rules in Britain, which have made it more difficult for start-ups and technology giants alike to add jobs in London, Berlin’s biggest rival on the European Internet scene.
     “While there are certain things that government can do, to a large extent it should stand out of the way,” said Paul Zwillenberg, a partner at Boston Consulting Group.

As we approach our annual Summit in New York City on June 6-8, I plan on keeping the lesson of humility in mind.  Local governments, in partnership with business and institutions, can do amazing things to create a more prosperous economy and inclusive society.  But there will always be the X-factor – that thing you cannot plan for but can only  recognize and encourage when it happens.  

An economy – even in a single municipality – is so complex a thing that we should never presume to understand it.  It is the sum of thousands or millions of human decisions, of the culture and history that shape those decisions, and of that most potent of things, faith in the future.  When we make it our top priority that our children lead better lives than our own, whatever the obstacles, not much can stand in our way. 

Tuesday, May 15, 2012
Name It and They Will Come

What is the most astonishing thing about London’s new Tech City is that it’s not new at all. It’s an area covering more or less a community between Shoreditch Station to Old Street. It contains many of the ramshackle warehouses and brick and beam buildings that for years had been the low rent district of London, attracting marginal businesses and shops, artists and galleries looking for low rent near the city center with access to transit and some pubs and nightclubs that attract the young and fringes of society. And that is precisely why it’s so popular and exciting. The new buzz in England is actually quite old and didn’t just happen over-night. It has always been there but with a new designation and some incredible marketing, a major push by UK Trade and Investment globally and linked with the GREAT Britain campaign of the 2012 Olympics, it has blossomed into a tour de force matched only by the marketing of Silicon Valley by HP’s John Young, founding Chairman of Smart Valley back in the early 1990s.

Tech City today attracts software developers, code writers, designers, artists, musicians, entrepreneurs, technology consultants and the likes of Google, Cisco and others. It would like to attract venture capitalists and others into the mix as well.

I visited Tech City in London this past March and met some of its principal promoters. More recently I participated in a promotional exercise by some of their private sector “ambassadors” in Toronto and Waterloo, Canada. These ambassadors are not the land-owners and companies that will directly benefit from the rents of these properties in Tech City, but rather they are promoters helping to send out a consistent and powerful message globally that will attract businesses, investment and especially talent and venture capitalists to a specific area of London, thereby creating a brand message that a cluster of creativity and innovation is happening there. This is the power of marketing and advocacy and a great example of designating something and hoping through promotional efforts, that success will follow.

But advertising alone cannot ensure success. It has to be real. People need to come to a place and feel that that there has been truth in the advertisement; that the area is what the promotion has said it is. In the case of Tech City, the low costs of rent, one quarter of the price of West End London, will likely only stay low for now and with promotional and branding success will likely attract the bigger firms willing and able to bid up the rents and surely the attraction for low cost rent will shift to other areas further away. However, by then it is hoped that the attraction of talent and venture capitalists and creating an exciting new cluster and brand in Europe will have been achieved.

So is it possible that by designating a specific area in an already existing area, rather than by building anew in “greenfield” sites, could be the catalyst for attracting talent, risk capital and businesses in many communities? Designate it and they will come? Look at some examples in existing urban regions that have had similar success. In Toronto, for instance, MARS, the Medical Arts and Related Sciences complex in what the City of Toronto calls the “Discovery District” has been extremely successful in attracting highly innovative businesses and talent to the Toronto area. The former carpet factory area in Toronto’s west end has completely recharged the area with innovative and creative companies in the digital media area. Toronto’s waterfront area is also looking to attract end users of high-speed broadband and has designated an area as the “intelligent waterfront in order to do so. Tech Columbus in Columbus, Ohio is another tech cluster that has emerged. Communitech Hub in the old Tannery building in Kitchener, Ontario will likely kick-start a new tech campus area of older warehouses focused on digital media. I recall a developer in New York’s Dumbo district telling me that you have to follow the arts to be successful in New York’s development scene. I pursued that thought. He was one of the developers that was successful in SOHO in its early days when rents were cheap and attracted many creative and talented artists and designers. Today, the area has attracted high-paying renters and businesses much as the area in Toronto called Yorkville was the low-end district back in the 1960’s when Neil Young, Gordon Lightfoot and Joni Mitchel played the Riverboat Café as young and upstart artists; today these properties are among some of the most expensive real estate in Canada.

In the later part of the 20th Century, a great number of derelict waterfronts were rediscovered and redeveloped, attracting many companies to invest in their redevelopment. Bold new waterfronts from Johannesburg’s Randburg Waterfront Melbourne’s Docklands and Sydney’s Darling Harbour to New York’s Southstreet Seaport and Baltimore’s Inner Harbour were in the forefront of the evolution of many waterfronts around the world. Malmo’s new housing district along its waterfront and London’s Canary Wharf were exciting examples in Europe while Tokyo’s Teleport Town, known as Rainbow City and Yokohama’s waterfronts were also early incredible transformations of their former shipping areas. Today, the revitalized Bund overlooking Shanghai’s Pudong District is one of the most exhilarating areas in China; Hong Kong’s harbourfront is renown and Jumeirah Palm Island in Dubai is one of the most ambitious real-estate developments on earth and can be seen from outer space. Tradeshows such as MIPIM in Cannes were ablaze with new and wonderful redevelopment schemes to try to attract investors and businesses to locate in these new waterfront sites and many did.

Today, new developments from Hong Kong’s Cyberport, a massive digital media and shared use space to massive Asian examples of city expansions in places such as Tianjin Binhai and Chongqing’s New Economic development zones covering many square miles and attracting huge manufacturing campuses in the technology and advanced manufacturing sectors, are very different models and require very different marketing tools to attract the companies and institutions to make them successful in the long term.  

But London’s Tech City isn’t a new redevelopment site. It is not owned by a single developer or even a group of them. It is a cluster of small sites, many warehouses and tight urban streets that make up an area of London that few visitors have ever bothered to visit or venture into. It is precisely for that reason that it has attracted well over 700 tech start-ups and small to medium sized enterprises; over 125 galleries, and some of the most exciting underground pubs, restaurants and nightclubs in the region. In fact, Tech City is still relatively unknown to even its neighbours in London. I mentioned it to some of my architect and designer friends in neighbouring Smithfield Market and Barbican areas. They had not heard of it at the time, but probably over the past several months they will have become more familiar with it. The fear that my hosts guiding me around the area had was that the community of largely SMEs would prefer to keep the larger firms away in order to keep the costs down; it’s a double edge sword – attracting talent, investors and highly creative businesses in an area will also attract the larger firms to begin to investigate, consolidate and develop in the area, likely driving costs up and changing the nature of the community’s roots that make Tech City so interesting today. Perhaps by me writing about this today may capture the interests of a firm that had previously not been aware and it may open up the opportunity for their participation in this space or one of the many others that I mentioned. This is the power of viral marketing, earned media and other marketing examples that communities seeking success depend on. Advertising alone will not raise the interests of investors, talent and risk capital. There definitely has to be a buzz to an area.

According to my guide, Adrian Tipper of UK Trade and Investment, their goal is simply to raise the profile of Tech City to attract talent and VCs and other risk capital to the area. They are encouraging entrepreneurs to come to Tech City by promoting it and encouraging locals to build on it by hosting events and creating the viral buzz essential to raise it above other advertising noise globally. They have modeled their Digital Shoreditch Festival attracting 300 participants from around the world to a 2 day boot camp in November after Austin’s South by Southwest. It will include international business elevator pitches, an awards program and other features similar to Austin’s South by Southwest Festival in March of every year. The trendy area has also begun to attract celebrities such as Kiera Knightly who apparently purchased an upper level penthouse in the area. This will give the area another level of buzz among social media enthusiasts. Adrain asks “Why do students and young entrepreneurs want to be in this area?” Answering his own question, he comments, “They want inexpensive digs, they want to party, and have food and drink to sustain themselves. And it doesn’t have to be pretty.” Hence, of the more than 700 companies that have found their way into the area, 95% are less than 10 staff members.

Small is beautiful in Tech City.

Wednesday, May 2, 2012
Building Clusters from the Ground Up
A new study from Europe's Center for Economic Policy Research casts doubt on the magical power of clusters to bring about sustained economic growth.  Or at least on how the cluster, first described by Michael Porter in 1990, works its magic.  

The analysis of 1,600 companies in Norway found that regional and national clusters were "irrelevant for innovation."  Instead, the study identified international cooperation as the main driver of innovation.  After controlling for company size, industry type and share of foreign ownership, the study found that the more international partners a firm had, the more likely it was to innovate.  The addition of just one new international relationship improved a company's chances of successfully introducing a new product by 26%.  

I recently conducted ICF's site visit to Stratford, Ontario, Canada, one of our Top Seven Intelligent Communities of the Year.  They are trying to do something extraordinarily difficult: create a cluster from the ground up.  Or perhaps it would be more accurate to say, from the stage up.  With a population of 32,000 people, Stratford is home to one of North America's leading Shakespeare Festivals, which is the city's single largest employer and source of more than $150 million in annual economic benefit.  It is Stratford's ambition to build a digital media cluster around the Festival's programs and intellectual property.  

The first step was to ensure that Stratford has the robust broadband infrastructure that a digital media cluster requires.  The city's own Rhyzome Networks has done the job with a hybrid fiber-wireless platform.  

Next on the list: talent.  Last year, Stratford welcomed the first class of a graduate digital media program at a satellite campus of the University of Waterloo, whose main facility is located about an hour away.  An undergraduate program will soon be added, and deep connections forged with the Festival, which is a leading-edge user of visual and audio effects, social media and online video.  Mayor Dan Mathieson, who is a host in himself, estimated the economic value of the new campus at $43 million per year.  

Next: encouragement for business starts by these talented young people, and attraction of risk capital willing to back them.  Stratford is one of two commercialization centers for the Canadian Digital Media Network and home to a digital media conference, Canada 3.0, which connects entrepreneurs to opportunity.  Stratford has also persuaded the Greater Toronto AngelNet Investors to include the community in its schedule of annual meetings.  

So far, so good.  But there is another wave of activity in Stratford that involves international players.  A US company called anyCOMM is piloting a revolutionary approach to lighting.  The company has embedded a computer CPU and a WiFi connection into lightbulbs, and has a retrofit kit that lets cities embed this intelligence into existing street lighting.  While I was in Stratford, anyCOMM demonstrated that they could get streetlights to run on only 5% of the normal power and provide the same brightness, or boost the illumination and run on 20% of the former load.    

Because anyCOMM is there – and because Mayor Mathieson went to Japan to make his pitch – Toshiba is also there, testing its LED-based street lighting systems and looking into the anyCOMM technology.  Cisco is demonstrating how its Telepresence system can allow a small city staff to serve residents throughout the community by being remotely present over high-definition video.  An American company called Interop is conducting its first Canadian pilot of a remarkable system for emergency communications.  With the Interop platform, users of different radio systems, mobile phone and landlines can all talk to each other, and those with computers can share images and video feeds.  If you have ever listened to firefighters tell you why they can't use the police radios and the police telling you that the firefighters' radios just aren't good enough, this system will seem a Godsend.

So there, side by side, we have not one but two kinds of clusters taking shape.  One is intentional and well thought-out.  The other is opportunistic, assembled under what Mayor Mathieson calls the Stratford Principle – that his small city will test and prove technologies that the rest of Canada will adopt in the future.  Which one will take shape first?  Which will be more successful over time?  At the end of 2011, we announced that Stratford will become the site of ICF's first Institute for the Study of the Intelligent Community.   And I cannot think of anything better for that Institute to study than the natural experiment right in its own back yard. 
Sunday, April 15, 2012
The Cluster Evolves as a Tech Development Paradigm

The cluster is dead, long live the cluster.

The concept of the cluster, proposed and popularized by Michael Porter in 1990, is taking some hard knocks these days.  To quote a recent critic, Washington Post columnist Vivek Wadhwa:

The formula for creating these clusters is always the same: Pick a hot industry, build a technology park next to a research university, provide incentives for businesses to relocate, add some venture capital and then watch the magic happen. But, as I have noted before, the magic never happens. Most of the top-down cluster-development projects in the United States and around the world have died a slow death in relative obscurity. Politicians who held the press conferences to claim credit for advancing science and technology are long gone….Real estate barons have reaped fortunes, and taxpayers are left holding the bag.

If you are still doing anything the same old way you did it in 1990, it is probably time to rethink.  And in my recent visits to Top Seven Intelligent Communities, I find that these leading-edge places have done exactly that when it comes to creating platforms for innovation.  

In Oulu, Finland, which I visited at the end of March, they are proud of their Technopolis, which was created along the lines that Mr. Wadha cites (and is a major success).  But it is no longer Oulu’s focus of innovation.  

The University of Oulu now runs four centers of excellence, which get half of their funding from the university and half from R&D projects – a formula that keeps them lean and hungry.  The Center for Wireless Communications – an important source of R&D for Nokia – is the oldest and has produced a steady stream of industry “firsts” in mobile voice and data.  An Intelligent Systems Group has generated seven spin-offs in software security and related fields.  The Center for Internet Excellence is funded jointly by Nokia and Intel to research how the design vocabulary of video games can make the Web easier to use.  And a new Center for Health & Technology aims to generate commercial innovations while addressing the challenges of an aging population.  

Nothing embodies the new approach to clusters like OULabs.  This Living Lab project organized by the city has recruited 500 citizen volunteers to market-test new applications in information and communications technology, e-health and online learning.  A software company recently engaged OULabs to test an online product before its launch.   Testing revealed so many failures that the company postponed what would have proved a disastrous launch to retool the product – a decision that will save major time and money.

Living Lab is a term you hear a lot in Oulu.  The city is striving to make the entire community a place where international companies come to test the latest technologies in their target industries of communications, security, education and healthcare.  And Oulu is not alone. In my next post, I will report on a community half a world away that is following its own remarkable path to becoming a global platform for innovation.

Sunday, April 8, 2012
How to Persuade Apple to Donate iPads to your School - Maybe

My conversation partner was about four feet high, a woman of a certain age, and as relentless as an avalanche moving down a snowy slope. 

I had been speaking that afternoon to the Community Technology Day in Muskoka, Ontario, Canada.  She had been at the back of the room, listening intently, and had asked the day's most pointed question.  

At a post-conference reception, holding glasses of low-end Cabernet, we pondered together the issue behind that question.  How do we move from good intentions to action? She was a Council member in Gravenhurst, a town within the district municipality of Muskoka, which is what Canadians call "cottage country," a beautiful place for summer homes on the region's lakes.  The wintertime population of about 20,000 swells to 80,000 once the weather turns warm.  Like other tourist centers, the economy largely moves in the same cycle, up and down with little sustained growth, particularly of the high-skill, high-value type.  That's fine for the 60,000 summer folk but not so good for the 20,000 year-rounders.    

The event organizer, Muskoka Community Networks (MCN), has done a great job of extending broadband across the region using wireless towers and the Motorola Canopy system.  The core broadband asset is in place to power a better future.  In the view of MCN Executive Director Rob McPhee, it was now time for the region's leaders to decide how to use it.  

My conversation partner was one of them, and she wanted to know what it would take to convince Apple to donate a lot of iPad tablets to her school.  She was convinced that, properly used, they could bring her school into the 21st Century.  Did I know anybody at Apple?  Could I help her?  

Knowing people at Apple was fine, I said, but the real issue was: why they should make the donation?  This is not a company that needs help in making headlines or, for that matter, penetrating the school market.  Just then, I got that pleasurable little buzz that accompanies a new idea.  How about this, I asked? Apple has just released a new upgrade to the iPad.  Demand is hot.  But the biggest obstacle to new sales has to be the millions of older iPads that are already out there.  (I'm not planning to upgrade myself until they come up with something more than a sharper picture.)  

What if Apple and Gravenhurst made this offer: donate your old iPad to the school, and Apple will give you a 20% discount on the latest generation?  The school gets the technology it needs.  The 60,000 affluent people who spend part of their year in Muskoka can feel generous and get new technology they secretly crave.  It sounded like something a savvy marketer like Apple might go for.  It sounded like a national campaign that could win them a lot of friends as well as move a lot of product.

If my companion's brain had been equipped with one of those lights on your computer that flashes when it is accessing the disk drive, you would have seen it blinking furiously on and off in the middle of her forehead.  She got a faraway look and our conversation gradually ground to a halt.  The avalanche was no longer rolling down my hill but was headed to wherever Apple Canada is headquartered.  I silently wished them luck.

A healthy community is a collection of people with a particular history and culture, who share ideas about what the community is now and should become.   I had fun contributing the idea, and I hope it goes somewhere.  But it is people like my companion, steeped in her culture and with strong ideas about what should be done, who give communities the future they deserve. 

Photo credit: Wake Forest University

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