The 3 most important drivers of innovation…. location, location, location?

There are reflections from my reading of Indian PM Modi's Independence Day Speech delivered August 15, 2014.
See the original article printed in the Atlantic Weekly's online publication, Quartz.

Indian prime minister Narendra Modi’s independence day speech from the Red For set a distinctly modern tone. This was a speech focused on the realities of India, and its modern aspiration: Women’s rights and safety, manufacturing and banking for the poor, ubiquitous broadband and access. He underscored reforms such as the disbanding of the Planning Commission, and its replacement with the National Development Reforms Commission.

These are all strong building blocks for a resurgence, but it's also time for a deep review of India’s general business culture. The new commission must give real thought to what it takes to get a creative, innovative culture buttressed by entrepreneurial activity.

Modi's primary hook is education. One can’t argue with that. Building core skills and capabilities can only result in real progress. However there’s more to the innovation puzzle than an informed population.

What’s really needed is that stepsister of innovation and creativity—entrepreneurship. Entrepreneurship helps build capability across communities. It’s been the most progressive force in societies, beyond education. Indeed, female street vendors make up to 15% of the labor force in some African countries, which has shown a correlation with social change. I believe that what India needs is much more of a focus on growth-oriented startups that aim to build out technological and technical capabilities, hence growing long-term jobs that are truly value-added.

The three elements that India’s business culture will need to develop are:

1.  A tolerance for experimentation and the taking of small bets and risks to drive to big transformations in aggregate.
2. A portfolio approach to investment, which often allows for such experiments. We need funders who can provide entrepreneurs the guard-rails of functional expertise and advice, while also taking the long view so that it’s not about sure-wins, but about making enough investments and giving the startups the leeway to pivot and grow.
3. Vibrant forums that will provide the connectivity and energy to innovate.

These are the elements that are displayed in some of the most creative pockets of the globe—Silicon Valley and Alley, for example.

Practically, of course, large companies tend to be key drivers in the economy. Their genius lies in reach (scale), governance (regulation) and operations (manufacturing, brand-building and sales). Some companies have actually made real investments in innovation–either through investment funds that are tracked and allocated according to risk profiles, or perhaps companies like Google who encourage the use of talent and time to employees to experiment. A small percentage of those experiments to make it to the public sphere, but a rash of billion-dollar acquisitions in the Valley show that even yesterday's startups like Facebook know that they are getting too big to innovate.

Essentially, entrepreneurs are the innovators of any economy. Large companies will provide for 99% of the economy' actual wealth and productive work. However, the 1% of entrepreneurs who succeed have the potential to set new directions. Countries that provide entrepreneurs with access to capital, infrastructure and policy support they need are in essence putting into place their version of a portfolio approach to innovation. Entrepreneurs are the test balloons for future growth.

Is geography important?

If creativity is a critical element of entrepreneurship, then geography seems to play a critical role in it as well. In a February 2014 survey, Fast Company identified New York as one of the world's most creative cities (according to 34% of respondents), lapping San Francisco at 27% and London at 6%. The value proposition is different in each case—while San Francisco’s VC has a proven talent in identifying software and technology breakthroughs, it seems to lack the vision to get into more diverse spaces. On the other hand, as a magnet for diverse disciples, New York has developed a brand that constantly attracts to its shores a cross-section of driven artists, designers, high fashion startups and engineering talent. In parallel, it is the heart of the corporate northeast corridor, with the discipline to cultivate professionals who know how to make financially savvy choices, scale effectively, and know how to build out and make an innovation work within the system.

Yet, laggard cities and countries need not despair. UNESCO’s NetExplo observatory is a network of more than 200 journalists, scientists and academics who detect outstanding initiatives in the internet and digital technology. Since 2008, this group has recognized the 100 most significant innovations that signify the big picture of changes already at work in society. The top six are recognized with awards, and the top of that list is proof positive that geography may be replaced by platforms and networks. The BRCK is a wireless network generator created by Ushahidi in Kenya. It was designed in recognition of the increasing need for steady connectivity for many jobs, even when infrastructure is spotty due to wireless connections, intermittent power, or devices that can’t share connections. Seeing this, Ushahidi set out to redesign connectivity. The robust, beautifully designed BRCK isn’t the sensation, however. What’s notable is Ushahidi, originally a website and on-the-ground volunteers developed to map reports of violence in Kenya after the post-election fallout at the beginning of 2008. Since then, “Ushahidi” has come to represent the people behind the “Ushahidi Platform”, that powers the collaboration of Kenyan citizen journalists. The website had 45,000 users in Kenya, and has grown from an ad hoc group of volunteers to a focused organization with experts in areas as varied as human rights work to software development, in Africa, Europe, South America and the US. This ecosystem of innovators has developed seven innovative products and services, focused on doing good, but easily leverageable commercially.

Other Netexplo award winners come from emerging innovation ecosystems, such as the justice crowdsourcing site and app Socialcops from India, or the digital taste generator called the digital lollipop from Singapore. The former has a global advisory board, and the latter was developed at the National University of Singapore by a Sri Lankan researcher, Nimesha Ranasinghe.

Hence, while geography plays a part, one need not be fatalistic – there is no set pre-destiny at play. It is possible to design environments where there is significant creativity at work, the key is making sure that creativity breeds sustainable growth-oriented enterprises. In fact, it is possible that a place like India could drive truly transformative start-ups, because we’re not looking at the kind of social apps we’re seeing coming out of silicon valley, but technology or start-ups with a purpose that can drive change from the get-go. There is a need, and there is capable talent – what we’ll need to see more of is the culture of investment and experimentation to drive transformation

Nature or nurture?

The “DNA” of an entrepreneur tends to be a complex double helix of characteristics. Central to this is a high tolerance or appetite for risk. In addition, they tend to be flexible, with successful entrepreneurs tweaking their businesses and pivoting to account for what the market and their customers need. They have the fortitude required for selling their ideas and themselves, and the motivation and engagement with their environments to generate innovation. None of these characteristics are inherently unlearnable.

Another indicator is the fact that in the US, a quarter of all new businesses in 2012 were started by people between 55 and 64, up from 14% in 1996, according to research by the Kauffman Foundation. Even when they’re not starting new businesses, it appears more people are getting interested in entrepreneurship later in life. There is no indication that they fare any better or worse that young entrepreneurs– most, though, bring a wealth of experience to the table that may reduce the technical risks of the new enterprise.

A country or region that has the tolerance for the high churn in entrepreneurial ventures, the long-term vision to attract and develop strong technical talent (which spans industrial design, art, electronic and mechanical engineering, among others) and the vision to support the funding and resourcing of these enterprises can sustain a network of entrepreneurs.

So, what does this mean for Modi? Yes—focus on education at the primary and secondary level. But also, ensure that you put in place incentives that make it easy for entrepreneurs to experiment and raise funds for their innovative enterprises. That’s probably what’s going to make a real difference at the end of the day. A strong ecosystem of entrepreneurs is a strong marker of vitality and innovation in an economy. As the economy evolves, entrepreneurs tend to be a simple and direct way to test for the potential opportunities opened up by new technologies and macro trends like globalization.