This article is part of the World Economic Forum Annual Meeting
What do Silicon Valley, Helsinki, Dubai, Shenzhen, Bengaluru and Singapore have in common? They each represent cities or regions with successful innovation ecosystems. They act as magnets for global talent, attracting innovative companies that help shape the future. None of them would have flourished without successful partnerships between public and private sector stakeholders. The world recognizes the need to create more such successful ecosystems, but they must support inclusive and sustainable growth.
Firms have always been forced to compete for survival in global environments, so it’s not surprising that innovation has always been high on the corporate agenda. More recently, regional and city governments have prioritized innovation ecosystems too, as they have come to understand their economic and social benefits. Leaders in the public and private sectors appreciate not only the economic value that innovation ecosystems create, but more importantly the social value they foster from job creation and the provision of avenues for attracting and retaining talent.
While innovation ecosystems or clusters are not a new phenomenon, recent exponential trends in technological progress – digital, biological and physical – have proven to be important drivers for conscious efforts in creating more of them. The success of Silicon Valley in particular has generated envy across the world, inspiring many different geographies to emulate it.
One example is New York City, which aimed to future-proof its economic leadership by building a Silicon Valley-inspired, technology-driven innovation ecosystem. Fueled by the ambition of Mayor Bloomberg, the city held a global competition in 2011 to attract a major technology university that could act as a talent anchor for a vibrant innovation ecosystem. Competition winner Cornell University has now established Cornell Tech on Roosevelt Island, in collaboration with Israel’s Technion.
Cornell Tech’s success has been bolstered by the many novel ways the university operates and interacts with key regional stakeholders, both private and public. For example, top research professors at Cornell Tech are required to spend part of their teaching time in local middle schools. Private firms can also rent space on the Cornell Tech campus in which to base their innovation labs, deepening collaboration with talented faculty and students.
Silicon Savannah is a tech innovation ecosystem in sub-Saharan Africa, and it’s one of the fastest-growing in the emerging markets. Companies including Intel, IBM and Microsoft have invested more than $1 billion to support the growth of more than 200 start-ups. One interesting difference to other ecosystems is that Silicon Savannah companies aren’t focused on helping you park your car or fold your laundry, but instead on solving real problems where market solutions have failed.
Tech company BRCK is connecting off-the-grid schools to the internet using solar-powered routers and tablets. AB3D is turning electronic waste into affordable 3D printers that build artificial limbs. The runaway success of mobile money firm Mpesa, as well as regional governments’ significant investment in a new undersea fibre optic cable, have provided cheap reliable broadband. Average speeds in eastern Africa are faster than in the US. This has been a major contributor to the growth of Silicon Savannah. Its continued success will be predicated not on replicating Silicon Valley, but on leveraging its specific competitive advantages and focusing on its differentiating strengths.
As innovation ecosystems play an important role in creating economic and social value, we must ask if our current ecosystems have successfully addressed the most pressing issue on the global agenda: supporting inclusive and sustainable growth. The answer is not that heartening, in most cases. Despite the outstanding success of innovation ecosystems in areas such as Silicon Valley and Boston, swathes of the US, especially rural areas, remain largely untouched.
Brookings Institution has shown that since the financial crisis of 2008, 72% of the gains in US employment have accrued to the country’s top 53 metropolitan areas. The urban-rural chasm has contributed to the rise of populist political ideologies, not just in the US but also in many other developed markets such as France, Italy and the UK. The benefits of success are often not shared equally within the regions that serve as homes for these ecosystems – consider the high rents and house prices in Silicon Valley and Boston that have made living unaffordable for many.
1. New financing vehicles to provide not just patient capital, but capital that emphasizes inclusivity, as well as profitability.
2. Inclusive procurement, broadening the procurement base and levelling the playing field for innovators. Procurement strategies should be outcome-focused and support inclusive, sustainable growth.
3. Ecosystem mapping, creating a framework to show the connections between the different stakeholders of an innovation ecosystem. This would enable and support new entrants, making the system more inclusive and sustainable.
4. The acceleration of new ecosystems, especially inclusive innovation ecosystems in some of the more challenging areas of our world. Lessons and good practices in this context need to be documented and shared.
There are overlaps between the themes listed above and the areas of expertise and interest of many attendees at the World Economic Forum Annual Meeting 2019 in Davos. We invite fellow participants to reach out and collaborate with us in helping developing innovation ecosystems that are inclusive and support sustainable growth. This is our common endeavor, and we have to succeed together.
By Joanna Barsh, Marla M. Capozzi, and Jonathan Davidson
McKinsey research reveals a wide gap between the aspirations of executives to innovate and their ability to execute. Organizational structures and processes are not the solution.
Like short skirts, innovation has traditionally swung into and out of fashion: popular in good times and tossed back into the closet in downturns. But as globalization tears down the geographic boundaries and market barriers that once kept businesses from achieving their potential, a company’s ability to innovate—to tap the fresh value-creating ideas of its employees and those of its partners, customers, suppliers, and other parties beyond its own boundaries—is anything but faddish. In fact, innovation has become a core driver of growth, performance, and valuation.
Our research bears out this point. More than 70 percent of the senior executives in a survey we recently conducted say that innovation will be at least one of the top three drivers of growth for their companies in the next three to five years. Other executives see innovation as the most important way for companies to accelerate the pace of change in today’s global business environment. Leading strategic thinkers are moving beyond a focus on traditional product and service categories to pioneer innovations in business processes, distribution, value chains, business models, and even the functions of management.
Our research also shows that most executives are generally disappointed in their ability to stimulate innovation: some 65 percent of the senior executives we surveyed were only “somewhat,” “a little,” or “not at all” confident about the decisions they make in this area. What explains the gap between the leaders’ aspirations and execution? Even starting to build an organization in which innovation plays a central role is often far more frustrating than most executives ever imagine it to be. Many of those who mimic the approaches of the most successful practitioners have found that path to be ineffective. Sustaining innovation to create real value at scale—the only kind of innovation that has a significant financial impact—is even harder.
There are no best-practice solutions to seed and cultivate innovation. The structures and processes that many leaders reflexively use to encourage it are important, we find, but not sufficient. On the contrary, senior executives almost unanimously—94 percent—say that people and corporate culture are the most important drivers of innovation.
Our experience convinces us that a disciplined focus on three people-management fundamentals may produce the building blocks of an innovative organization. A first step is to formally integrate innovation into the strategic-management agenda of senior leaders to an extent that few companies have done so far. In this way, innovation can be not only encouraged but also managed, tracked, and measured as a core element in a company’s growth aspirations. Second, executives can make better use of existing (and often untapped) talent for innovation, without implementing disruptive change programs, by creating the conditions that allow dynamic innovation networks to emerge and flourish. Finally, they can take explicit steps to foster an innovation culture based on trust among employees. In such a culture, people understand that their ideas are valued, trust that it is safe to express those ideas, and oversee risk collectively, together with their managers. Such an environment can be more effective than monetary incentives in sustaining innovation.
This list of steps is not exhaustive. Still, given the limited time and means—as well as the short-term performance pressures that executives constantly face—pursuing innovation with anything other than existing talent and resources often isn’t an option. These three fundamentals are a practical starting point to improve an organization’s chances of stimulating and sustaining innovation where it matters most—among a company’s people.
While senior executives cite innovation as an important driver of growth, few of them explicitly lead and manage it. About one-third say that they manage innovation on an ad hoc basis when necessary. Another third manage innovation as part of the senior-leadership team’s agenda. How can something be a top priority if it isn’t an integrated part of a company’s core processes and of the leadership’s strategic agenda and—above all—behavior?
According to 19 percent of the senior executives, neither growth nor innovation is part of the strategic-planning process, which focuses solely on budgeting and forecasting. Just under half indicated that innovation is integrated into the process informally. Only 27 percent said that innovation is fully integrated into it. But these executives feel more confident about their decisions on innovation and say that they have implemented ways to protect it and to ensure that it gets the right talent.
In a separate survey of 600 global business executives, managers, and professionals, the respondents pointed to leadership as the best predictor of innovation performance.1 Those who described their own organization as more innovative than other companies in its industry rated its leadership capabilities as “strong” or “very strong.”2 Conversely, those who believed that the ability of their own organization to innovate was below average rated its leadership capabilities as significantly lower and, in some cases, as poor.
As with any top-down initiative, the way leaders behave sends strong signals to employees. Innovation is inherently associated with change and takes attention and resources away from efforts to achieve short-term performance goals. More than initiatives for any other purpose, innovation may therefore require leaders to encourage employees in order to win over their hearts and minds. Our sample of 600 managers and professionals indicated that the top two motivators of behavior to promote innovation are strong leaders who encourage and protect it and top executives who spend their time actively managing and driving it. Indeed, senior executives believe that paying lip service to innovation but doing nothing about it is the most common way they inhibit it. The failure of executives to model innovation—encouraging behavior, such as risk taking and openness to new ideas, places second. Rewarding nothing but short-term performance and maintaining a fear of failure also make it to the top of the respondents’ list of inhibitors.
Holding leaders accountable for encouraging innovation makes a big difference. Thirty percent of the senior executives in the survey were accountable for it, through formal targets or metrics, in their performance reviews. They were more likely than the broader group of respondents to view innovation as one of the primary growth drivers, to manage it formally as part of the leadership team or through an innovation council, and to learn from their failures to achieve it.
Our research implies that most senior executives do not actively encourage and model innovative behavior. If they did, they could give employees the support needed to innovate. They can also take a number of other practical steps to advance innovation.
Define the kind of innovation that drives growth and helps meet strategic objectives. When senior executives ask for substantial innovation in the gathering of consumer insights, the delivery of services, or the customer experience, for example, they communicate to employees the type of innovation they expect. In the absence of such direction, employees will come back with incremental and often familiar ideas.
Add innovation to the formal agenda at regular leadership meetings. We observe this approach among leading innovators. It sends an important signal to employees about the value management attaches to innovation.
Set performance metrics and targets for innovation. Leaders should think about two types of metrics: the financial (such as the percentage of total revenue from new products) and the behavioral. What metrics, for example, would have the greatest effect on how people work? One company required that 20 percent of its revenue come from products launched within the past three years. Another established targets for potential revenues from new ideas in order to ensure that they would be substantial enough to affect its performance. Leaders can also set metrics to change ingrained behavior, such as the “not invented here” syndrome, by requiring 25 percent of all ideas to come from external sources.
Senior executives say that the top three ways they spend time making decisions about innovation involve determining what types or strategies to focus on, who gets to work on the resulting projects, and how to commercialize the fruits. Few spend time on targets, metrics, and budgets for innovation. That is telling, since executives whose companies do have such targets and metrics feel the greatest confidence in their decisions.
Designing innovation networks
Chances are your organization has some people who are passionate about innovation and others who feel uncomfortable about any topic related to change. Recent academic research finds that differences in individual creativity and intelligence matter far less for innovation than connections and networks—for example, networked employees can realize their innovations and make them catch on more quickly.3
Since new ideas seem to spur more new ideas, networks generate a cycle of innovation. Furthermore, effective networks allow people with different kinds of knowledge and ways of tackling problems to cross-fertilize ideas. By focusing on getting the most from innovation networks, leaders can therefore capture more value from existing resources, without launching a large-scale change-management program.
Social-network analysis can help executives to diagnose existing networks in order to ascertain their characteristics, such as the frequency of collaboration and the degree of cross-functional interactions among members, and to identify people who broker information and knowledge. This kind of information can also serve an essential role in the creation of effective innovation networks by clarifying the mind-sets of individuals and groups.
In one company, for example, we found three groups with distinct perspectives on innovation. One believed that the company was innovative, but the other two, with 57 percent of its employees, thought that it wasn’t—indeed, that it was actually bureaucratic, slow moving, inefficient, and stressful. A separately developed network map highlighted the company’s hierarchical structure but also showed that cross-functional departments were well connected.
When we combined the analysis of personal perspectives on innovation with the network map, we found opportunities for improvement. Paradoxically, the analysis revealed that those employees, largely middle managers, with the most negative attitude toward innovation were also the most highly sought after for advice about it. In effect, they served as bottlenecks to the flow of new ideas and the open sharing of knowledge. A further analysis of the people in this group highlighted their inability to balance new ideas with current priorities and to behave as leaders rather than supervisors. We have observed that middle managers pose similar challenges in many organizations.
Senior management used this analysis to create a network of middle managers who were encouraged to generate newer and bigger ideas. Members of the network regularly discussed new ideas with senior executives, and these ideas were evaluated collectively by mutually agreed-upon criteria.
Shaping innovation networks is both an art and a science. Any network is unpredictable and, in the end, impossible to control. Focusing on the replacement of one or two ineffective members has less impact than establishing the conditions for vibrant networks and taking advantage of the connections through which they flourish.
Making networks more decentralized is another way to improve collaboration and performance (Exhibit 1). Consider the case of two geographically separate units that undertake the same activities. A larger leadership group with an open and positive mind-set is a distinguishing feature of the higher-performing unit. Its information network is also more decentralized, with a larger number of connections. Hierarchy is still evident in the higher-performing unit, but its information and knowledge network is more distributed, and more of the members participate actively. The lower-performing unit has just one leader, who controls most of the interactions and has a negative mind-set about openness and collaboration, and there are far fewer connections. The network design is more centralized.
The four critical steps in designing, implementing, and managing an innovation network are presented in Exhibit 2. In addition, executives can fine-tune the network’s goals by identifying the appropriate mix and balance of employees. Innovation networks, like cross-functional teams, require different skills and attitudes. In our experience, they include combinations of several archetypes:
Idea generators prefer to come up with ideas, believe that asking the right questions is more important than having the right answers, and are willing to take risks on high-profile experiments.
Researchers mine data to find patterns, which they use as a source of new ideas. They are the most likely members of the network to seek consumer insights and to regard such insights as a primary input.
Experts value proficiency in a single domain and relish opportunities to get things done.
Producers orchestrate the activities of the network. Others come to them for new ideas or to get things done. Producers are also the most likely members of the network to be making connections across teams and groups.
This kind of staffing is clearly an inexact science. A team or network in need of more ideas might get additional idea generators to fill the gap. If the challenge is commercializing the right ideas, management might opt to add producers and experts. In our survey of professionals, respondents who regarded their companies as more innovative than competitors in the same industry were also more likely to work for companies that had larger numbers of producers.
Cultures of trust
Senior executives say that making top talent available for projects to meet innovation goals is their single biggest challenge in this area. Some 40 percent of them also believe that they do not have enough of the right kinds of talent for the innovation projects they pursue. A different view emerges from below, however. Employees are more likely to believe that their organizations have the right talent but that the corporate culture inhibits them from innovating (Exhibit 3). We, for our part, believe that defining and creating the right kind of culture, however elusive, greatly increases the prospects for successful and sustained innovation (see sidebar, “Many paths to success”).
Managers and employees broadly agree about the attitudes, values, and behavior that promote innovation. Topping the list, in our research, were openness to new ideas and a willingness to experiment and take risks. In an innovative culture, employees know that their ideas are valued and believe that it is safe to express and act on those ideas and to learn from failure. Leaders reinforce this state of mind by involving employees in decisions that matter to them. Respondents to our survey of 600 executives and managers indicated that trust and engagement were the mind-sets most closely correlated with a strong performance on innovation. In the same survey, 46 percent of the professionals surveyed said that they were far more likely to seek out a trusted colleague than an expert or manager to get new ideas and feedback on their own ideas.
There is also widespread agreement about the cultural attributes that inhibit innovation: a bureaucratic, hierarchical, and fearful environment. Such cultures often starve innovation of resources and use incentives intended to promote short-term performance and an intolerance of failure. Only 28 percent of the senior executives in the survey said that they are more likely to focus on the risks of innovation than on the opportunities, but only 38 percent said that they actively learn from innovation failures and encourage the organization to do so as well. Even more alarmingly, only 23 percent of the employees believe that their organizations encourage them to learn from failure. To make a corporate culture friendlier to innovation, managers must acquire new skills to engage and lead the staff. Many fall under the heading of leadership skills, such as coaching (as opposed to ordering) subordinates and facilitating collaboration across silos.
Corporate-wide change programs not only are daunting and time consuming but also often have only a limited impact. Our experience helping companies to change and become more innovative suggests that they can make progress without such programs. We have described a number of leadership role-modeling and formal organizational mechanisms to promote innovation. When top management reinforces them with commitment and energy to build capabilities for specific tasks, the combination can yield impressive results. Top teams can help build a more innovative culture in several ways:
Embrace innovation as a top team. It’s not enough for the CEO to make innovation a personal goal and to attend meetings on innovation regularly. Members of the top team must agree that promoting it is a core part of the company’s strategy, reflect on the way their own behavior reinforces or inhibits it, and decide how they should role-model the change and engage middle management.
Turn selected managers into innovation leaders. Identify managers who already act, to some degree, as network brokers and improve their coaching and facilitation skills so that they can build the capabilities of other people involved in innovation efforts more effectively. The goal: making networks more productive.
Create opportunities for managed experimentation and quick success. Not surprisingly, this approach is typically the best way to start any change effort in large organizations. Quick success matters even more with innovation: people need to see results and to participate in the change. To get going quickly and learn along the way, select an innovation theme or topic area and then create small project teams. While you try out topics and ideas, test the most effective leadership and organizational approaches for your organization. The goal isn’t to get it right the first time but to move quickly to give as many influential employees as possible a positive experience of innovation, even if a project doesn’t generate profits immediately. A positive experience will make all the difference in building the organization’s capabilities and confidence.
Innovation is a big idea with a big potential. But it is wise to approach it in small steps, implementing just one or a few of the ideas we propose and building from there. For many companies, the initial steps on this value-creating journey are the most critical of all.
A House Appropriations Military Construction bill includes $1.6 billion in funding to continue the VA EHR modernization project.
By Kate Monica
May 13, 2019 – The House Appropriations Military Construction bill for 2020 will allot $1.6 billion to the VA EHR modernization project, up from $1.1 billion in 2019.
VA’s new EHR system will be built on a Cerner platform to enable seamless health data exchange with the Department of Defense (DoD), which uses the Cerner-supported MHS GENESIS system.
“The bill contains $1.6 billion to continue implementation of the VA electronic health record system,” wrote the House Appropriations committee. “This will ensure the implementation of the contract creating an electronic record system for VA that will be interoperable with the system being developed for DOD.”
“These two identical systems will ensure our veterans get proper care, with timely and accurate medical data transferred between the VA, DOD, and the private sector,” the committee continued. “The bill also continues GAO oversight of this program to ensure that the EHR system is implemented in timely manner.”
In addition to enabling interoperability with DoD, VA plans to continually add new capabilities and EHR functionality to the Cerner system to ensure veterans, VA care providers, and community care providers have access to all health IT tools necessary to deliver high-quality care in an ever-evolving digitized healthcare system.
“This bill honors our commitment to the men and women in our armed services, to our veterans, and to the tens of thousands of military families who sacrifice every day for our nation,” said House Appropriations Committee Chairwoman Nita Lowey.
“We are also upholding our promise to America’s veterans by increasing funding for key priorities including healthcare access for women veterans, suicide prevention, benefits, and homeless assistance, so that those who served receive the care and resources they have more than earned,” Lowey continued.
The 2020 appropriations bill will also put $1.5 billion toward military family housing construction and maintenance and $80.4 billion toward VA medical care.
“This bill provides robust funding to support and improve the quality of life for servicemembers and their families, and continues the fight against Russian aggression and emerging threats in the Middle East and North Africa,” said House Appropriations Subcommittee on Military Construction, Veterans Affairs and Related Agencies Chairwoman Debbie Wasserman Schultz.
The bill also highlights the need for increased oversight and accountability over DoD and VA spending.
“Several provisions are included to keep these agencies on track and to address problems that have wasted money and hurt critical services,” wrote the committee.
Improving oversight throughout the VA EHR modernization process is top of mind among several policymakers as the project continues.
In April, Senators John Tester (D-MT) and Marsha Blackburn (R-TN) introduced a bill intended to establish a third-party oversight committee to monitor the EHR modernization project.
The VA Electronic Health Record Advisory Committee Act is designed to help VA maintain transparency and stay on task as it carries out its $16 billion commercial EHR implementation.
“The new electronic health record system is too important to veterans’ health care for the VA to get wrong,” said Tester, ranking member of the Senate Veterans’ Affairs Committee. “Our bill will create another layer of accountability and oversight of the process to make sure the VA roll-out does right by the nine million veterans who will rely on this system.”
The oversight committee would include 11 members who would operate separately from VA and DoD. Committee members would include medical professionals, IT and interoperability specialists, and veterans currently receiving care through VA.
ClimaCell claims its service, which taps into millions of wireless devices, is 60% more accurate than traditional forecasting methods.
by Douglas Heaven
On April 14 more snow fell on Chicago than had been the case in nearly 40 years. Weather services didn’t see the heavy accumulation coming: they forecast one or two inches at worst. But when the late-winter snowstorm hit, it caused widespread disruption, dumping enough snow that airlines had to cancel more than 700 flights across the city’s airports.
One airline did better than most, however. Instead of relying on the usual weather forecasts, it listened to ClimaCell—a Boston-based “weather tech” startup that claims it can predict the weather more accurately than anyone else. According to the company, its correct forecast of the severity of the Chicago snowstorm allowed the airline to better manage its schedules and minimize losses stemming from delays and diversions.
Founded in 2015, ClimaCell has spent the last few years developing the technology and business relationships that allow it to tap into millions of signals from cell phones and other wireless devices around the world. It uses the quality of those signals as a proxy for local weather conditions, such as precipitation and air quality. It also analyzes images from street cameras. It is offering subscribers a weather forecasting service that it touts as 60% more accurate than those of existing providers such as the National Oceanic and Atmospheric Administration (NOAA).
The internet of weather
The approach makes sense, in principle. Other forecasters use proxies, such as radar signals. But by using information from millions of everyday wireless devices, ClimaCell claims it has a far more fine-grained view of most of the globe than other forecasters get from the existing network of weather sensors, which range from ground-based devices to satellites. (ClimaCell taps into those, too.)
The company has now opened a new research center in Boulder, Colorado, where it is developing a new mathematical model that turns cell phone observations into weather data that can be plugged into a simulation. The more accurate your picture of the weather today, the more accurate your forecast for tomorrow.
The model can be tweaked to focus on the region, the type of weather, and the frequency of updates a subscriber wants. That would help renewable-energy companies know how much sunshine is going to hit their solar panels or how much wind will hit their turbines, for example. Better forecasting lets power providers match up supply and demand.
“There’s always a need for better forecasting,” says weather scientist Ken Mylne at the Met Office, the UK’s national weather service. “It’s impossible to do perfect forecasts, but we keep trying to narrow that gap between impossibility and perfection.”
The Met Office is also looking at new ways to measure current weather conditions. The latest version of its simulation, launched in March, uses data from aircraft radar systems, which can provide information about the temperature and humidity of the air that aircraft pass through. “It’s given a significant improvement in forecast quality,” says Mylne.
Yet making use of things like radar and wireless signals is not easy. Mylne says you can’t just put that data straight into the simulation; you have to translate your observation into the most likely weather conditions that fit it. “There is weather information in those signals, but it’s quite deeply buried,” he explains. “Exactly how you use that data is very challenging.”
Mylne thinks that what ClimaCell is doing is a good idea in principle. But he’d like to see many rigorous comparisons with other forecasters in different locations and over several months before he is convinced the technique is as accurate as ClimaCell claims.
Tim Palmer at the University of Oxford in the UK would also like to see more comparisons with other forecasters. “It’s difficult to make a clear judgment on whether they’re doing anything useful or not,” he says. “All weather services are looking for new data, and it’s quite difficult to add value. There’s already an enormous amount of information.”
A spokesperson for NOAA said the organization welcomes new techniques from the private sector but declined to comment on the specifics of ClimaCell’s approach.
In ClimaCell’s favor, Luke Peffers, who heads the startup’s research team in Boulder, has a lot of experience in measuring weather conditions. Before joining the company, he worked for the US government carrying out forensic analyses of the atmosphere to check whether nuclear test bans were being violated. He did that by looking for signs of radiation in the weather.
ClimaCell says it has also performed retrospective simulations for periods of one to 10 years that compare favorably with observations made by others. And it says it tested its model in Israel for a three-month period during heavy floods. “We did a terrific job compared to the Israel Meteorological Service’s rain gauges,” Peffers says.
As well as providing bespoke weather updates to businesses, ClimaCell is interested in collaborating with national forecasters. It is also keen to keep tapping into new sources of data. With more and more devices being connected to the internet, the number of wireless signals is increasing. As the company likes to put it, “Everything is a weather sensor.”