Home / Hélice / Volume 5 (2016) / Hélice Issue 2

Ecology of Innovation and the Triple Helix

A Tribute to Tapan Munroe

JOSEP M PIQUE
CEO, Office of Economic Growth, Barcelona City Council
Vice-President, International Association of Science Parks and AI

Tapan Munroe

Tapan Munroe

Introduction
In 2004, I had the opportunity to meet Tapan Munroe at a workshop held in Saint Mary’s College, Moraga, California. After the workshop we had the opportunity to visit each other and to open our house and our friendship. Tapan was a speaker at the IX Triple Helix Conference at Stanford University in 2011. The purpose of this paper is to make an explicit Tribute to Tapan Munroe, who died in 2014, and to connect his knowledge on the ecologies of innovation with the well-known Triple Helix model. Universities, industry, and government are developing different functions in the ecology of innovation.
In 2007, Tapan Munroe wrote the book ‘Silicon Valley: The Ecology of Innovation’ in partnership with Mark Westwind. He was invited to Spain as a speaker at two international high-tech conferences: the Global Internet Congress, May 2006, in Madrid; and the International Technology Forum, November 2007, in Barcelona. He gave a series of lectures on high-tech related topics at the La Salle University Graduate School of Business in Barcelona, where he was visiting professor. In May 2007, he was invited by the Science Park Association of Spain to lecture at science and innovation parks in Madrid, Bilbao, Lleida, Barcelona, and Malaga. The Science Park Association had been using the book as a reference for understanding Silicon Valley and for training new generations of policy makers, parks mangers and innovators in the world.

 

siliconvalley1. Silicon Valley: the Ecology of Innovation
For Tapan, the key to understanding what makes the Silicon Valley‘s innovation economy so successful can be understood via the workings of the unique evolutionary model: the biological ecosystem.
Just like any biological ecosystem, a successful ecosystem is based on key elements that adapt and evolve in the face of constant change. The ability of these elements to rapidly adapt to change assures resilience in response to external shocks and internal upheavals. Resilience supports long-term sustainability so that the hard-earned prosperity of one cycle of success becomes the foundation for the next cycle, and so on. The success of an innovation ecosystem relies on the vitality and health of each of these elements and their interconnectedness. A failing or an unhealthy element can undermine the existence of the entire ecosystem.
At the heart of the book are the key elements that make up the core of the Valley‘s innovation ecosystem and their relationships to one another. This thriving high-tech region in the southern San Francisco Bay Area is a unique economic environment where bold, new ideas compete and then are transformed into products and services that reshape our world. In this process of transformation, the Silicon Valley entrepreneur becomes part of a symbiotic web of supportive relationships. In a world of innovation, ideas need entrepreneurs to survive, and entrepreneurs need ideas to flourish.

In Silicon Valley‘s innovation ecosystem, the elements, each play different and mutually supporting roles, to maintain and enhance the ecosystem‘s health. World-class research universities, industry clusters, venture capitalists and angel investors, intellectual property lawyers, consultants, skilled workers and talented engineers, all linked through a variety of social and professional networks, contribute in interconnected ways to the success of the entrepreneur‘s venture, and in doing so, contribute to their own prosperity and the prosperity of the region.
Innovation and technological change are undoubtedly the drivers of economic growth at organizational, industry, and macroeconomic levels. For decades, Silicon Valley has sustained its success by consistently providing a steady stream of ideas and innovations that have created value for consumers and organizations worldwide. Universities, industry and government are providing the elements to the ecology in a dynamic way, making a clear evolution from the early days of Silicon Valley until now.
The success of Silicon Valley is neither the brainchild of a brilliant planner nor the grandiose vision of a forward-thinking economic development agency. The evolution of the Valley as a global center for high-tech innovation was almost totally organic rather than intentional. Certainly, the creation of the Stanford Industrial Park was an intentional effort to provide a ‘center of high technology close to a cooperative university’, but virtually every other aspect of the emergence of the Valley‘s prominence was unplanned, unexpected and unintended on the macro level. Its evolution represents a long series of individual initiatives, great innovations, and interactions among the stakeholders via ever-expanding social and professional networks. In Silicon Valley there is no role of
leadership of the government. The role of the University is in the source of the technology and talent. The role of industry is in the ‘industry of growth’, combining big corporations and clusters with the Investment Industry.

 

2. Key Ecosystem Elements
Tapan identified six key elements of the Valley‘s innovation ecosystem that have served and sustained Silicon Valley‘s economy so successfully (see Figure 1):

  1. Research Universities: World-class research universities such as UC Berkeley, UC San Francisco, and Stanford University form the foundation for a world-class innovation economy in several key ways: through the generation and licensing of intellectual property; through the involvement of faculty as consultants and advisers to businesses; by supporting faculty in capitalizing on their innovations; by providing the private sector with a steady supply of talented engineers, designers, managers, etc; by providing innovators with access to cutting-edge laboratories and equipment; and, by encouraging a continuous dialogue between industry experts, faculty and students.
  2. Entrepreneurs: In the innovation ecosystem, the entrepreneur is a biological host for the innovation. Without the unique talent, traits, and tenacity of the entrepreneur, bold new ideas would never see the light of day. We all have lots of new ideas, but the entrepreneur, driven by the energy and excitement of the core idea that is the seed of innovation, as well as a hefty dose of self-interest and vision of personal gain, makes the commitment and takes the risk to manifest the innovation as a product or service. A culture of entrepreneurialism and a tradition of serial entrepreneurship are fundamental to the success and sustainability of the Silicon Valley‘s economy.
  3. Investment Capital: Few high-tech ventures can launch and grow to become world-class companies without large infusions of cash at crucial stages of development. While the Valley offers relatively convenient access to high-net-worth individuals (angel investors), multimillion-dollar venture capital firms, and investment banks, the competition for cash is one of the primary survival tests for both innovations and entrepreneurs. (Theoretically, this process should assure that only the best innovations make it to market, but as we have seen, this has not always true). Investors do more than provide money; they offer a wealth of technical expertise, business experience and valuable connections to resources and people.
  4. Talented Work Force: No business venture can thrive without a skilled and dedicated workforce. The Valley is a magnet for talent from all over the world and the diversity of the region‘s workforce has been a source of its strength and success. More so than the social environment, the Valley‘s business environment is a ‘melting pot’ of people and ideas from a range of ethnic backgrounds, academic disciplines, business cultures, etc. At the same time, as in every ecosystem, organisms (ie. skilled workers) at every level are opportunistic. In a culture where ‘job-hopping’ is an accepted practice, retaining talented employees is challenging. As a result, Valley companies are experimenting with various innovations to keep their employees loyal and happy.
  5. Social and Professional Networks: Just as money is the primary fuel for innovative ventures, information is vital for survival and success, particularly when competing on a global scale. Information takes many forms and comes from a myriad of sources including both formal and informal social and professional networks; information, ideas, contacts and connections flow freely despite the hyper-competitive spirit that pervades the Valley. How the Valley‘s business community has successfully managed the tension between collegiality and competitiveness has proven to be a major contributor to the unique culture of its business environment.
  6. Quality of Life: Business is business, but we‘re all human, and it is safe to say that world-class innovators, investors, and workers all appreciate a world-class lifestyle. The overall quality of life in Silicon Valley and the Bay Area is a significant contributor to the region‘s long-term economic success. With its comfortable Mediterranean climate, scenic beauty, first-rate cultural venues, cosmopolitan ambiance and proximity to sun, surf and snow, the San Francisco Bay Area easily qualifies as one of the most attractive regions in the United States. While quality of life may not seem the most important element of an innovation ecosystem, we believe that the Valley‘s locale has played a key role in its birth, evolution and long-term success. The people of California and the Bay Area have worked hard to protect their natural treasures and encourage a wide range of artistic and cultural expression.
Figure 1: Elements of Silicon Valley‘s innovation ecosystem

Figure 1: Elements of Silicon Valley‘s innovation ecosystem

 

3. Resilience and Reinvention
Perhaps the most unique feature of the Silicon Valley innovation economy is its resilience despite continuous change including the high failure rate of startups, shakeouts such as the dot-com bust, and intense global competition. Creighton University Professor Ernie Goss, a scholar-in-residence at the Congressional Budget Office studying the economic impact of technology, says ‘Cutting-edge tech hubs have to reinvent themselves every cycle. That reinvention and dynamism gives them life – and death. This is a natural cycle that can be … brutally painful to workers and residents’.
Factors contributing to the region’s longevity and vitality include the constant creation of new companies stemming from new ideas funded from diverse sources, including personal capital, angel investments and venture capital. Another factor is the Valley‘s culture of the serial entrepreneur. ‘Silicon Valley recycles its talent … individuals embrace the start-up culture and become comfortable with the risk of failure’ says Rolando Esteverena, a successful serial entrepreneur who came to the Valley from Argentina years ago.

Waves of innovation
Silicon Valley has weathered many storms. But with every ‘wave of innovation’ and economic boom and bust cycle, its economy has successfully managed to reinvent itself. For much of the first half of the twentieth century, Valley companies were deeply involved in developing and manufacturing defense-related products. In response to the recession in 1970, the Valley‘s innovators began applying defense technologies (particularly integrated circuits) to new commercial applications. A wave of electronic innovation swept through the region, laying the foundation for the personal computer that followed in the early eighties.
With each cycle, disruptive technologies or depressed economic conditions (eg, the defense recession of 1970 or the semiconductor recession of 1985) changed the playing field and a new cycle of reinvention began. Over the years, the Valley‘s economy showed tremendous resilience in rising from economic downturns and major business setbacks best illustrated by the dot.com boom-bust cycle.
While the dot-com boom made Silicon Valley a household term, the dot-com bust of 2000-2001 showed the world that the Valley is not immune to market forces and that economic prosperity can be fleeting. Underlying one of the greatest financial disasters of recent times was a euphoric view of the future with enormous expectations involving the Internet. The financial markets, at least for a while, supported the spectacular promise of the Internet. Investors paid astronomical prices for shares in Internet-related companies.

Resurgence: the next big thing
The years following the bust demonstrated the adaptability and sustainability of the Valley‘s innovation economy in the face of economic adversity. In a matter of a few years, venture capital investment levels were back to pre-bust levels. The Internet did not collapse and disappear; in fact, it spawned viable Internet-related businesses based on the lessons learned from the dot-com disaster. Silicon Valley also stepped up to meet the growing challenge of global warming and the rising cost of fossil fuel. The Valley had the potential to become the leading region for clean energy products because of its highly sophisticated innovation ecosystem including the region‘s access to major research universities, think tanks and entrepreneurs, its critical mass of successful technology companies, and its sophisticated venture and angel capital presence.

4. Challenges to the Valley’s Sustainability
Silicon Valley faces many challenges that could undermine the health of its innovation ecosystem, including intense global market competition, competition for world-class talent and investment capital, declining financial support for the public research universities such as UC Berkeley and UC San Francisco, and a decline in the region‘s quality of life.
There are non economical challenges such as the declining quality of high school education in the region, the shortage of mathematics and science graduate students for the region‘s universities, worker burnout, local traffic congestion and high housing costs. Not paying attention to these challenges and failing to find solutions will certainly pose a threat to the region‘s economic health.

Risks to the Silicon Valley Ecosystem
Risks of Losing Talent
* Declining quality of US secondary education
* High housing costs
* Declining quality of life
* Transportation congestion
* Worker burn-out
Competition: Domestic and International
* Increasing VC investments in Boston area Cleantech companies
* Increasing innovation around the globe, e.g. India, China

Lack of high school performance
Although Silicon Valley companies such as Google, Yahoo, Cisco Systems, HP and others attract the best talent from all over the world, and the region is endowed with some of the finest research universities in the world, the Valley continues to be challenged by the lack of performance of the region‘s high schools.
This is of critical concern for such a knowledge-intensive region. How well the region prepares high school graduates for entrance to the various campuses of the UC system, Stanford University, the California State University (CSU) campuses and other universities in the nation has a lot to do with the future economic success of the Valley as well as the San Francisco Bay Area. The region‘s companies need to be able to hire top talent locally and regionally, not just globally.
Data suggests that Silicon Valley high school graduation rates have dropped over the last years. A matter of greater concern perhaps is the fall in graduates who did not meet the requirements for entry into the UC and the CSU systems. This is a reversal from previous years. In addition, the Valley‘s high school dropout rates have continued to increase.

Shortage of mathematics and science graduates
With hiring in the high-tech sector up for the first time in five years, Silicon Valley has recovered from the dot-com bust and is surging. Corporate profits have soared in the past few years. High-quality science and engineering graduates are desperately needed for an innovation ecosystem such as Silicon Valley, whose lifeblood is creating ideas and innovations and shaping them into new products and services. They are just as valuable as venture capitalists and entrepreneurs.
However, there is a concern about the sustainability of the region‘s innovation ecosystem due to the local talent crunch. There is fierce competition in Silicon Valley for hiring and retaining the best talent. Tech companies are searching not only globally but locally for the best and brightest talent. It is the local picture that is of the greatest concern.
The real problem for California, the Bay Area, and Silicon Valley is that not enough engineers and scientists are graduating from local universities to meet the demand of high-tech industries. The source of this problem is that a small and declining percentage of high school graduates are entering technical fields that require science and mathematics.
Another serious concern arising from the lack of students entering university science and math programs is that many programs may be closed due to lack of enrollment. The loss of innovative science and math programs limits opportunities for truly talented students and continues the downward spiral of educational achievement.

Worker burnout
Despite Silicon Valley‘s high wages, high quality of life, and supportive social and professional networks, its fast pace and competitive nature make it not only a leading technology region but also a leader in worker stress. Because of the intense pressure to stay on the cutting edge of technology and business, long workdays have become the rule rather than the exception.
The Valley has a dominant ‘culture of accomplishments’, where being first in the world is important. According to David Gamow, Founder of Clarity Seminars in Mountain View, the Valley moves quickly, and if everyone is moving at 200 miles an hour, then 100 miles an hour is slow. ‘More speed’ is the mantra of the Valley.
Not everyone feels overworked in the Valley. Many people enjoy the long hours as they have learned how to lead a balanced life. Personal perceptions of workload vary depending on individual needs, lifestyle, expectation, and experience. Also, individuals have a different tolerance for demand and stress.
However, on average, many workers in the Valley are overworked. This results in a low employee retention rate, lower efficiency, and loss of creativity. These are serious problems for idea and creativity intensive companies, and a potential threat to the sustainability of the Valley‘s innovation ecosystem.

Traffic congestion and high housing costs
Rapid economic growth has resulted in increasingly clogged freeways and sky-rocketing housing prices. The impact of traffic congestion and housing affordability on the region‘s ability to attract top talents, with the median cost of Valley housing at $800,000, few of the region‘s families can afford a home in Silicon Valley.
A vibrant economy has meant more cars, congestion, and longer commutes to this vital region. Traffic congestion means commuters are wasting time sitting in cars, smelling polluted air, and worsening the air quality of the region.
It is important to note that despite twin problems of high home prices and traffic congestion, the Valley remains the top global technology hub. It dominates technology and life science industries over other hubs such as Singapore, Shanghai, Tokyo, Basel, Bangalore, Dublin, and Berlin. Why? Because in many of these places the cost of housing and traffic congestion are even worse than in Silicon Valley.

5. Lessons Learned
According to Tapan, thirteen lessons learned about developing a successful and sustainable innovative economy from the Silicon Valley case study, such as:

  • Silicon Valley is unique. Its innovation economy cannot be cloned but there are useful lessons to be learned from the region‘s innovation ecosystem that can be applied to other places seeking to emulate the success.
  • A high-quality educational system and strong connections between universities and business are as important to a region‘s long-term success as seaports and airports, paved highways and digital highways.
  • Aspiring regions need to develop a nurturing environment for entrepreneurs and encourage innovative risk-taking. It is important to recognize the success of local entrepreneurs and not dwell on failures. Help make them role models.
  • Attract the best scientific, technical, and managerial talents from all over the world to the research universities and think tanks in the region.
  • Develop technology-transfer offices at regional universities that encourage entrepreneurial faculty and graduate students to start new businesses in the region.
  • Develop angel capital networks in the region. This will encourage the investment of early stage capital from regional or local sources as well as enhance the culture of risk-taking. Establish links with US angel groups such as the Keiretsu Forum and the Band of Angels. Use these groups as models.

Silicon Valley‘s success as an innovation economy is rooted in the way in which it has evolved as a healthy, resilient, adaptable and sustainable innovation ecosystem. It can be emulated by creating, fostering and nurturing a region‘s own set of key elements – a healthy innovation ecosystem will very likely evolve.

6. Triple Helix and Ecology of Innovation
Within an innovation ecosystem, there are different agents (universities, industry and government), which develop different roles and interrelations in order to manage resources and contribute to the development of the ecosystem. Every agent can provide one or more elements. The ecosystem has a dynamic constraint as the industrial cycle, the economy and the legal framework. In every area of the world, agents can provide or manage different resources.
Innovation ecosystems depend on the role of every agent, the articulation of the role between the agents, and how they are working together developing hybrid organizations.

In the case of Silicon Valley:

The role of the University is clear:

  • They provide the talent to the Valley, attracting the best talent of world and delivering them to the industry. In other hand there are some challenges of local and regional STEM students. This is both an economical and social challenge.
  • They are one of the sources of research, providing technology and patents, and supporting industrial clusters

The role of the Industry is more complex:

  • New entrepreneurs are the source of the innovation and the risk taken part.
  • Industry of investment is combining Business Angels and Venture Capital Firms in order to invest in high scalability of the start-ups.
  • Large corporations are one of the exit plans (instead of IPO) of the entrepreneurs. They scale to the globe the entrepreneurial projects.
  • All industry knows the rules of the game, and aligns interests, incentives and goals.

The Role of the Government is missing:

  • At the origin were the US Government with the Military research and Military Contracts. Nowadays it is only the National Labs.
  • At State Level, the UC System is one of the key contributions, with all the constraint in funding.
  • The educational system is one of the challenges to be solved.
  • No leading actions in urban planning and infrastructures of mobility.
  • Challenges in the environment and the quality of life.

Every ecology of innovation has to provide people, capital and technology, delivered by the agents of the Triple Helix – universities, industry and government. The starting point, the path to growth and the global connections, will be the challenge of every region to become a ‘Silicon Valley’.

 

References
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