If you’re looking for the place where the very divergent mindsets of corporate strategy and startup dogma meet around the back end of the “horseshoe,” you may want to try Creative Construction, by Prof. Gary Pisano of the Harvard Business School.
Creative Construction is another in the long series of books by HBS profs who seek to turn their scholarship and private consulting into books of practical advice aimed at workaday businesspeople. Normally I hold limited expectations for such titles, but Pisano is someone I’ve been following since his excellent work with his colleague Prof. Willy Shih on America’s loss of manufacturing supply chains and the impact on our national innovation capacity.
Creative Construction presents a very nice exposition of why large businesses that genuinely want to be innovative often fail despite the best intentions, and then the book suggests how they can do better. With a title that plays on Schumpeter’s famous coinage “creative destruction,” but also phonically on the word “disruption” as used in the last decade by his HBS colleague Prof. Clayton Christensen, Creative Construction lays out a three-part agenda for executives in “Big Corp” (my term, not his): creating an innovation strategy, designing a system to support that strategy, and building a culture that makes it all more than just words.
Since “disruption” has become the mantra of venture-capital-backed startups, I wondered whether there would be overlap between Pisano’s argument and the guiding principles of the startup world. Surprisingly, though, the book’s index includes no explicit reference to several canonical works in the literature of practical advice on startups: Eric Ries’s The Lean Startup; Alex Osterwalder’s Business Model Generation and Business Model Canvas; and most especially Steve Blank’s The Four Steps to the Epiphany and The Startup Owner’s Manual. And yet, despite the lack of explicit reference, the reader with feet in both camps (for example, investors or bankers) will find important points of connectivity.
In an important piece of research recently released, two smart analysts have put numbers to what many of us active in economic development in New York State have long been saying: there exists a deep, fundamental mismatch between the stylistic preferences of regionally based venture-capital firms and the kinds of innovation emerging from the state’s university R&D community.
The study by Judy Albers and Tom Moebus – both well known and respected players in the statewide innovation ecosystem ((Judy, now an entrepreneurship professor at SUNY Geneseo co-founded the Pre Seed Workshop program, and Tom runs several innovation programs for the SUNY Research Foundation)) – employs data from NVCA and other sources to nail the case that while the amount of venture capital under management in New York City is rising, it is specializing heavily in digital technologies (IT, software, media) and focusing on capital-efficient “quick hits,” often at the expansion phase, with high potential for fast liquidity and outsized returns. Almost none of that potential is available upstate, and consequently almost no regionally managed capital goes there.
The authors show that while the VC industry in California and Massachusetts is more eclectic in its tastes, only a very small share of that money comes to New York to begin with, and exceptionally little makes its way upstate. That leaves ventures in what Albers and Moebus call the hard sciences (subdivided into the engineering technologies and life sciences) a long, hard slog with few early-stage investors (and almost no seed investors) either based here or deploying money anywhere in the state.
On more than one occasion I’ve been approached by economic developers or policy advisors working on behalf small or mid-sized cities. These people want to know how their town can grow so-called new-economy jobs to replace those in traditional sectors that have declined.
Many such cities, particularly the smallest ones, lack a driving knowledge-based institution like a research university, and these are the toughest cases. They may host a primarily instructional undergraduate campus of a big public university, a private liberal-arts college or a community college. While these places do have students, sometimes in ample number, they offer neither a reservoir of promising intellectual property derived from federal R&D nor concentrations of graduates (and especially postgraduates and professional students) superbly trained in the so-called STEM disciplines or well suited to startup management. As a consequence, these cities have little to offer the investors and business executives who control the allocation of startup and expansion capital in our system. And without financial investment and the jobs it creates, even the best-educated do not remain long: they simply have no choice but to leave upon graduation, deepening a cycle of trouble.
These small and mid-sized places are not the coastal metropolises and cannot easily pursue Richard Florida’s vision ((See for example http://www.creativeclass.com/richard_florida/books/books_home)) of dynamism based on coolness, tolerance, diversity, and density (though that hasn’t stopped Florida from pitching to small and mid-sized cities). Nor are they the small-city oases with high quality of recreational life that Joel Kotkin has highlighted (along with their suburbs and exurbs of course) for their appeal to rootless software engineers and other professionals ((See for example http://www.joelkotkin.com/content/00832-surprising-cities-creating-most-tech-jobs)). No, they are flyover territory in the old, industrial heartland, burdened with all the cares of aging infrastructure and population, but without much taxing capacity left, and without enough private wealth creation to drive a virtuous cycle of renewal or even dynamic philanthropy.
Really, these places are at the mercy of forces well beyond the control of the usual civic and business establishments, and they are desperate for answers. With encouragement from the Obama Administration’s Strong Cities, Strong Communities initiative ((See http://www.whitehouse.gov/blog/2011/07/11/announcing-strong-cities-strong-communities)), many such cities have come to understand they need this kind of guidance. But it’s always seemed that we were flying by the seats of our pants. Data are scarce, good theory scarcer. Experience rules.
When I saw the notice for Revitalizing American Cities — which doesn’t have the words “small cities” in its title but is nonetheless focused on them — I was curious to know what the latest scholarship says. Comprising papers by academics and practitioners, this useful review of current research and thinking is published by University of Pennsylvania Press (ISBN 978-0-8122-4555-4). It is co-edited by Susan Wachter at the Wharton School and Kimberly Zeuli at the Initiative for a Competitive Inner City, a nonprofit institute created by Harvard Business School’s Michael Porter.