Notes from the ‘Capital of Innovation’

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This past summer, I joined my colleagues on a visit to the Global Innovation Summit and study tour in Silicon Valley—which is undoubtedly the world’s capital of innovation and entrepreneurship. Also joining us were representatives from Lebanon and Vietnam, who were clearly interested in enabling inclusive innovation in their respective countries.

Silicon Valley isn't afraid of failing and risking its way to success.  The Global Innovation Summit brought together more than 500 innovation practitioners—including entrepreneurs, financiers, think tanks, NGOs engaged in inclusive innovation, and government officials from emerging markets.  While we were there, we got an inside look at business accelerators, financiers, higher education institutions, and NGOs engaged in inclusive innovation.  It was an important learning opportunity for us, considering the importance of innovation to the development agenda and the World Bank’s role in fostering innovation in our client countries. 

For my part, the lessons I learned have already begun informing my work with client countries. Here are my key takeaways, which I believe will be useful to anyone with a professional interest in innovation and entrepreneurship:

Innovation ecosystems can be viewed as “rainforests” based on trust. The Innovation Summit introduced the concept of the “rainforest” as the essence of dynamic innovation systems. The Rainforest is a human ecosystem that allows all initiatives to flourish and where social barriers in the market are low allowing individuals to connect and work together. Individuals are the most important components of the Silicon Valley ecosystem.

Connecting to and learning from experienced individuals is one of, or possibly, the most critical factor to nurture “start ups”.  Plenty of actors around the Valley facilitate such connections. This area which is also very crucial in many developing countries is usually overlooked. It is becoming increasingly possible to find young talented individuals that have interesting marketable ideas. Yet, they do not know whom to consult on turning these ideas into business plans.

Risk is encouraged and failure is not stigmatized. Ideas are tested and exit is encouraged early on when ideas become non-viable. Failure is not stigmatized or penalized. In many developing countries that we are working on the culture and the regulatory environment does not encourage and maybe even discourages vibrant entrepreneurship.

The financing structure for innovation is sophisticated and well-structured. Silicon Valley provides smart capital as investors have deep expertise in the industry and can guide entrepreneurs to the right place in the market. Financing in the Valley is highly integrated with both strong early-stage and later-stage capital markets, which is vital for the investment cycle. This mechanism, which is vital for the investment cycle, is not yet accessible in many countries.

Many countries have benefited from connecting with the Diaspora that lives in the Valley. Connecting to the Diaspora in the Valley has proved valuable to countries that are trying to kick start financing mechanisms for start-ups. However the Diaspora does not only provide guidance on financing mechanisms. Organizations such as Techwadi (Middle East) and TIE Global (South Asia) are actively working to build connections between the Valley and emerging markets—inter alia providing mentorship, networking links to angel investors and venture capital.

Innovation is increasingly based on the convergence of multiple disciplines, and the Valley provides opportunities for interactions across a wide range of fields. Universities also encourage multidisciplinary learning. The ecosystem embraces diversity and allows people to form synergies leading to higher creativity. There are no social barriers that prevent people from working together, which can be a concern in many developing countries that we work on.

Higher institutions play an active role in “nurturing” entrepreneurship. In many developing countries, higher education institutions only serve as teaching places. However in the Valley, higher institutions are an important part of the eco-system, collaborating with enterprises in the development of new products; integrating entrepreneurship training within their curricula; and providing business acceleration services for “start ups” (e.g. StartX Incubator at Stanford University).

Technology is developing at a staggering pace and opening incredible opportunities to developing countries. Many technological developments could generate abundance where there was scarcity before (e.g., food, water, and energy). The big challenge is how to take these opportunities to low income countries to help them accelerate growth and reduce poverty.  Examples of “inclusive innovations” aimed at the bottom of the pyramid are emerging but far more is necessary. 

Promoting innovation and entrepreneurship is no longer a choice for policy makers in our client countries but a necessity. While replicating Silicon Valley is not possible, the visit taught us valuable lessons. Many of the programs and instruments that we saw could be customized and tested in our client countries.  There are also clear opportunities for strengthening the links of Silicon Valley to our client countries, inter alia through the diaspora.


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