Crafting the Urban Recipe for Innovation That Matters

May 14, 2015

Every city has a feel and a heartbeat.  If you’re a local to an area, it’s instinctual to you. If you’re a visitor to a place that’s not your hometown though, the feel and heartbeat of where you’re at is what can make a lasting impression on you.  For example, it might be the vibrant colors and music of Miami, the hustle and concrete canyons of NYC, or the seemingly never ending expanse of Houston. 

In each of those places there is an energy that says you’re in someplace new and different and, as a result, helps to separate one place from another. That essence of a city is hard to replace or even replicate, but when it comes to being a magnet for new business and innovation, the ingredients of a recipe can be a real challenge. 

It’s one of the reasons the U.S. Chamber of Commerce Foundation partnered with our Chamber colleagues at Free Enterprise as well as the global incubator and seed funder, 1776, in a study of eight U.S. cities and their civic institutions. The results from this study are presented in “Innovation That Matters – How City Networks Drive Civic Entrepreneurship.”

Whether we realize it or not, successful innovations address an existing need, and when it comes to the civic functions of a city, American metropolises have many needs. Fortunately, the country also has legions of entrepreneurs hungry to develop the products and services that can advance some of the most central aspects of urban living. These entrepreneurs have their choice in terms of places to take root and grow some of those innovations and that’s something that comes across loud and clear in our report.

The focus of our study sought to understand how cities cultivate civic sector startup ecosystems; what challenges they face; and what methods do they take for increasing startup activity in ways that benefit society. In the report, “civic institutions” are the service providers that cater to the public good, including: schools and universities in education; utilities in energy; provider and payer networks in health; and local government agencies and transport authorities in cities.

In each of these areas there are entrenched institutional players that often face highly regulated environments. Any time you seek to advance competitiveness and innovation in any of these civic institutions it most definitely demands new thinking and new businesses to spur it along.

Each of the cities we studied (Austin, Boston, Chicago, Detroit, New Orleans, New York, San Francisco, and Washington, D.C.) face challenges and opportunities specific to their makeup. Yet, there are crosscutting themes that reveal lessons for all cities and institutions. So how can a city promote innovation and entrepreneurship that advances the civic sector and provides high-quality, competitive services at low costs?

 

Finding the Secret Sauce

On the face of it, one might assume that talented people plus investment capital yields immediate entrepreneurship and economic growth. It sounds like the ultimate of perfect gardening conditions: just put the seeds and plants into the perfect soil, add some sunlight and water and “poof!”—jobs and innovation will abound in the urban garden! Unfortunately it’s not that simple because no one city is able to attract the best and brightest and pair the investors and the entrepreneurial community into a perfect ecosystem. No garden, despite its near perfect conditions, can take care of itself.

Like a gardener, ask any entrepreneur what their secret to success is and you will hear a laundry list of tips, tricks and best practices. For a startup, there is not just one thing that yields success (or failure) but instead it’s a number of factors. On the macro level, our study found that there is one essential factor for the civic success cities seek: networks.

Indeed, as the report states, "network connectivity is the defining factor that influences the development of entrepreneurial innovation in all four fields.

The study’s survey of 230 civic tech entrepreneurs in the eight cities studied found that there is sometimes insufficient interaction between entrepreneurs, civic institutions, and locally based corporations. Thus, the challenge for cities is to find ways to leverage their unique assets and capabilities to create fluid, open networks that connect diverse stakeholders, facilitate the exchange of ideas, bridge cultural gaps, and foster collaboration. Consider lessons from the two cities that scored the highest on the report’s Civic Entrepreneurship Index.


Boston boasts a large and often exceptional pool of talent, drawing in part from its proximity to the Massachusetts Institute of Technology (MIT) and other regional, high-caliber institutions. Even as Boston scored somewhat lower in terms of support from venture capital investors, overall it scored second highest on our report’s  Index. Yet, the city’s entrepreneurial ecosystem suffers from what one entrepreneur called, “‘uberlocalization,’ where everything is concentrated in just one place.”

Siloed institutions often inhibit connectivity and get in the way of a robust and growing entrepreneurial ecosystem.  If things become to “walled off” and regimented, it prevents wider growth and connectivity thus limiting its overall potential.

Contrast this with San Francisco, which scored the highest on our report’s  index. In recent years, San Francisco has increasingly become a hub for digital innovation, owing in part to the movement of startups and young professionals from Silicon Valley, attracted to “The Golden City” for its quality of life and other charms. This in turn encourages companies to relocate to where the talent lives, sparking a perpetual cycle of opportunity, job creation and entrepreneurship. Stakeholders in San Francisco reported that the city’s overall network connectivity exceeds that of any other city. For all intents and purposes, this is the “secret sauce” that is driv

ing growth and innovation in San Francisco. As James Windon, president of the civic engagement startup Brigade, told us:

“The level and discourse when it comes to technology is so high here. People live and breathe their jobs way more than they would anywhere else, and there’s a sense of let’s all work together, because there’s no traditional path.”

This collaborative sentiment is what makes San Francisco stand apart from the crowd as a powerful center of civic entrepreneurship and innovation. Each stakeholder recognizes thatsuccess in their role demands that other stakeholders succeed in their areas as well. In this free-flowing region with its collaborative exchange of ideas, effort and ambition, San Francisco is enjoying the kind of entrepreneurship that is capable of advancing the civic sector. From these cities and the others investigated for the report, there are lessons for every metropolis. While recognizing that every city is different, there are common ingredients to cultivating civic entrepreneurship.

 

A Five-Step Framework for Success

Building a highly networked entrepreneurial ecosystem relies on foundational factors that allow a startup community to flourish, what the report calls “environmental building blocks.” These include:

  • A thoughtful regulatory environment that supports the public good, fosters competition and is tailored to the challenges, opportunities and potential of local businesses, particularly startups;
  • A high quality of life that attracts and retains a talented workforce;
  • A culture of creative thinking that yields the new ideas that drive startups, even if these ideas diverge from longstanding traditions and entrenched institutions; and,
  • Sufficient city density that naturally connects stakeholders, the underpinning of a fluid network that offers regular opportunities for interaction and collaboration.

Establishing and improving these building blocks is much easier said than done, in part because each city holds unique assets, advantages, and challenges. There is no easily replicable recipe for success, though there are some common critical ingredients.

Our study offers five steps any city can follow to create the conditions that allow civic entrepreneurship to thrive.

1. Build Connectivity

As shown in San Francisco, a fluid, broad network profits a city with new ideas, new opportunities, and new businesses. Connecting local actors (like startups, civic institutions, investors, regulators, and established corporations) creates a collaborative environment where innovation is valued, risk is embraced and reward is possible.

2. Foster Competition

Competition is always a good thing. Cities must find opportunities to encourage all stakeholders to deliver their level best. This may create friction between startups and longstanding established corporations. If conflicts arise, the free market should decide which competitor advances change and which is left behind. Critically, there must be a level playing field where institutional knowledge and fresh ideas are equally valued.

3. Cultivate Opportunities

There is always room for improvement, so cities must purposefully make room for the startups that can bring new products or services that address ongoing challenges in existing institutions (be they public or private). The environment must contain opportunities for newcomers to experiment, test prototypes, and apply their entrepreneurial ambition in a safe, supportive environment.

4. Deliver the Data

The rapid rise in computing power and data generation holds enormous potential for public and private sectors alike. When it comes to the operations of civic institutions, startups need access to data, ongoing delivery of new datasets, and continual improvement of data flows.

5.Show Me the Money

Every community holds wealth assets. The challenge for cities is to identify sources of funding and connect them with startups, offering essential support in the formative and most challenges stages of entrepreneurship.

 

With these steps, cities can purposefully move down a road towards enhancing their own startup ecosystems and all the benefits that brings. Those benefits extend far beyond building the tax-base of a city and enhancing the overall richness of the community, but more importantly they contribute to the spirit and energy that makes each city unique and diverse. 

Our report captures those aspects and is the first step to a deeper exploration that we hope to do in the future.   The fun part of that effort is knowing we already have eight great American cities where innovations do matter, and we have a whole lot more cities to explore in the coming months and years to see how their “secret sauce” makes a positive difference.

 

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