Building an innovation nation
McKinsey has partnered with the World Economic Forum to create an “Innovation Heat Map,” by identifying factors that are common to successful innovation hubs. As part of this effort, they have examined the evolution of hundreds of such clusters around the world and analyzed over 700 variables, including those driving innovation (business environment, government and regulation, human capital, infrastructure, and local demand) along with proxies for innovation output (for example, economic value added, journal publications, patent applications) to identify trends among the success stories.
In the process, McKinsey have found patterns that suggest the critical ingredients required to grow, nurture, and sustain innovation hubs. At the same time, they have compiled thousands of data points that may be used to identify bottlenecks and benchmark the performance of cities, regions, and countries by measuring how they are evolving.
The research shows that the critical drivers of innovation vary from sector to sector. The local regulatory environment, for example, is a critical determinant for some sectors; for others, the availability of venture capital or the presence of a demanding local customer base are key. However, the single common factor that drives—or, indeed, constrains—innovation across all sectors is the availability of a well-qualified and specialized talent pool. While a hub’s initial success can often be fueled by relying primarily on local talent, the importance of attracting, developing, and retaining a vibrant base of world-class talent increases as clusters mature and grow in complexity.
McKinsey analysis indicates that while focus is critical for emerging innovation hubs, as they mature, they need to broaden their portfolios of businesses and sectors. This diversification is vital to the long-term survival of an innovation hub—it allows the hub to survive the unavoidable downturns that affect specific sectors and provides the impetus for continuous reinvention.
The research shows that, depending on the strategy, mature innovation clusters will evolve toward one of the following categories:
- Dynamic oceans: large and vibrant innovation ecosystems with continuous creation and destruction of new businesses. Leading innovators and primary sectors change organically as the hub frequently reinvents itself through significant breakthrough innovations.
- Silent lakes: slow-growing innovation ecosystems backed by a narrow range of very large established companies that operate in a handful of sectors. These clusters are frequently the source of a steady stream of “evolutionary” innovations and step-wise improvements.
- Shrinking pools: innovation hubs that are unable to broaden their areas of activity or increase their lists of innovators and so find themselves slowly migrating down the value chain, as their narrow sector becomes less innovation driven and increasingly commoditized.