Remember the days when Nokia and Motorola owned the phone market? They are not so distant, only a few years ago. Yet how many of you have a Moto or a Nokia now? Let me guess: none!
If you are sceptical about the power of innovation for shaping markets and destroying fortunes, these two examples are a reminder of how fast things can go. But they tell us more; they describe a change in the way we compete.
Not so long ago, firms competed on price. In a way all societies started here, taking advantage of low wages, natural resources or any other factor that might provide a sustainable advantage, difficult to replicate. As we know now, these advantages were far from sustainable. Low wage countries, if successful, became richer, raising wages. Shifts in extraction technology, such as fracking, made extraction advantages less relevant, and so on. So, let’s forget about sustainable, ok?
Competing on innovation needs early adopters, experimentation and fast market validation of proposals.
Productivity replaced low costs as the main form of competition. Knowledge became the new buzzword. Nowadays however, knowledge is everywhere and while some sectors strive to maintain their knowledge advantage, engineers in India or China have become just as competent as their rivals in Europe or America, and with them the productivity level of these different societies is levelling out.
We are no longer competing on productivity. Some of the biggest, most thriving companies such as Apple, Google, Airbnb, Tesla, Facebook, GE, Amazon and Apdo still compete on productivity of course, but they earn their huge surplus and tremendous market share from innovation. They compete not on making similar things more efficiently but on transforming the world with completely new products and services.
This Copernican change in the way we compete has huge implications.
Competing on cost doesn’t need much. Competing on productivity needs good engineers and labs, it is the territory of incremental improvement. Competing on innovation needs early adopters, experimentation and fast market validation of proposals.
Cities are becoming the medium for this experimentation to take place. New proposals for smart cities cannot be validated in labs; they need real-life spaces and the interaction with citizens for validation.
Barcelona, for example, put in place quite some years ago the idea of ‘urban labs’: a simple idea with a difficult implementation. Put simply, firms were invited to submit their proposals for experimentation and, if selected, they were allowed to use the urban space for testing, experimentation and as a showcase for their new technologies. At the same time, Trentino, Manchester and Helsinki worked on similar concepts from the point of view of Living Labs and the facilitation of citizens’ involvement in innovation.
Sounds great, doesn’t it? It certainly is, but implementation has been complicated because you have to navigate a maze of permits, economic incentives and costs. Moreover, user experimentation is at the firms’ expense and many firms are not – to put it politely – up to speed in this area. Therefore the project ends up being badly done or not done at all, greatly diminishing the whole purpose and value of the urban lab experiment.
After some years’ experience of urban labs, their flaws are well known. Pilots such as the Barcelona example are great, but continuous programmes are better. Spaces should be prominent if they have to function as showcases. Global awareness is a must and user-driven development and co-creation should be facilitated by the programme. Finally, many firms, particularly the small ones, the most innovative ones, need support and resources to implement their programmes, either from the city, crowdsourcing or regional government. If not, probably most of the really innovative ideas won’t even be attempted.
However, in spite of all the problems, urban labs have been a success and it has been proven that they are the right way to go. We need cities that once again want to become places where ideas are born and developed.
Nevertheless, for that to happen we need change. Not only in the companies themselves but also a complete change of mindset in the cities and their policymakers. They need to embrace, facilitate and foster open innovation – innovation that is not coming from the city but to the city. They need to be proud of helping this process to thrive, to be facilitators in this new transformation of cities into entrepreneurial spaces.
This change of mentality will go far beyond the businesses, empowering the entrepreneurial spirit of citizens and changing the government’s role to that of an ecosystem orchestrator instead of trying to solve everything with the provision of resources and services.
Fostering this change is our job; it is everybody’s job.
Originally published by Esteve Almirall in Illuminated Minds