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Restoring America’s Innovation Economy
Rosabeth Moss Kanter, Harvard Business School professor and author of the HBR article “Enriching the Ecosystem.”
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An interview with Rosabeth Moss Kanter, Harvard Business School professor and author of the HBR article Enriching the Ecosystem. For more, see the special insight center on American Competitiveness.
SARAH GREEN: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Sarah Green. I’m here today with Harvard Business School’s Rosabeth Moss Kanter. She’s part of our special March issue on American Competitiveness. Her article is called “Enriching The Ecosystem,” and it’s a four-point plan for fostering innovation in the United States. Rosabeth, thanks so much for chatting with us today.
ROSABETH MOSS KANTER: My pleasure.
SARAH GREEN: So I’d like to start with the landscape as you see it right now. In a globalized world, for instance, does the competitiveness of one nation still really matter? And when you talk about competitiveness, what do you mean by that, and how is it different from something like protectionism?
ROSABETH MOSS KANTER: Well, it’s certainly not protectionism. What it is is the ability for a country, and actually the regions within a country, to create jobs, create prosperity, create enterprises, and enjoy a high quality of life. So in fact, I want that for many countries in the world. I happen to be American, but I think many of the ideas I’ve worked on translate to other parts of the world.
In fact, the minute the HBR issue hit any public view, somebody from India said to me, those ideas would work in India too. We all have a stake in the prosperity of every country. First of all, that’s good for the world, fewer problems that travel across borders and fewer conflicts, and then the ability for people of all kinds, all seven billion people on the planet to thrive.
SARAH GREEN: So you really focus in your piece on innovation, which is, of course, a global issue, as you say, but also something that has really driven the American economy forward. What are the key drivers of innovation that we should really be focused on improving?
ROSABETH MOSS KANTER: It’s really important to work on innovation, absolutely essential, because innovation is not only improving products and services for the future, adding features, creating change that produces progress. It’s also one of the ways that companies can earn a premium, because when you’re the innovator, you have something unique that others want. So it’s good for export, you charge a premium for it, and you can then reinvest in further innovation. So it’s absolutely critical, and it’s been the reason for the US success in global markets 100 years or more.
There are many production processes, for example, textile mills and the steam engine and lots of other things, that were invented in other countries. But it was that entrepreneurial spirit in the US that made those things into big industries. And it’s been the US investment in universal public K-12 education– well, actually, 1-12 in some places– investing in human capital and then being enriched by people who would come in search of opportunity from other countries who, because they would leave their home base, were a little more entrepreneurial. And therefore, they were risk takers, and that’s how you get innovation.
And our system of higher education, which grew on the base of having all those people who could get universal high school education, our base of higher education is the envy of the world. This draws talent, but it also produces ideas. And those ideas become the foundation for enterprises. So this is our strength. This is where we have to invest. This is what will revive American progress.
SARAH GREEN: So in the piece, which is sort of billed as this four-point plan, one of your key points is that education has to be connected with industry needs. That seems easy to make a case for. But others struck me as more counterintuitive. For instance, one of your points is connecting small and new enterprises to large companies. Why would something like that actually result in more innovation? Presumably, those companies are competitors.
ROSABETH MOSS KANTER: Well, it would result in more innovation. It would also result just in more growth and more jobs, because what has happened since the economy started to globalize is that many of the large companies in the US that work overseas– multinational companies– they have become more efficient, in part, by consolidating their supply chains, looking for more and more goods and services from other parts of the world. And that has squeezed out many small, local suppliers, some of which may be content to be small businesses, but some of which are growth engines for the future.
And a highest proportion of small businesses, or small- and mid-sized enterprises with growth potential, are selling not direct to consumers. They’re selling to companies. They’re supplying companies with components, with parts, with whole products. They’re supplying them with services. And that’s their market.
So unless they have a way to access that market– but it’s very hard to access that market when every big company, first of all, is looking at the entire world. They’re not looking in their own backyard, and there’s no way to get information from them. There’s no way to understand what the company is doing in another part of the world that might be valuable to you, the small company.
And if you want to qualify as a vendor, even though it all can be done on the web now, you have to fill out a different application for every company you’d like to sell to. So it’s very hard to break in these days. And that’s a change from even 20 years ago. That’s a change.
So since small companies are the ones we depend on for growth, for new ideas, we need to find a way to mentor them, get their best ideas. And they also are sort of innovation, by the way, because they’re tinkering at the fringes of new technology. One of the stories I tell in the HBR article is about the Verizon innovation center, of which they have only two advanced R&D open innovation centers in the world. And at one of them, where they invite any company to come and build an application that could be used over a 4G LTE wireless network, they have not only attracted global companies as their partners to send a project team there.
They’ve also attracted startups. And two favorite startups was one startup that had seven people called 4Home– the number 4– and they were working on a connected home, connecting all your devices and all your, actually, probably anything electric, in your home via one connected system where you could just press a button and do anything. That was one.
And my other favorite, it’s called VGo, and it’s robots working on the wireless network that monitor home health. If you’re home sick, or if you’re an elderly person, it can monitor that. Well, these startups were nurtured in the Verizon Innovation Center, a big company getting innovation that will help them build their network through being better connected.
SARAH GREEN: That’s really interesting. What are some of the other nascent signs you see of new pilot programs or new ways of doing things that could really help improve, as you say, the whole ecosystem of innovation?
ROSABETH MOSS KANTER: Well, thank you, first of all, for mentioning the whole ecosystem, because that’s really important, because this is not just about one program or five things to try in your neighborhood. It’s about the fact that we will get more power, more benefits, more leverage, more growth, when things are better networked. So I love the new research collaborations that are springing up between universities, businesses, small businesses, public funds.
So in Albany, New York, for example– this is a little esoteric for many people– but the State University of New York at Albany had one of the country’s first schools of nanoscience. And this is a very important science for semiconductors, which is a very important component of all of our devices, computers, and anything else that runs digitally. So they are the world’s leading researchers.
And recently, a consortium started, with IBM taking the lead, but also including Intel and GlobalFoundries, which was spun off from AMD. And they’re all sponsoring research and getting involved. And now Intel and AMD, or GlobalFoundries, have moved facilities to the Albany, New York area. And the business school at the university is getting students interested in what kinds of businesses could be started around nanotechnology. So they’ve got a whole active set of connections between big, small, ideas from Universities.
And then one of the more interesting, kind of almost quirky but “you could try this at home” collaborations, is in Milwaukee between, again, a world-leading research center at the University of Wisconsin-Milwaukee that is a research center dedicated to freshwater science, because Milwaukee’s on a Great Lake. And they have connected with a bunch of urban entrepreneurs, one of whom is really a counterculture figure himself, who’s really rabid about food and ecosystems and fish and saving the fish.
And a number of these entrepreneurs have started– it’s called Aquaponics. It’s a combination of fish farming and vegetable farming with interactions. So the fish waste becomes fertilizer for the plants. The plant roots clean the fish tanks. And they’re growing large quantities of fish and salads in abandoned factories in a slum area of Milwaukee, getting that food out to neighborhoods that need healthy food, as well as having business for export.
And they’re all connected, the scientists, the entrepreneurs. They’re connected to the schools that teach them about that technology. So as a connected system, it’s more powerful than any one of those groups operating by themselves. By themselves, they’re isolated. How do you get critical mass?
And then IBM came along and worked with the mayor of Milwaukee to do some analytics that has made the city decide that that will be a real innovation zone. And they’re going to try to get more investment in that area. So you begin to build power and leverage by building these connections.
SARAH GREEN: I wanted to ask you, actually– that goes in just the direction I was thinking, which is, who gets involved in all of this? Who’s responsible for creating these ecosystems? Is it governors? Is it university presidents? Is it CEOs? Who’s really best positioned to have an impact?
ROSABETH MOSS KANTER: Sarah, that’s a really great question. First of all, there are multiple actors, and the lead could start from nearly any of those directions. As usual, you need leadership, and you need somebody who has the vision and convince a group of other people to go in that direction. So sometimes, it starts with a group of entrepreneurs.
In Milwaukee, the founder of Sweet Water Organics is also a real advocate for, let’s have urban farming. Let’s have healthy food. And he just talks to anybody he can talk to. In fact, while we have never heard of him in the US, he’s been invited to India to talk about what he’s doing.
It can be governors, mayors. Mayors are, right now, in a position to do an awful lot of things in cities. And there are some enlightened mayors who grab ideas that come from entrepreneurs or start innovating themselves. In New York state, the Albany example, it was part the State really wanted this and tried to make it possible to have the semiconductor collaboration.
In New York City, Mayor Bloomberg decided that New York City should have a big science complex on an island– a small island– next to Manhattan and solicited bids from universities. And now Cornell is going to put up an advanced science facility in New York City. So that came from the mayor. But an awful lot of work getting businesses on board, finding the university, in other cases, it’s business associations that have a good leader who’s visionary, who go after it. So it comes from a lot of places.
I think business leaders have a big role to play, especially larger companies that have a headquarters in a particular area. They usually care about those areas, but they’re looked to for leadership. And one reason their leadership is so important, frankly, is because mayors and governors come and go, because they have to be elected. And sometimes, there are term limits.
But business leaders in companies that are rooted in an area, they are there for a longer period of time. So in some of the turnarounds I’ve seen around the country, sometimes it’s been an enlightened CEO who helped create an entire industry. Years ago in South Carolina, Roger Milliken of Milliken Textiles, which we had lost textiles in New England, but it was now a flourishing manufacturing industry in South Carolina.
And he started talking to the people who supplied equipment to his company from Germany or Austria, where they had a lot of precision manufacturing, about they needed to locate a facility near his plant in South Carolina. So they did. And that was the beginning.
Then local officials caught on and said, hey, we’re starting to have all of these companies. They need training. They need trained workers. An enlightened governor of South Carolina at that time, who later became Secretary of Education for the US, he got the community colleges involved in training. The Chamber of Commerce started thinking about how to welcome all those people from Germany and Australia that might be coming over. So it built because of the collaboration of lots of different players.
So I would say to anybody listening to this that’s really concerned about the future of their region or the future of the US, the US future depends on this regional action. We’re not going to do the country as a whole all at once. And every region has a different mix of industries or advantages.
So you sit down and look at those assets, and you find people who think the same way– sometimes it’s a foundation, a local community foundation– and rally other people, build coalitions. And when you’re collaborating to get this done, you’re also more likely to have one of those rich ecosystems that produces more innovation, more enterprises, more jobs.
SARAH GREEN: It’s interesting, as you brought it back to the national level there, because we’ve really talked about at the company level, the city level, the state level. And I guess the good news there is that we don’t actually have to wait for the US Congress.
ROSABETH MOSS KANTER: I think that is good news at the moment, because it looks like the US Congress is not going to do very much. Also, some of these things– I mean, sweeping national policy, yes, there’s certainly some things that can be fixed nationally. But even when you get mandates nationally, they still have to be implemented locally.
And there are an awful lot of functions in the US that, again, regardless of one’s political views, that have been left to the states. And within the states, they’re left to local areas, like public schools. So the action often comes at that level. But also, as we watch a sort of dysfunctional apparatus in Washington that’s not able to really get anything done or get consensus, I see that it’s possible to get things done regionally.
And it’s also possible to get consensus on very difficult issues. In this anti-tax environment, nobody likes taxes, and that’s one of the contentious issues in Washington. Yet, I saw a few years ago in southern Florida, in a very anti-tax environment, in an anti-tax, somewhat conservative state, voters in Miami-Dade County, about 87% of voters voted in favor of a tax levy to support something called Children’s Trust that funded children’s services for everybody’s children, not just poor children, throughout the county.
So that was interesting. People would vote for something locally where they could see the results, feel the benefits, and could come to agreement with their neighbors. And that was led by, again, a very entrepreneurial business leader. He had been the publisher, which meant CEO, of the Miami Herald.
And he just talked to everybody he could talk to. He lined up coalitions. He convinced people that they must do it. And he got it done. So that’s interesting. That was, you could get something controversial done and done with overwhelming support.
But also, this is where we have the laboratories for the nation. If we wanted incredible school reform around the needs of employers, to do that nationally, you pass a law, you provide mandates, you provide some funding. But meanwhile, you need demonstrations. And those demonstrations go region by region, like the new six-year high school in New York City, which is now going to grow in New York and be copied in Chicago, which is a new form of schooling.
It means kids in ninth grade are essentially entering community college. And after six years, they graduate with a high school degree and an associates degree. And they get a job interview, because their work has been so targeted to the skills that are needed.
Nationally, we could have an innovation fund. And actually, the Obama administration does have innovation funds where they’re trying to encourage this kind of experimentation. But meanwhile, it takes creativity at the local level. And I’ll bet the people listening to this or reading the HBR issue have lots of examples of things that are getting started in their area, because I see more signs of this kind of action, this kind of thinking, everywhere. And to me, that’s the best hope for America.
SARAH GREEN: Well, there’s clearly a lot of interesting work going on here and also a lot more to get done. Rosabeth, thank you so much for talking with us today.
ROSABETH MOSS KANTER: Thank you, Sarah. My pleasure.
SARAH GREEN: That was Harvard Business School’s Rosabeth Moss Kanter. To join our conversation on American competitiveness, including perspectives on jobs, manufacturing, education, finance, entrepreneurship, trade policy, offshoring, and fixing a deadlocked political system, visit hbr.org.