Insights Blog

Innovation Districts, the New Norm

Innovation Districts, the New Norm

18 May 2017, by Haydn Wright

Twenty-five centuries ago the Greek philosopher Heraclitus opined that “nothing endures but change”.

Whilst true, there are periods in time where, to quote some more Greek, stasis prevails.

Change and stasis are equally relevant to innovation.

Stasis can exist where, over time, incremental advances replace or make obsolete a technology or process. This is called Evolutionary Innovation. Innovation that has the potential to quickly disrupt a world order that is in stasis is called Revolutionary.

Innovation Districts have been evolving since the time of Heraclitus, where ideas and relationships were formed in the Agora. The evolution of the Agora to the Forum, Campus, Science Park and Industrial Park has culminated in the rise of the Innovation District. Put simply, a place where a diverse group of individuals congregate in the same place, for the same purpose; to live and innovate. This is a logical outcome of urbanization and a return to regional specialization that leverages unique attributes.

Whilst it can argued that Twitter has replaced the Agora and that all relationships can be communicated via the “Net”, the reality remains that enduring & effective relationships are based on face to face engagement. The technology that has made Silicon Valley so successful was produced by a community that lived, worked and played in an environment that celebrated collaboration, not a series of gated communities. This is the key to the Innovation District model that began with Silicon Valley and is now being replicated globally by Governments that recognize Innovation as a key to economic prosperity.

What defines an Innovation District? According to the Brookings Institute, “geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators. They are also physically compact, transit-accessible, and technically-wired and offer mixed-use housing, office, and retail”. Cluster specialization and critical mass or density are the fundamental keys to the success of an Innovation District as a keystone for attracting the world’s best talent, R&D funding and the ability to provide state-of-the-art shared infrastructure.

A Fortune 500 company is unlikely to locate in an “Innovation District” that has one university or a handful of research institutes. The corporate decision is made easier, and risk mitigated, when the environment includes multiple world class research institutions, universities and corporates that can form part of that company's supply or value chain. Why is risk mitigated? World class research teams have the ability to move from employer to employer. It is preferable if they move to the building next door, not 50 or 5,000 kilometers away. This is a distinction that defines a true Innovation District such as 22@Barcelona which has 10 universities (generally at faculty or research level rather than full campus), >25,000 students, over 7,000 companies, >100,000 employees and more than 90,000 residents living, working and playing in a diverse and vibrant community. 22@Barcelona transformed within a decade an industrial area with low density infrastructure textile manufacturing, declining population and failing economy, to a globally recognized Innovation District leveraging its DNA of design excellence.

The success of Silicon Valley and 22@Barcelona have instigated the New Norm. The silos of science or industry parks are now co-locating, universities such as Milan are relocating their campus into the new Arexpo Innovation District and in China, there is an unprecedented paradigm shift in the positioning of its economy and infrastructure to underwrite it’s Innovation Agenda.

In President Xi’s 2017 Davos speech, the following insight was offered regarding China’s economic transition:

“Unlike the previous industrial revolutions, the fourth industrial revolution is unfolding at an exponential rather than linear pace. We need to relentlessly pursue innovation. Only with the courage to innovate and reform can we remove bottlenecks blocking global growth and development”.

When the President of China makes such a statement it is not based on rhetoric. To put this statement into perspective; in 2015 the Chinese Government funded approximately $A600 billion in R&D with ~A$127billion provided to higher education institutes and ~A$360billion for research institutes. This funding is projected by Battelle to be >A$1,000,000,000,000 (that’s a trillion) by 2025, the same year that China’s R&D expenditure eclipses the United States. By any standards that is a massive source of funding for innovation.

However, when you add the China Bureau of Statistics estimate of non-government R&D expenditure into the pot, you have a 2015 R&D investment of $A2,834,000,000,000. Add into this ecosystem the 37 million students currently enrolled in higher education and the 15 million employees that work for the 74,275 Hi-Tech companies located in China’s Science Parks, who in their own right generate revenue that is double that of Australia’s GDP, it is reasonable to assume that China will be a global innovation powerhouse within the next decade. The “Western Scientist” may say “yes but the hi-tech is really not hi-tech” which in many cases is true. The reality is that the Chinese innovation system is not in a state of stasis, with resources and talent that will quickly bridge technology gaps. Hark back to Japan and South Korea circa 1970.

China is building this capacity through purpose-built Innovation Districts, achieving critical mass across key infrastructure, innovation funding and the linkages into supply and value chains that can only be secured through collaboration.

China’s Ministry of Science & Technology Torch Program currently oversees 160 Science Parks in China with a near term domestic target of >300 domestic as well as international expansion. One of the largest is the Zhongguancun Precinct (Z-Park) that covers 570km2 of land and is home to >40 universities and colleges, >300 research institutes and >20,000 R&D-focused companies. Z-Park is not an anomaly with the Zhangjiang Hi-Tech Park in Shanghai being a similar size and new “cities” are currently being developed that are designated as Innovation Districts.

Other Asian jurisdictions are also recognizing the need to centralize knowledge ecosystems into Innovation Districts and through China’s One Belt One Road policy are securing the collaborations required to source both R&D funding and market access. In Australia we have seen the first effective yet tentative steps to engagement with China through initiatives launched by the University of Queensland and UNSW.

What is the opportunity for Australia? Enormous. We just need an Innovation District with the critical mass to attract the world’s best.

To quote a Nobel Laureate:

Come gather around people
Wherever you roam
And admit that the waters
Around you have grown….. For the times they are a-changing.

Haydn Wright is Project Lead - Education, Australian Education City.

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