I have written several posts focused on Chicago’s challenge to stay relevant as an economic power. I have made the case that while Chicago is attractive in many ways, we should be deeply concerned about the city’s ability to attract the next generation of business because we aren’t doing what is necessary to be competitive (http://niden.com/innovation-in-chicago-what-to-do/).
Cities that can attract the businesses of the future share a feature that nurtures new ventures, provides nourishment in the form of new ideas, and motivates legacy businesses to reinvent themselves. And while the most successful American cities (New York, San Francisco, Seattle, Austin, San Jose) have many attributes that make them competitive, in this post I focus on only one, the ecosystem.
I believe that Chicago’s ecosystem is both fragmented (in a bad way) and underdeveloped. But, before I talk about that, let me present my definition of an ecosystem. The best ecosystems, which I refer to as the “naturals,” are organic, i.e. developing in a manner analogous to the natural growth and evolution characteristic of living organisms (Dictionary.com). This is the character of New York, London, San Francisco and Hong Kong. A key feature all four share was their status as trading and later banking centers. They were vibrant commercial centers that had the ability to finance new ventures. And, it didn’t hurt a bit that they were the first to reach a critical mass in terms of being able to maintain the chain reaction of business development.
Cities like Austin, San Jose, Seattle and Shenzhen weren’t quite so lucky. They did have some of the attributes of those that are naturals but had to work harder to build their ecosystems. They had to look at what they did well, what resources they had and what areas needed strengthening. Austin had the University of Texas; San Jose had the Silicon Valley and Seattle had both Boeing and Microsoft.
Be clear, even the naturals have challenges that they need to work on, e.g. New York’s fumbling the deal with Amazon and Arlington Virginia, which did win, had to work hard for that win. They worked systematically to build strengths in six key areas:
- Leadership— Even the strongest ecosystems need leadership. Leadership develops and incessantly communicates vision. Leadership makes sure that essential initiatives are identified and addressed. New York’s inability to close a deal with Amazon was a failure of leadership. New York’s Mayor assumed that he could negotiate with Amazon without getting buy-in from the many constituencies that would be impacted by the deal. As I mentioned in a previous post (http://niden.com/why-did-the-amazon-deal-fail/) good leadership would have planned for such a negotiation and would have prearranged with all of the relevant constituencies the boundaries within which terms of a negotiation had to remain.
In other words, leadership develops a strategy (where we are, where we want to be and how we get there), sells it and makes sure that the resources and tactical plans that make the strategy happen are in place and working toward the objectives that are laid out in the plan.
It is key that leadership gets buy-in, something that is most efficiently gained up front, not as continuing negotiations with every “new” initiative.
- Talent— An ecosystem is fueled by talent. Talent has the great ideas, talent takes the ideas and makes them real, talent attracts more talent. Talent is demanding. It requires both opportunity and an attractive environment in which to both work and live. Great things (that too often seem like they happen by themselves in exceptional ecosystems) require a large number of extremely talented, highly motivated people. It is a numbers game—the larger the talent pool the more ideas that get generated and a small number of those ideas are the winners (Microsoft, Google, Uber) that keep the virtuous cycle going.
- Ideas— I have called this out because good, productive ideas are generated when there is a very large, diverse set of talented people who have deep expertise in a given area. And as I noted earlier, it is a numbers game. The more people in a geographically confined space who interact, the more likely they are to have a conversation which results in an idea and agreement to try to commercialize it.
So, the combination of talent (capable, skilled, experienced and willing to work) with a network that brings that talent together results in new business opportunities. I recently read an article on the Israeli tech industry. One of the people interviewed suggested that universal military service, combined with a desire (if one is going to serve) to get into one of the elite Unit 9900 where really smart people are trained to develop sophisticated computer systems results in an aggregation of smart capable people. They have lots of time, talented people to talk to and they leave their military service with a network of similarly talented peers and ideas that have lots of potential—e.g. Mobileye and Zebra Medical.
Similarly, cities like San Francisco and New York have talent pools with expertise in a variety of domains of interest. These communities generate many ideas, which in turn provide the foundation for a vital venture creation zones.
- Infrastructure— “Infrastructure” has a lot of different dimensions. It includes affordable housing, high quality office space, transportation systems to get to and from work (not to mention to and from the city itself), educational institutions for both the workers and their children, and of course entertainment for those times that people aren’t working.
Educational institutions are particularly important and probably one of the more difficult to completely replicate in the short to medium term. They provide a source of talent (and ideas), they are a resource that a highly motivated workforce uses for continuing education and they provide the mechanism to educate the children of a workforce that greatly values education.
- Capital— Business doesn’t happen without funding. When we started Textura, Pat Allin had to spend a much higher proportion of his time (time that wasn’t spent on adding value to our product) raising money, because we weren’t in New York or San Francisco. A functional ecosystem needs a well-developed source of funding that is accessible to high potential businesses who need the money. Get the other items on this list in place and the funding will follow.
- Collaboration— I’ve often heard that 1) Competitors don’t collaborate; and 2) growth companies don’t have the time to collaborate. Not true. At some level any community that wants to be a sustainable place for businesses to form and grow needs to figure out how to get them to collaborate. You can’t have a workable plan to build and sustain the community if people don’t buy in, which I would note is a form of collaboration.
Collaboration takes time. It takes community members who understand that there are important (to the health of the community) things that can only be done through shared efforts. Most of all the community needs to understand that you can’t afford to be too selfish and that you can’t afford not to have the time to participate. And this is one of the places where capable leadership can make a difference; it mitigates selfish impulses of the community and promotes collaboration.
All the items on my list require substantial time, care (planning and getting buy-in) and feeding (funding) to be successfully deployed. Which gets back to leadership. Without an engaged and focused leadership team that are willing to invest the time and resources necessary to do the community equivalent of moving mountains, we will not be successful.
In their own ways the other cities— even the naturals— have dealt with the items outlined above. None have done it perfectly, but they addressed (or should be addressing) each of these areas where they identify weakness and should be leveraging their strengths. And, where they didn’t/don’t, e.g. San Francisco with affordable housing, they only hurt their ability to compete for resources— i.e. talent, ideas and capital.
Chicago is lagging. We aren’t competitive. I have talked about needing a plan (http://niden.com/chicago-youve-got-to-have-a-plan/), but for a plan to be viable you need both leadership who provide the vision and resources, and for the major players to, well, play. The players (government, businesses and the Universities) need to lead. Mayor Lightfoot needs to be the focal point, but given the many demands facing her, might benefit from leaning on leaders coming from business and the university communities to develop a vision for the City. The vision lays the foundation for a plan, the plan ensures that resources are deployed effectively, and effectively deployed resources get things done. And, we really need to get things done if we want to move from a pretender to being the real deal.
Copyright 2019 Howard Niden
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