Setting up the conditions for rapid learning and improvement – Business clusters and vibrant innovation ecosystems

There was an analysis of why the Soviet Union fell behind the USA and the west so badly in key technology.

In 1957, the Soviet Union surprised the world by successfully launching Sputnik, the first artificial Earth satellite, and then consolidating itself as a superpower by achieving nuclear parity with the United States in the early 1970s. The Soviets were, by most measures of technological capability of the time, in real competition with the United States. By the 1980s, however, the USSR had been relegated to the technological periphery as the United States catapulted itself to the frontier of the information revolution.

The centrally-planned economy was meeting the ambitious targets that leaders set out to achieve, and by the 1980s, the Soviet Union had outpaced the United States in heavy industrial production, producing 80% more steel, 78% more cement, and 42% more oil than the United States. The Soviets had an industrialized economy that could have served as the foundation for later technological advancements. State support for scientific and technological development was so strong that, by the 1980s, the Soviet Union had more scientists and engineers, relative to the total world population, than any other major country in the world (Fortescue, 1986). With the major exception of the biological sciences the Soviets were competitive in most sciences, including math, physics, and computer science.

The paper gives some reason about how Statism was incompatible with an information society. However, Nextbigfuture will argue that there are more areas of innovation and that entire business clusters or innovation ecosystems are needed to truly participate in each vibrant leading edge area of innovation.

McKinsey has a discussion on China’s effect on global innovation

Silicon Valley is a primary example of a vibrant innovation ecosystem. It is where the global centers was for semiconductors, the personal computer and then the internet. It still is a main center for those areas of innovation.

A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. In urban studies, the term agglomeration is used. Clusters are also very important aspects of strategic management.

It is a critical mass of skilled and experienced people. There have to be many people who can truly innovate and start new companies and generate new products and launch new breakthroughs.

Shenzhen has a massive market called Huaqiangbei, which is dedicated to selling electronic parts; it’s where you can purchase wifi devices, sensors, a circuit board, or 100,000 circuit boards. The city is full of incubators and consultants who specialize in hardware products. This cluster of innovation formed around becoming the global center for the manufacturing of smartphones. Companies are rapidly forming and people can prototype commercial quality products. Unlike maker innovation in the USA, there are actual companies and factories and people that can generate not just somewhat functional prototypes but ready to sell product innovations. This can be done at very low cost and high speed (within a day).

There are entire areas of engineering and manufacturing that were outsourced to China by the USA and the west. This was more efficient and profitable economically in the short term. However, it is leading to gaps and weaknesses now. Germany did not follow this path as much and have maintained more domestic engineering capabilities.

The USA is mostly not being able to make the steel components for bridges and other key infrastructure is and will be a growing problem. There are many other examples.

The US military has maintained key technological and manufacturing capabilities. However, being able to produce one offs every few years or few decades is different than having many companies building and improving every year.

Speed of the development cycle matters.

Shinto shrines in Japan can last for hundreds of years. Just like the European cathedrals. Knowledge and skills in making European cathedrals has mostly been lost. Shinto shrine knowledge is maintained because shrines are built every 20 years even though the old ones are perfectly fine. Then the old shrine is taken apart. While a 20 year cycle maintains the generational knowledge and could be used as the model for maintaining a 10,000 year clock, there is almost no innovation is the 20 build model.

Elon Musk is showing vibrant innovation in Spacex and Tesla. He is producing entirely new rocket designs every few years. There have been several versions of the Falcon 9. Those new versions have substantially upgraded capabilities (reusability, improved engines, freezing fuel, and many other innovations). Spacex will soon launch the Falcon Heavy.

Spacex can be compared to the Space Launch System. Space Launch was a pork project to maintain the companies who produced the Space Shuttle in the 1980s. Space Launch is using shuttle derived boosters at this point.

The Space Shuttle was minimally improved for 30 years.
There was the Constellation program and then the Space Launch Program which combined had funding for about 13 years. Constellation and Space Launch have not gotten to the point of launching any rockets.

Innovation needs faster cycles of actually producing something that can be used by customers and then improved with real feedback.

The concept of lean startups and minimally viable products are examples of the importance of rapidly getting products that can be used and have features validated. A minimum viable product (MVP) is a development technique in which a new product or website is developed with sufficient features to satisfy early adopters. The final, complete set of features is only designed and developed after considering feedback from the product’s initial users.

It is to rapidly get to a valid improvement feedback cycle.

Business innovation clusters have ecosystems of improvement feedback cycles. Ten of thousands of people are learning from improvement feedback cycles. They are driven by how to launch new products and new companies. Managers and developers are understanding all of the unwritten rules of what works and what does not and how to improve things and what might enable breakthrough improvement. There also needs to be a culture that thinks about moonshots that will dramatically alter the landscape with 10X or more improvement.

The strength and vibrancy of innovation is based on designing systems and products that not only satisfy existing needs but which enable shorter cycles of end to end development and rapid improvement. This should ideally be set up for enabling and encouraging breakthrough improvement.

This is an argument against big aircraft carriers that take ten years to build and are maintained for forty or more years. This argues against fighter plane programs or rocket programs that have 20 year development cycles before the first prototypes are flying. This argues against building cities that have city planning and building codes that force the layout and most aspects of the city to stay unchanged for 50 to 100 years or more.

Metastrategy needs to be – how can we set things up where things work and things can improve rapidly and where can the people who do it keep learning and innovating.

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