EXCERPT

The Brainbelt Awakening

It’s time to stop championing the "lonely heroes" of innovation like Apple, Google, and Amazon and rally around the ingenuity of the world’s waning industrial communities.

Worker prepares the collaborative dual-arm robot YuMi at the Swiss automation group ABB booth at the Hannover Messe industrial trade fair in Hanover, central Germany on April 13, 2015. India is the partner country of this year's trade fair running until April 17, 2015. AFP PHOTO / TOBIAS SCHWARZ        (Photo credit should read TOBIAS SCHWARZ/AFP/Getty Images)
Worker prepares the collaborative dual-arm robot YuMi at the Swiss automation group ABB booth at the Hannover Messe industrial trade fair in Hanover, central Germany on April 13, 2015. India is the partner country of this year's trade fair running until April 17, 2015. AFP PHOTO / TOBIAS SCHWARZ (Photo credit should read TOBIAS SCHWARZ/AFP/Getty Images)

The revitalization of former rustbelt areas is bringing new competitiveness to the United States and Europe. Former centers of industry have become centers of innovation: brainbelts. Over two years, we visited many of these areas around the world. We expected to find crumbling industrial sites, to drive through dilapidated neighborhoods, to meet with people struggling hard to keep their heads above water. But instead what we discovered blew those images out of our heads.

A single conversation with Luis Proenza — then-president of the University of Akron in Ohio — might have been enough to change our thinking. Akron had long been the center of the global tire industry, but it slipped into decline as tire production went offshore. But Proenza, who had been instrumental in revitalizing the city, indeed, the whole region of northeast Ohio, was brimming with enthusiasm for the region, its people and organizations, and the work they were doing, and he had a glowing vision of its future. He proudly told us that the 1,000 start-ups in the area employed more people now than the four big tire companies had in the region’s manufacturing heyday.

In Sweden, we visited Lund and the nearby city of Malmo, which had taken a serious blow in the mid-1980s when the major shipyard in the area went bankrupt, another victim of the low-cost advantage of manufacturers in Asia and elsewhere. In response, local politicians, entrepreneurs, and Lund University came together to create Ideon, Scandinavia’s first technology park, in Lund. Swedish telecommunications company Ericsson brought its research group to the park, as did many pharmaceutical companies. Today, the leaders of the cities of Malmo and Lund meet regularly, and Lund University is the engine that drives the corporate spinoffs that create cutting-edge products for the life sciences industries.

In North Carolina, we visited the Research Triangle Park (RTP) — surrounded by the three university cities of Durham, Raleigh, and Chapel Hill — the first park of its kind in the United States. In its early days, the RTP had been a roaring success, attracting 170 companies and creating jobs for more than 40,000 people. But they operated in ways that were customary at the time — in isolated buildings hidden among trees, guarding their ideas, working in secrecy, keeping disciplines separated. As the emerging economies zoomed forward, the inevitable happened, and the RTP lost some of its cachet. What we found in 2013, however, was evidence that the new brainbelt model was spreading its wings right next door to the RTP. In Durham, Duke University had set up an incubator in the renovated buildings of the old Lucky Strike cigarette factory. In Raleigh, North Carolina State University’s Centennial Campus had become a whole new type of research campus where promising start-ups, supported by big companies such as the Swedish-Swiss ABB Group and German multinational Mann+Hummel, have labs and offices right on campus, working jointly with university researchers on projects around new materials, clean energy, and smart grids. There were young entrepreneurs everywhere.

* * *

The world has entered a new era in which many forces are at play: the sharing of brainpower, smart manufacturing, the simultaneous interaction between thinking and making, the rise of the brainbelt, and the decline of the low-cost labor advantage. But this new era is still patchy in places and struggling to emerge against a backdrop of structures, practices, organizations, skills, and attitudes left over from earlier times.

And this new era, like other transformational moments before it, did not come about as the result of a grand plan or globally unified effort. How could it have? The new era evolved, happened, was pushed.

But on the local and regional levels inside the brainbelts, however, there were always ideas and a willingness to take action, even if federal initiatives in the United States or, to a lesser extent, European-wide efforts sometimes languished. People found ways to break loose from the stagnation and negative thinking that had been prevalent in the rustbelts. Individuals with vision and commitment brought institutions, authorities, and companies together.

Necessity played a major role in the rise of the brainbelt phenomenon. The need for jobs, revenue, and clout — combined with the complexity of technologies and a lack of resources — forced people and groups to put aside their differences, step over their organizational barriers, and reach out to unaccustomed colleagues, in order to collaborate on research, share knowledge, and work together to make things and push forward initiatives. This sharing of brainpower across an ecosystem of participants to achieve innovation is very different from the kind of innovation that is so talked about these days — the kind that Apple, Google, Amazon, and other iconic technology leaders practice.

These players already possess the talent and resources to build internal innovation engines. They are not weighed down by the memory of stagnation or hampered by the presence of abandoned facilities or faltering infrastructure. What they lack they can acquire. They do not need to open up, share knowledge, reveal their secrets, reach compromises, and forge win-win deals. Indeed, they continue to operate as “lonely heroes.” They have power and influence. Such companies may form partnerships and allegiances, but they remain at the center of them. They call the shots.

And though we tend to revere the lonely hero, there are limitations and drawbacks to the model. The lonely hero organization can amass too much power, squash outside innovation when it becomes threatening, limit the range of action of partners, become complacent, and put a chokehold on consumers. Brainbelts may not be as tidy in their process or as burnished in their image, but they have every bit as much — or more — potential to create breakthroughs and game-changing technologies and products as any lonely hero.

However, in order to fully realize the potential of the world’s brainbelts, to awaken beauties that are currently slumbering — to extend and leverage the practices of sharing brainpower that have been pioneered in those innovation hubs — we need to think about altering and improving those leftover structures and practices. We need to start with the recognition that today’s innovation is more bottom-up than top-down. It takes place mostly at the local level, in proliferating brainbelts where academia and business share brainpower and are hard at work to invent and design the smart products that address the challenges of the 21st century.

That’s not to say that national — or, in the case of Europe, EU — brainbelt initiatives that support the continuous process of innovation through funding of fundamental research aren’t immensely helpful: They are. The payoffs in innovation from top-down support from the U.S. Defense Advanced Research Projects Agency (DARPA) and EU programs to Chinese and South Korean innovation policies stand out. Which is why national government support for innovation must be untangled from ideological debates: More funding needs to find its way to potential brainbelt areas.

The idea that a country should have a common framework and policies to stimulate and support innovation in brainbelts is hardly a radical one. On the contrary, almost every country in the world has a set of innovation guidelines and objectives, with one notable exception: the United States.

Why is it that, in the world’s largest economy, politicians and business leaders seem to have an allergic reaction to the notion of a national innovation policy? Perhaps it’s because things seemed to be working pretty well without a national policy in places like Silicon Valley, where entrepreneurs and researchers were quick to claim credit for projects that would not have happened without government funding. Or perhaps it’s because such policies are sometimes confused with industrial policy, which focuses on specific industries or economic sectors and is often seen as a form of governmental interference in private enterprise. But the goal of innovation policy is not to regulate or to interfere but rather to encourage, motivate, and support innovation.

What follows is a list of initiatives that would further spur and support innovation:

  • Develop guidelines and articulate best practices for regions and localities that want to create a positive environment for brain-sharing ecosystems. (The practices developed in Akron; Eindhoven, Netherlands; Portland, Oregon; and Dresden, Germany are useful models.)
  • Provide incentives and rewards for groups that take an interdisciplinary, collaborative approach to the creation of technology products and services. The Swiss example of bioscience in Zurich is illustrative. One idea is to encourage that some goods and services be purchased from brain-sharing entities.
  • Encourage and facilitate public-private partnerships based on the model of the German Fraunhofer institutes.
  • Favor open innovation platforms when providing funding. The Open Innovation Pavilion of the U.S. Air Force Research Laboratory is a good example.
  • Enable educational institutions to serve as antitrust umbrellas, through tax-code revisions and new guidelines, in a way similar to SUNY Polytechnic Institute’s NanoTech Complex or the Akron Model.
  • Provide financial support, expertise, and incentives for the transformation of rustbelt areas, facilities, and infrastructure into 21st-century innovation districts, as North Carolina did when it revitalized the old tobacco factories and established the Research Triangle Park.
  • Remove regulatory barriers that prevent the testing and adoption of innovations such as the self-driving car, as California, Nevada, and Florida have in the United States and Sweden and Germany have done in Europe.
  • Encourage the use of new technologies and products through regulations and incentives. Examples include accepting payment by smartphone for government transactions and incentivizing charging stations for electric vehicles.
  • Recognize brainbelts, the sharing of brainpower, and smart manufacturing with awards and praise. For example, Startupbootcamp has initiated a program for young entrepreneurs in multiple cities around the world.

The impact of sharing brainpower and integrating new production techniques, new materials, new data analytics, and new discoveries into everything — from agriculture to manufacturing and services — is becoming increasingly visible in revitalizing whole cities and regions.

The bottom line: Economic productivity can no longer be reduced to a simple spreadsheet that measures the most effective use of labor and capital. The coming decades will be just as much about the creative use of talent, knowledge, ideas, and new technologies in the most effective way. From now on, it’s not about being cheaper; it’s about being smarter.

This article was adapted from Antoine van Agtmael and Fred Bakker’s recently published book, The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation. It has been edited for length and clarity.

Photo credit: TOBIAS SCHWARZ/AFP/Getty Images

Antoine van Agtmael coined the term "emerging markets" while at the International Finance Corp., was the principal founder, chairman, and chief investment officer of Emerging Markets Management, and is the author of "The Emerging Markets Century."

Fred Bakker is former editor in chief of the "Financieele Dagblad" in the Netherlands, former managing director of FD Mediagroep, and author of a series of articles on MIST countries (Mexico, Indonesia, South Korea, and Turkey) and the environment.

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