Tech guru: Build innovation ecosystems, not a Silicon Valley

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Silicon Valley is a concept that is hard to replicate, so Europeans should instead strive to build ecosystems for innovation that rely on investment, talent, leadership and risk, high-tech guru David Parekh tells EURACTIV.

A mechanical engineer by training, David Parekh is vice president of the US-based United Technologies Research Center, the research and development arm of United Technologies Company. ?He spoke to EURACTIV Editor-in-Chief Daniela Vincenti.

Can Europe build an innovation excellence centre like Silicon Valley?

Silicon Valley is a concept that is hard to replicate, especially in other places, because within 50 miles you have top universities, like Stanford and Berkeley, and start-ups. It is that culture that created the Googles, the Hewlett-Packards of the world. Facebook, which started at Harvard, moved there to Silicon Valley.

I think it’s important for regions that want to boost entrepreneurship to be realistic about what they can do, but surely not give up saying, “Well, we can’t replicate Silicon Valley,” rather think about how to create an ecosystem for innovation.

I think that starts with leadership: being able to articulate why innovation is important. People can easily articulate things about infrastructure or about tourism, sports – Who’s going to win the [Euro] Cup? – but they have a harder time to frame innovation, technology and science.

It is harder because whereas you can make an investment and say, ‘I’m going to build this building and this road,’ and you see it as it’s being built, when you invest in an innovation ecosystem, it takes some time and often the output might not directly be what you had expected.

One of my favourite examples is text messaging. I still remember when that became a part of mobiles and I thought “Why would you text anyone on your phone when you can call them?”

When you look at the statistics in the US, there were 80 billion text messages sent in 2005, by 2010 that number jumped to over 2 trillion. Globally, 192,000 text messages are sent per second.

When the standards for this were being developed in the early days, there were debates about whether this was something that should be included as part of mobile communication.

My point here is that it’s very hard to anticipate where innovation will take you, and what it will produce, but you can focus on the building blocks for it.  Investing in R&D is the sort of raw material that produces many of these ideas that are harvested in terms of businesses. The rest is about leadership and talent development.

This is why UTC is keen in supporting education in science, technology, engineering, mathematics from the elementary- and secondary-school level. There are a lot of things we do in the US, for example, with robotics programmes, supporting school teams.

Let me come back to leadership. Are you talking about policymakers or businesses or both – what concrete steps can be taken in order to have the right leadership in place?

Let me take an example from UTC that can be translated over to the EU.

Years ago, we launched a new engine, the geared turbofan engine, which is now part of the Airbus 340: this engine is 15% more fuel efficient than previous ones, it reduces noise by 50-75% and operating costs by 20%.

So how does this tie back to your question? The company invested in this technology 15 years ago. Before,  it was asked for by customers, before society taught broadly about green technology and energy efficiency, UTC’s leadership made a commitment to say this is something we believe in and want to support it.

If you have leaders, politicians and others who truly understand the importance of innovation and technology and the need to creating those ecosystems, then I believe while they are balancing their budgets, they must not shy back from moving towards the European target of 3% of GDP invested in R&D. 

They must not shy back from investing in highly educated workforces and facilitating access to science and technology training. They must not shy back from the things they need to do to create the infrastructure that allows people to build innovative startups.

Innovation is not something that is planned. You plan the development, plan execution, but often a lot of the creative ideas come from looking at an old problem in a new way. I think the diversity of bringing new skills and ideas together in one place where you foster that is key.

So I think … what I’ve seen in Ireland and other parts of Europe where there’s a network of people who all know each other, they make it  a point to get together, that is a key ingredient to creating that ecosystem.

So you are basically saying any community of researchers can pull up a model like Silicon Valley, but not exactly in the identical way ….

Yes. Often people will focus only on places and money, questioning whether they have this or that. One has to step back and truly look at the ecosystem.

You have the raw material of the top universities and the talent. You have a business-friendly culture that would allow someone to register a new company in a day or a week, not five months. Are the intellectual property frameworks friendly enough so that someone would want to work with universities? Are governments investing in R&D?

When you begin putting all these together, you are framing a culture of innovation. That’s why I was talking about ecosystem.

You rightly pointed out that ecosystems start with education. Now, one of the major problems in Europe is that we have 27 different educational systems, some of which, like the German one, focus on vocational training, while others privilege more academic teaching. Do you believe a better harmonisation of the educational system would be beneficial to the creation of this ecosystem?

I don’t know if I would have a good answer to your question. I suppose the quality of education, the corporate curriculum could be common. But I think part of the flexibility is having different approaches, as it lends itself well to innovation.

But I have noticed that in Europe people in third-level education are mostly from their own country, even though the EU allows for people to move easily and universities have figured out how the financials for making students study in different countries. That is a huge contrast to people studying at the top universities in the US where you have people from all around the world sitting there in one place.

Whatever can be done to encourage and nurture that I think will go a long way towards creating a culture of innovation, as countries and educational institutions look at how do they measure up compared to the global enterprises, US, China, India and other places.

Are you saying Europeans are too much naval gazing, inward-looking?

It’s amazing the shifts and trends… I guess it’s not surprising. You had the boom, everyone went into IT, it went bust and no one wanted to do IT. Big construction boom, everybody wanted to do construction engineering. All of a sudden this collapses, and where do they go? You have these shifts that are very rapid, but now the companies need a lot of IT-skilled workforce. There needs to be an understanding that businesses have cycles. But there are core areas of education and technology that have lifetime value. So this is why we have put a lot of emphasis on science, engineering and mathematics.

And also the courage to fail, I suppose?

I think it’s a very good point. Learning from bad experiences. If you look entrepreneurs, often the best ones fail 3-4 times. And even the R&D, the investment frameworks in the US, the government funding… the faculty and the researchers who have been the most successful in winning significant funding in terms of research often wrote many failing proposals. But in the process they have built their ideas and skills. It taught them a lot. And I think that willingness to take risks, fail and be persistent, is I think, a virtue.

Just look at examples close to us: Twitter, Google, Facebook, iPad. People miss the innovation that continues to happen in enabling existing industries to persist for long time successfully.

All of our tech companies were founded by the innovators who created those spaces. Igor Sikorsky invented the helicopter. Fred Rentschler the jet engine, Willis Carrier the modern air conditioning, Otis in 1850 the elevator, without which you would not have modern cities.

But each of these has sustained time because folks have continued within that space. Innovation is not just about small companies. It’s not just the revolutionary … companies but also those sustaining evolutionary innovation that is key, and often it’s not celebrated enough and not recognised enough.

Maybe we should consider restructure our manufacturing industry – highly skilled workforce for high-tech manufacturing. Those skills are very much available in developed countries. So you need a different kind of manufacturing and have a re-shift, evolutionary…

Absolutely, so the high-touch labour making furniture or making a carpet, you don’t bemoan the shift.

The US used to be more than 50% farmers, now I think it is in the order of 7%, but it feeds not only the country, but much of the world.

The advanced manufacturing for very complex parts in a jet engine or chips like Intel and others make, or bio-technology, this is the frontier, but it’s a shift in terms of talent. So take some of these factories today, they have very few people in them because they are automated.

But then there are the jobs of all the people who programme and develop the robots, the software and electronics that enabled that level of automation. So it’s this kind of shift that people have to be agile to respond to.

That’s another distinguishing mark in terms of, say, many things you see in the US and in Europe. So one, like we talked about earlier, willingness to fail and take risk, and to do it over and over. The other part is the ambition to be significant in the scale, and scale quickly. You look at how quickly Facebook has scaled, how Google has scaled.

And then I think from the earlier point about innovation having been evolutionary, what we often find is governments focusing too much on small companies. … What we sometimes run into is that people forget the impact of the established companies. They do a lot for the economy. To take our own example in Connecticut: While our employment level has remained constant over 10 years, our payroll has gone up tremendously.

So we have a payroll of about 2 billion US dollars in Connecticut. But we also spend $5 billion on the local economy in Connecticut, on the companies that are part of our supply-chain, that are small-medium enterprises.

You think about what would you have to build up to replicate the impact of a $2 billion payroll and $5 billion spent in the local economy and you begin to realise that when one looks at the ecosystem, there needs to be a balanced view: figuring out how do you sustain the ones that are established, while growing the new ones that will be part of the future.

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