When Jerome Engel and colleagues presented a framework to describe innovation communities in 2014, the world was a different place. That book, Global Clusters of Innovation: Entrepreneurial Engines of Economic Growth around the World, explored the explosion and global trendsetting impact of Silicon Valley new venture development business practices. Now Engel has refined and extended that framework with Clusters of Innovation in the Age of Disruption (Edward Elgar Publishing, 2022), a collection of essays from business leaders and teachers worldwide. Berkeley Haas asked Engel, the founding executive director emeritus of the Lester Center for Entrepreneurship (now the Berkeley Haas Entrepreneurship Program), about his new findings.
What made you want to revisit your study of clusters of innovation?
In my first book, we outlined and demonstrated how innovative technology companies tend to emerge in clusters in certain regions—and we questioned what drives that process. The world has since entered a period of severe economic, cultural, and environmental disruption due to an ongoing series shocks. We wanted to investigate what was happening in these innovative communities and whether they demonstrate enhanced resilience. We found that the answer was a profound “yes”. Clusters of Innovation demonstrate an entrepreneurial agility that enhances their resilience to external shocks, contributing significant social and economic value to society.
How do they do this?
Through innovation, which I define as the positive response to change. Trends are obvious, especially technology trends which tend to be of relatively long duration. While a tech trend is not in itself innovation, its adoption into a valuable good or service is. Commercialization of such tech trends is often pursued by venture-capital backed entrepreneurial firms. Their initial market entry strategy is often to approach niche markets that provide a beachhead opportunity because incumbent firms are not serving their needs exactly. So smaller firms gain traction by providing these niche markets with products and services that provide a tight product market fit. Many entrepreneurial firms that blossomed in the midst of the pandemic were prepared for years before the pandemic. Their work in refining their technology and products put them in a position to provide solutions of huge impact quickly when the pandemic hit. This agility enhanced the resiliency, as they were already in the market with a limited but proven track record—so their businesses were positioned to explode into an “overnight success” when the shock occurred.
Can you provide examples of this?
Two clear, and very different, examples are Zoom in telecommunications and mRNA vaccine development in health care. Zoom had an innovative business model and mRNA developers embraced deep technology innovation. Zoom displaced slower- moving Cisco (WebEx), Microsoft (Skype/Teams), and other incumbents in revolutionizing business, personal, and education communication. Zoom became a verb, a place, a way of conducting much of our daily life. Zoom’s quick mass adoption revolved around a subtle business model innovation: Product-Led-Growth [PLG]. PLG is an evolution of the freemium model, where ease of user adoption is emphasized (just click the link, no log-ins, no hassle) and is often free. Traditional marketing is initially de-emphasized and that investment pored back into product development and viral marketing. Revenue evolves eventually from upselling to universities and larger businesses with value-added full-featured SaaS subscriptions. This ease of adoption drove the rapid behavior change that enabled a greater collective agility and a greater resilience.
A different type of innovation-driven agility is demonstrated in mRNA technology, which enabled the creation of vaccines in months rather than many years. Startups commercialized the novel mRNA vaccine technology, based on university research, before the pandemic. While the fundamental technology was revolutionary, its impact on the health of the general population was minimal. But during the pandemic, the benefits of this novel approach and the urgent need for a vaccine made its advantages clear, gaining the full attention major pharmaceutical firms. The rapid development and deployment of the various Covid-19 vaccines often depended on partnerships with major pharmaceutical companies, providing a perfect combination of speed and scale. The smaller firms’ product development speed combined with the larger firms’ capacity to scale trials, manufacture, and distribute.
What’s the takeaway from the book?
Economic regions such as Silicon Valley and other Clusters of Innovation around the world have proven to have enhanced resiliency to economic and environmental shocks. At the heart of such Clusters of Innovation are entrepreneurs, collaborating with venture investors and major corporations. Their constructive interactions build the resiliency required to quickly adapt and rebound from shocks. The process is helped by supportive government, universities, service firms, and other supporting actors in the community.
Three new books written by Haas professional faculty members share one thing in common: deep learning from the successes of people making innovative change in business today. Here’s more on each new book:
Edward Elgar Publishing, published August 2022
By Jerome Engel, founding executive director emeritus of the Lester Center for Entrepreneurship (now the Berkeley Haas Entrepreneurship Program)
Much has changed since Engel’s 2014 publication of Global Clusters of Innovation: Entrepreneurial Engines of Economic Growth around the World, a book that explored the explosion of entrepreneurship and innovation ecosystems globally, a movement that spread Silicon Valley business practices around the world. By 2022, economic disruption from the COVID-19 pandemic, global warming, and environmental degradation led Engel to ask how innovation ecosystems can support the evolution of more robust, agile, and sustainable societies. Those questions led to this book about innovation ecosystems, clusters of innovation, and the global networks of clusters of innovation that naturally form. He argues that entrepreneurs, collaborating with venture investors and major corporations, can create clusters of innovation that help build the resiliency required to quickly adapt and rebound from economic shocks. The process is helped along by supportive government, universities, and other elements of the ecosystem.
Matt Holt (BenBella Books), published August 2022
By Aaron McDaniel, BS 04, lecturer with the Berkeley Haas professional faculty, and Klaus Wehage
Aaron McDaniel, who teaches entrepreneurship to undergraduates at Berkeley Haas, and Klaus Wehage are co-founders of 10X Innovation Lab, which helps build innovation ecosystems worldwide. During the pandemic, the authors said they realized there was no book published on innovation in international business expansion that matched the success of Eric Ries’ The Lean Startup. So over 1 1/2 years, they interviewed more than 300 executives from the world’s fastest-growing companies across 50 countries to understand what made them successful in reaching global scale. The list included CEOs and founders of Apple, Zoom, Slack, and Airbnb. The authors suggest that applying agile principles will enables global-class companies to more easily pivot their business and successfully localize in overseas markets with different cultural contexts. McDaniel said he hopes that Global Class will provide a tool kit and framework for companies of all sizes and stages to help build global, distributed teams; manage a diverse footprint; and balance cultural differences.
Balance (Grand Central Publishing), published September 2022
By Alex Budak, Haas lecturer and creator of the Changemaker course
Stepping into a leadership role doesn’t require people to be at the top of a group or organization. Anyone—regardless of title, personality, race, gender, age, or class—can be a changemaker and effect powerful, positive change from where they sit in a workplace or community, Haas Lecturer Alex Budak argues in his new book. Based on Budak’s popular Berkeley Haas course of the same name, the book is anchored by the Berkeley Haas Defining Leadership Principles Question the Status Quo, Confidence Without Attitude, Students Always, and Beyond Yourself. Budak introduces concepts and tools aimed at helping readers develop the confidence, courage, and commitment to lead change from wherever they are—and includes examples across industries, age levels, and abilities. The book includes a longitudinal study of how people develop key changemaker skills over time and provides access to some of the same exercises he uses in his class.
Berkeley Haas thought leader Henry Chesbrough, whose paradigm of open innovation has influenced corporations throughout the world, has received the 2022 Distinguished Scholar-Practitioner Award from the Academy of Management (AMA).
The AMA Career Achievement Awards were presented during the Annual Meeting of the Academy of Management in Seattle on August 7.
The Distinguished Scholar-Practitioner Award is presented annually to a scholar who has demonstrated long-term, significant contributions in one or more of the following areas: successful application of theory or research in practice and/or contribution to knowledge through extraction of learning from practice; authorship of scholarly works which have substantively affected the practice of management; and integration of research and practice that is respected by peers (both practitioner and academic).
Chesbrough, who retired in July from his role as adjunct professor and faculty director of the Garwood Center for Corporate Innovation and continues to lead courses through Berkeley Executive Education, published his first book on open innovation in 2003. Since then his work has since been cited more than 100,000 times. The central idea of open innovation is that companies thrive through the use of both external and internal ideas and paths to market. According to Chesbrough, companies cannot afford to rely entirely on their own research but should instead buy or license processes and inventions from other companies. In addition, business ideas that are not used internally should be taken outside the company through joint ventures or spin-offs.
Separately, Chesbrough was also named as a fellow by PICMET (Portland International Center for Management of Engineering and Technology). The fellowship was awarded to recognize Chesbrough’s outstanding contributions to the development and growth of the engineering and technology management discipline.
Find out more about Chesbrough’s Open Innovation for Leaders program through Berkeley Executive Education.