The Smartest Places on Earth

by Antoine van Agtmael

  Then, in the 1970s, that began to change. In Europe, Charles Weissmann, a professor at the Swiss Federal Institute of Technology in Zurich, founded Biogen, which became the first successful European biotech company. Now based in Cambridge, Massachusetts, it is the world’s third-largest biotechnology company. In the United States, Genentech was founded by Herbert Boyer, a biochemist, with Robert A. Swanson, a venture capitalist, to pursue work in the field of recombinant DNA technology. These firms and others presented a new model to the academic world: serious researchers with the instincts and drive of the entrepreneur creating for-profit companies driven by research and focused on the creation of breakthrough products.

  Jealous of the dominance of East Coast manufacturing and finance, researchers and entrepreneurs in the West had long been eying an opportunity to make their own mark. Their breakthrough came when researchers at Stanford (with its dean of engineering, Frederick Terman, serving as connector, starting in the 1950s) teamed up with scientists-entrepreneurs to develop the transistor, the integrated circuit, the microprocessor, the PC, the inkjet printer, and the precursor of the Internet.4 Local entrepreneur Ralph Vaerst and journalist Don Hoefler coined the term “Silicon Valley” in 1971, to describe the area stretching between San Francisco and San Jose. There, where orchards once flourished, semiconductors made of silicon and lots of related, research-based industries became dominant, along with leading venture capital (VC) firms that backed many of the early start-ups.

  The success of Silicon Valley demonstrated that patents generated by government-sponsored research should not stay on the shelf (as they often did) but that close collaboration between the government, universities, and entrepreneurs would stimulate the commercialization of unorthodox ideas as long as the required incentives were in place. This notion became the guiding principle behind the Bayh-Dole Act of 1980, which allowed researchers and universities to benefit financially from research undertaken under government grants and would allow the Silicon Valley model to spread like wildfire all over the United States.

  It took some time for the new models from Switzerland and Silicon Valley to take hold. Scientific research continued to be seen as sacrosanct and commercial application as a violation of the holy separation of science and commerce. But as new scientific insights, such as the mapping of the human genome, presented new opportunities for commercial applications, the application of academic research accelerated. Gradually, it became an accepted option for engineers, computer scientists, biologists, chemists, or physicists to start companies, and they usually did so by focusing on a specific activity related to their research, such as a new technology, drug, or material.

  In Europe, regulatory changes forced the acceptance of such collaborative efforts. In 1991, for example, the Swiss government created a shock wave with a new law that required state universities, including the Federal Institute of Technology, to apply their research to the development of commercial products. Researchers had little choice but to seek new sources of funds, and contract work with commercial companies became a major source. It was the beginning of a trend, as other national governments in Europe cut the budgets of state-funded educational institutions.

  Within large companies, the move for collaboration—with academics and with other business organizations, particularly start-ups—has been accelerated by corporate chief technology officers (CTOs) in companies as different as Shell, Philips, ASML, Fokker, DSM (State Coal Mines), and Xerox. Leaders in these companies told us that cooperation with universities and start-ups, especially in the early stages of product development, is now standard practice—indeed, a no-brainer—for them and their companies. DSM, based in Heerlen in the southern Netherlands, for example, is a leader in the development of new materials. Marcel Wubbolts, chief technology officer of DSM, told us that his company had long been seeking to develop an energy source that did not rely on fossil fuels. “It is too complicated and too expensive to develop a second-generation biofuel on your own,” Wubbolts said.5 DSM partnered with the small American company POET and in early 2014 opened the first biofuel plant (using corn waste rather than corn) in Emmetsburg, Iowa, a town better known at the time for its gambling casino than for technology development.6

  There is another important reason that companies cite for the move toward collaboration with outside partners: to keep abreast of what is happening in their industry and in adjacent fields of activity. There is so much research and innovation going on in so many places, it is impossible for any single organization to be aware of every development that might be relevant, including those developments that might pose a competitive threat. With the proliferation of start-ups and tiny companies working under the radar, the threat of a new technology emerging that could make a company’s own research obsolete is ever-present. Pharmaceutical companies, in particular, see this kind of industrial reconnaissance through collaboration as essential. That’s why Medtronic, Novartis, and Roche have established offices in science parks in Lund, Oulu, and Zurich (and of course have a major presence in Cambridge, too), where they can keep an eye on dozens of potential partners or competitors with the aim of investing in start-ups that do not have sufficient resources to test a new medicine. This, in turn, gives them access to the smaller company’s knowledge and expertise beyond the specific project itself.

  Focus and Openness: And the Necessity of Trust

  The sharing of brainpower among a diverse set of players in a brainbelt ecosystem is most effective when the entities have the right mix of focus and openness. Focus means they concentrate their energies on a particular discipline or activity. Openness means they are open to sharing their knowledge and expertise with others.

  Sharing is not known as a typical organizational behavior. What would compel an individual or a company that has focused its energies and resources on creating new knowledge to share it openly with others? One reason is obvious: necessity. There is no other way to pursue the kind of big, complex projects that characterize brainbelt initiatives. Mutual dependency demands that collaborators open up to each other. Another reason is less obvious: when a company is sharply focused, its commercial activities don’t significantly overlap with those of its partners, so sharing knowledge is less likely to create a competitive threat.

  In Portland, for example, an academic institution—the state-funded Oregon Health & Science University (OHSU)—entered into a collaborative research project with a decidedly for-profit entity, the chip maker Intel, which has a major presence in the Portland area. The purpose of the initiative was to analyze a vast amount of cancer-related patient data that OHSU had gathered from around the world. The university did not have the capacity to manage “big data” at this scale and had no interest in developing it. Big data is the term for massive and complex collections of data, typically generated from many different sources and often in real time, that cannot be analyzed by the human brain or through traditional data-processing applications but require instead enormous processing power, high-level analytics, and sophisticated algorithms to yield proprietary and practicable insights. Intel did not have the kind of supercomputer power typically applied to the management of big data in medical research, but it could link computers together to manage OHSU’s data in smaller batches, which was sufficient for the needs of the research.

  In this extraordinary partnership, Oregon Health & Science University entrusted Intel with its huge store of patient data. In return, Intel allowed OHSU into its inner computing sanctum. The two were eager to work together because both parties needed the other’s expertise, but there was virtually no risk they would end up competing. Added to those practical considerations were the sense of pride and identity in the Portland brainbelt and an understanding of the values and rules that prevailed. The collaboration, therefore, was based on commercial necessity and mutual trust. Both parties were so committed to working together and so unconcerned about potential violations that the project began before the formal contract was even finalized—almost unheard
of in a big technology deal.

  The importance of sharing brainpower and the necessity of openness has, as you can imagine, forced a change in structure and working relationships in business and academic organizations. The two had similar characteristics that got in the way of collaboration and innovation. They were typically hierarchical in nature, operated with organizational silos, and fiercely protected their intellectual property. In brainbelts, we found that entities—like OHSU and Intel—that have focused missions are very open to sharing their knowledge with other focused partners and collaborators. And they will do so at a very early stage of product development, when, traditionally, they would have kept the doors to the laboratory tightly shut.

  Not only has the evolution of the innovation process changed the attitudes that business and academic entities have toward one other, it has caused a shift in how academics work together within their own institutions. As Shirley Ann Jackson, a Bell Labs veteran and now president of Rensselaer Polytechnic Institute, put it to us: “Cutting-edge research is now completely interdisciplinary. The major new discoveries are between the academic disciplines.” So the sharp separations between academic disciplines—such as chemistry, physics, biology, mathematics, and engineering—are crumbling, and as new knowledge is gained, organizational silos are, as Jackson put it, “dying a slow, natural death.”7 As the walls crumble, collaboration blossoms still more luxuriantly.

  Environment: Attracting People and Catalyzing Ideas

  A brainbelt is more than an ecosystem of disparate entities that have developed collaboration skills and mutual trust: it also features a distinct environment, one that acts as a magnet for talented people and focused businesses, and that supports their collaborative initiatives.

  These environments feature physical elements that bring people together in appealing ways. Science parks, start-up incubators, shared-working facilities, and offices in renovated factory complexes are all there, sometimes grouped together in innovation districts. Such environments attract a young, mobile, and diverse talent pool of graduate students, entrepreneurs, engineers, corporate researchers, venture capitalists, designers, and others. Beyond the work environment itself, people choose a brainbelt area because of the availability of affordable homes and nonwork attractions and benefits, from cafés and restaurants to good schools and recreational activities. They have many informal opportunities to meet, interact, and stimulate each other’s thinking.

  Once word gets out about a brainbelt environment, it may start to take off. The number of start-ups increases. Large companies create spin-offs. More business plans are filed with potential investors. The global players who are in the area invest anew in talent and facilities and even open new units and initiate new endeavors, attracted by the availability of talent and the relatively low cost of operating in a former rustbelt, when compared to doing business in Silicon Valley or Boston. Forgotten downtown areas are developed or improved. New shops and businesses open. The tax base increases. Local services are bolstered or added. As companies achieve success and some enterprises are sold, new wealth is created, some of which is reinvested in the area. As collaboration develops and trust grows, local players begin to understand they are involved in something special.

  Leaders, role models, and local heroes emerge. Entrepreneurs and researchers stay in the area and take on new roles, as mentors, coaches, investors, advisers, board members, partners, and teachers. They may invest in training programs, establish professional associations, and become the spokespeople and lobbyists for the interests of the brainbelt. They champion incubators and establish science parks. In Zurich, for example, the Technopark opened its doors in 1993 and is now home to more than three hundred start-ups employing more than 2,000 people. Lesley Spiegel, who spent five years as CEO of the Technopark, told us she spends most of her time now coaching entrepreneurs. The young people have plenty of enthusiasm, she said, but little management know-how. “I interact at any stage of their business, to suggest better ways of attracting people and approaching funders.”8

  Awakening Beauties: From Dormancy to Collaboration and Focus

  We think of successful brainbelts—including all the ones we visited—as “awakening beauties.” That’s because, like the fairy-tale Sleeping Beauty, they have lain dormant for a long time—doomed to a state of inertia by the evil witches of policy or (lack of) leadership or faulty analysis—and have been given up for lost by entrepreneurs and investors. But, just because they lie inert does not mean they have lost everything. They still have their fine qualities. There is still energy, skill, knowledge, talent, and potential there.

  Then something happens to bring the sleeper awake. In the fairy tale, it’s a prince’s kiss. In sleeping rustbelts, it’s a bit more complicated. Beauties typically awake when an individual or a group reaches a tipping point of frustration or, often, when a new player arrives on the scene. Although people have long been aware of their area’s dormancy, they have done little, just wishing and hoping that something will happen, perhaps in the form of a government bailout or the discovery of some unknown resource. At last, when it becomes clear that no solution is going to appear from out of the blue, a connector resolves to take matters into his or her own hands, and when that happens, people are ready to respond. The connector brings people together—politicians, entrepreneurs, scientists, executives—to identify strengths and resources, find common ground, and collectively set ambitious goals.

  Gradually, as we have described, the different players learn to collaborate and sharpen the focus of their activities. The style and nature of their collaboration gives each brainbelt a distinct profile. They build on what they already have—the dormant expertise—and then expand and extend it. In Akron, Lund, and Eindhoven, for example, there was already tremendous knowledge about materials; in Albany, Dresden, and Eindhoven it was chips and sensors; biotechnology and bio pharma are the main attractions in Zurich, Dresden, Raleigh, and, to a more limited extent, Portland; medical devices dominate in Minneapolis, Oulu, and Portland.

  Collaborations develop, and as time goes by and early goals are achieved, the members of the brainbelt become more self-aware and work to define themselves and their qualities. Gradually, as collaboration becomes ubiquitous and the players deepen their knowledge of others in the brainbelt, they build trust in one another and confidence in their ability to take on even more complex and difficult innovation challenges.

  The beauty is now not simply awake but more fully alive than it was before the evil witch invoked the curse. The awakening beauty develops new capabilities, particularly the ability to adapt to new circumstances and to refocus its energy on new areas of activity. Three of the regions we visited were early starters in exploring new concepts of sharing brainpower. In Lund, it was the Ideon science park that was the birthplace of Ericsson’s handheld phones in the 1980s. When Ericsson lost its market position, Lund lost its focus. But the area did not lapse into a period of dormancy, as it had earlier. Instead, it adapted. A $300 million investment in a new particle accelerator will refocus on new materials and pharmaceuticals. A similar development took place in Oulu, Finland, where Nokia was also the victim of Apple’s and Samsung’s success with their smartphones. But entrepreneurs and local politicians built on their wireless expertise and focused on wearable medical devices.

  Awakened beauties remember their dormant times and are far more aware of the risks that can befall them. They become highly adept at avoiding evil spells.

  How Smart Manufacturing and Smartfactories Work

  The brainbelt model not only involves a new process for generating ideas, it revolutionizes how those ideas are realized as products and technologies. New manufacturing methodologies—particularly robotics, 3D printing, and the Internet of Things, all described below—enable the creation of a whole new generation of smart products. Unlike the low-cost, just-in-time factories of the past several decades, smart manufacturing focuses on customization, localization, complexity, and quality.
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  In traditional manufacturing, the focus was on the productivity of individual workers, whereas in smart manufacturing, the emphasis is on sharing brainpower among members of teams.

  As the following table details, the “smartfactory” looks and operates very differently from traditional factories, in many ways: equipment, organization, processes, metrics, and mindset. The smartfactory is highly automated and often small. System operators, designers, and researchers work side by side. The factory no longer operates only during standard business hours but rather 24/7. Customer orders, raw materials, supplier parts, production, delivery, and maintenance are all part of the same information system. Advanced materials are widely used, and scrap and waste have virtually disappeared. Close monitoring of every part of the process (nearly) eliminates defects. Customers care more about custom fit, high quality, speedy delivery, and innovative design than they do about low cost, so production is in custom-designed batches rather than huge volumes. The smartfactory is compact and clean enough to be located downtown in innovation districts of brainbelts where the technicians and engineers who operate them like to live.

  TraditionalManufacturing: Mechanization

  Smart Manufacturing: Automation and connectivity

  TraditionalManufacturing: Worker productivity

  Smart Manufacturing: Teams adding value

  TraditionalManufacturing: Efficiency