Mar 23, 2023
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Article
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14 minutes
📍 On March 23, our team attended an event on innovation ecosystems featuring Barry Katz, organized by the UCU Business School. The content presented in this article is a short retelling of the lecture as well as a reflection of the insights and knowledge we gained from the lecture. We invite you to familiarize yourself with the key points and perspectives shared during the event.
Over the past decade, countries worldwide have been striving to build their own innovation ecosystems, often inspired by the Silicon Valley model. With the increasing demand for innovation, learning from previous efforts and understanding what factors are critical for success is essential. With its highly educated population, flourishing technology sector, and startup culture, Ukraine has the potential to become a significant player in the global innovation economy. In a recent event, we had the opportunity to discuss this topic with Barry Katz, an expert in design and innovation. He shared his insights on the positive lessons learned from previous experiments and what pitfalls to avoid, as well as discussed how Ukraine can position itself as a capital of innovation and the unique strengths and opportunities it offers as a potential center of innovation. Join us as we explore how Ukraine can build a thriving innovation ecosystem with the guidance of an expert in the field.
Getting to Know the Mister Barry Katz
Barry Katz, in his own words, actually wears multiple hats. He started teaching at Stanford University as a professor in the School of Engineering but became a professor of design at California College of the Arts in San Francisco. In addition to his academic affiliations, Barry worked for over twenty years with IDEO, Inc., the global design and innovation consultancy, where he conducted front-end research supporting IDEO project work. He consults with governments, companies, and academic institutions worldwide on issues about design and innovation. Also, Barry Katz is the author of the book Make it New: The History of Silicon Valley Design, which discusses the role of design in forming the Silicon Valley ecosystem of innovation.
So, below, we invite you to immerse yourself in a concise retelling of Mr. Katz’s lecture.
Innovation Hotspot: the Birthplace of Technological Game Changers
For good reasons or wrong reasons, Silicon Valley has become the world’s envy.
“I have hosted, I don’t know, maybe hundreds of visiting groups from around the world, and their first question is always something like, “How do we build a Silicon Valley back home?”, “How do we build a Silicon Valley in Bogota, Colombia?”, “How do we build one in New Zealand?”, “How do we build one in Western Ontario?” And the simple answer to that is it’s the wrong question.”
According to Barry Katz, the question is never, “How do we replicate something that worked in one place in another?” It’s what lessons can be learned and eventually adapted to unique local conditions.
Silicon Valley’s microelectronics revolution laid the foundation for numerous groundbreaking innovations that have transformed how the world works, travels, communicates, plays, and thinks. Then, one industry, not just companies but one industry after another, moves into this region.
This small real estate area has been the birthplace of many game-changing developments, including the world’s first video game, Pong, created by Atari in 1972. The video game industry has since grown exponentially, with projected revenues reaching $384.90 billion in 2023.
The first personal computer. As explained by Barry Katz during the event, if any of us have a personal computer that can combine text and video data on the same screen, that is a product of the innovation ecosystem, not just a bunch of brilliant engineers and scientists, but an ecosystem created there.
The first social network. It’s hard to imagine the number of people that arrive in Menlo Park to be photographed in front of what used to be the Facebook thumb and is now Meta’s pretzel. This is a fact of history, and people reasonably want to know what happened in this region and contributed to this extraordinary wave of innovation. Drawing on an example from the lecture, this is more than just looking backward at important things that happened 30 years ago or 40 years ago, or 50 years ago. Today, OpenAI is transforming the landscape of artificial intelligence, further demonstrating the ongoing impact of Silicon Valley on the world. It was somewhere around 2011 that the number of devices in the world was approximately equal to the number of human beings on planet Earth. And now, we’re looking at something like 20 billion devices.
Some of the most important laboratories and companies developing connected products originated in the region. Around 12–15 years ago, Google announced that they would build a car that didn’t need a driver. Referring to Barry, the first reaction to that was: “Wait, wait, wait, wait, wait. You guys are a search engine. You don’t know anything about car engines!” And now, practically every automobile company in the world is experimenting with one or another level of autonomous vehicles.
We can not even remember the world before we have mobile communications. Steve Jobs, co-founder, chairman, and CEO of Apple, got on stage and announced that Apple would make a telephone that was also an iPod, a phone, and an internet communicator.
“These are not three separate devices, this is one device,” he said.
This was a completely new product to the world. What we’re looking at is more than just an iPhone. We are also looking at the single most successful product in human history.
Not just products but entirely new business models have emerged from this innovation ecosystem. Twitter, Airbnb, which is now the largest hospitality company in the world, more significant than the next two physical hotel chains put together, and Uber, which is causing such distress among taxi drivers.
“And the point that I wanted to make here is this entire story, from laboratory science to consumer products, happens in the radius of a bicycle ride. And that is, and I make that point because that is not necessarily something that can be repeated or replicated everywhere in the world. And it’s part of the reason why “How do we build a Silicon Valley back home” is not necessarily a great question. The second thing is that cultural factors are unique to a region and can’t necessarily be exported from one place to another. That’s what culture is. It’s what makes a specific place unique.”
So, the lecture shed light on the complexities of a striking fact of history that some of the most important companies — if not all — dominated the world’s technology landscape and didn’t start in lavishly equipped laboratories in gleaming skyscrapers with huge budgets. They began in somebody’s garage or the dorm room of a couple of sophomores with nothing better to do. David Packard and William Hewlett, as in Hewlett Packard, began the electronics revolution with $738 they borrowed from their Ph.D. supervisor. There is a boring suburban home in the town of Los Altos Cupertino where Steve Wozniak and Steve Jobs, away from the prying eyes of their parents, put together the Apple I, which doesn’t look like a computer. It looks like a circuit board screwed onto a piece of plywood in their garage. Some years later, Sergey Brin was going out with a young woman whose mother happened to have extra space in her garage, which Sergey and his partner Larry Page, rented. And that’s where they wrote the algorithms that led to Google. And the rest of that is history.
“So what about a garage that’s so much better or more productive of innovative ideas than a gleaming research facility in a corporate lab and all of that? It’s partly because you can do whatever you want. And it’s happening in an old disused industrial building where you can pretty much do whatever you need to do without anybody writing the rules except yourselves,” — highlighted Mister Katz.
In light of this, the focus should be on creating intentional innovation ecosystems worldwide, tailored to specific local contexts. By fostering an environment that supports innovation and entrepreneurship, we can unleash the potential for new technology breakthroughs around the globe.
So here is the representation of the Silicon Valley ecosystem by Barry Katz. According to this model, we’ve got a kind of interplay between technology and psychology.
In this case, the microprocessor revolution that we associate with companies like Intel and National Semiconductor, and a few others back in the 70s, began to change the technology landscape and what was driving it.
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💡 The primary motivation is inventing new technology and bringing new ideas into existence.
And this is now the decade of Steve Jobs and that old generation, and the motivation was the microprocessor. The computer on a chip is astonishing, but on a chip doesn’t mean much to most people. It becomes interesting when you can put it in a box.
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💡 The primary motivation: starting a company to “put the invention in a box.”
The next stage of the 1990s was the era of software growth. So again, a personal Apple computer running an Intel chip is excellent and even more remarkable when running all kinds of Microsoft software. Then, it becomes a valuable product, such as word processing, graphics, or whatever else. And what drove innovators back then was to make money.
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💡 The primary motivation: making lots of money.
In the 2000s, the economy crashed, and the era of the internet and universal connectivity started.
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💡 The primary motivation: developing sustainability.
Intentional and Deliberate Planning of Innovation Ecosystems
The lecturer emphasized that there is an organization called the International Association of Science Parks. So a town, city, country, or region intent on building an innovation ecosystem, a science and technology-based ecosystem, must contribute a certain amount of money to this trade organization. And it supports companies in one way or another. It’s all around the world — in New Zealand, North America, South Africa, etc. — almost everywhere.
The oldest science and technology research park in the United States is in North Carolina. It is a public-private consortium called the Research Triangle Park. Triangle because it connects three university towns: the University of North Carolina, Chapel Hill, Duke University, Durham, and Raleigh.
The famous innovation ecosystem in Europe is Eindhoven, which was started by Philips as a corporate research center for electronics, covering everything from light bulbs to high-tech diagnostic medical equipment and everything in between. As Barry Katz noted, the American Investment Company, Oak Tree, recently purchased it. So, Eindhoven’s high-tech campus is now privately owned.
One of the most important in Asia is the Hsinchu Science Park in Taiwan, known as “Taiwan’s Silicon Valley.” It is also home to a growing biomedical sector. It was created in 1980, and something like 400 technology companies are clustered in a specific region, with an almost exclusive focus on science and technology innovation.
Two points about what the lecturer asked us to pay attention to. The first — all of them were consciously and deliberately planned. They were intentional, deliberate projects, each of which is or will be centrally administered, which is a second point. However, each factor distinguishes what’s going on in these places from what is going on in California's Silicon Valley, which was never planned. And it is undoubtedly not a confined, focused, regionally governed thing. Silicon Valley happened almost by accident.
Pillars of Innovation Situation
As explained by Mister Katz during the event, there is a vast and growing literature, academic literature, and business literature on innovation ecosystems, in which the authors always talking about the pillars of innovation and how we have to have the pillars of innovation put into place if we’re going to achieve this — they must spend a lot of time looking at Greek architecture. A critical study was done in the business school at Stanford, together with the World Bank, Ernst & Young, and Endeavor, in 2014. These studies try to identify the factors or components supporting a quote-unquote innovation ecosystem. Research suggests entrepreneurial ecosystem stans on accessible markets and intelligent people with domain expertise in biosciences or electrical engineering, or whatever it might be, money, a bit of infrastructure, and cultural support.
“The problem with representations of this sort is that each is an independent entity and not connected with the others. And what that means is it’s not an ecosystem. The essence of an ecosystem, as I am experiencing it and thinking about it, is the interconnection among these assets.”
Barry Katz offered a new model based on interconnections. It means money has to be talking to real estate. Real estate has to be talking to infrastructure. Infrastructure has to be talking to cultural forces and on and on and on.
A Vibrant Organic Ecosystem Model
According to Barry Katz, that is what really constitutes a vibrant organic ecosystem.
Silicon Valley has the technology companies: Intels and Apples, Facebooks and Metas, and Google. They are hard at work, but where are they getting their workforce? Where are they getting what the pillars of eco of innovation model call human capital? They’re getting them from a pair of major research universities, like Stanford plus Berkeley, plus a host of smaller and more specialized schools, which gives them designers. That’s why all of these arrows go in multiple directions.
Over 50% of US investment capital is concentrated in Silicon Valley, leading to high real estate prices and traffic congestion. Venture capitalists, often with solid connections to universities, invest in tech startups. Corporate law in the region has specialized in intellectual property (IP) law, ensuring that new ideas are protected from being stolen by competitors. This is exemplified by the legal battle between Apple and Samsung over their respective smartphones. Furthermore, the design industry plays a critical role in the region’s success, with Moore’s Law predicting the consistent doubling of transistors on integrated circuits over time. Interestingly, another lesser-known lesson from Silicon Valley is Moore’s second law (Barry Katz’s formulation), which advises staying away from the consumer market. Why? Due to the unpredictable nature of human behavior. For years, tech companies in Silicon Valley avoided consumer markets, focusing instead on their core technological expertise. They needed to catch up on the importance of design.
“Why is that so important? Pretty simple. Have any of you ever bought a printed circuit board? No. Have any of you ever bought a laptop computer? Sure. Does anybody ever buy an internal combustion engine? No. Any of you who purchased a car? I think so. Okay. Any of you ever download JavaScript? Actually, some of you probably have. But probably, the vast majority of you have done something equivalent to downloading Tinder and swiping left and swiping right, and then doing whatever you need to do. This highlights the importance of understanding not just technology but also how it intersects with human behavior to create successful products.”
The central idea presented by Barry Katz was that the difference between a technology and a product is design. And it is when we enter the consumer market that the big driver of economic change happens — there is a pretty good reason why Apple is the most valuable company in the world.
The increasing importance of design in the technology industry can be attributed to a few key factors. Firstly, for most consumers, the differences in the core technology of products are often insignificant. What truly matters is the user experience, which is created through design. Secondly, as products become smaller, cheaper, and more integrated into our daily lives, our tolerance for a poor experience diminishes. Design plays a crucial role in delivering a positive experience in these situations. Thirdly, we now tend to purchase systems rather than standalone products. Ensuring a cohesive experience across platform elements becomes the task of design. A study by McKinsey demonstrated that design-driven companies were significantly more profitable than those that didn’t prioritize design. This has led to a growing interest in understanding the role of designers and the value they add to companies.
Design thinking has emerged as an essential aspect of the innovation ecosystem, with designers taking on new responsibilities and expanding their horizons. Without focusing solely on traditional design tasks like refining fonts or perfecting product shapes, designers are now tackling complex problems such as pediatric obesity, teen pregnancy in East Africa, urban violence in the United States, and post-war reconstruction in Ukraine. One notable example of the power of design thinking is Apple, which has achieved remarkable success thanks to its cohesive ecosystem. Steve Jobs emphasized that design is not merely about appearance but encompasses the entire user experience. The seamless integration of hardware and software products within the Apple ecosystem exemplifies the impact of design thinking on product development and innovation.
At the very end, Mister Katz illustrated the rising importance of design in the innovation ecosystem through three examples: Apple, Google, and Tesla.
Apple, with its focus on the seamless integration of hardware and software products, has set the bar for design, prioritizing user experience. The company’s closed system, known as the spaceship, is embodied in its headquarters, which reflects Apple’s design philosophy.
Google, now Alphabet, recognized the need for a consistent design language across its various divisions to provide a more unified experience for users. This led to Project Kennedy, which aimed to integrate all of Google’s hardware and software products under a common design language. Google’s new campus showcases the architecture of the information technology industries.
Tesla, the innovative automotive company, has also embraced design in a transformative way. Rather than treating designers as a link in a chain, Tesla positions them as the hub of a wheel, coordinating with various functions such as aeronautical, mechanical, and electrical engineering. This shift illustrates the evolving role of designers in driving innovation.
These examples demonstrate how design has become essential in the world of technology and innovation, transcending traditional design tasks and taking on new responsibilities in addressing complex problems.
Focus on assets’ organic interconnection and interdependence rather than just the individual components.
Build bridges and remove obstacles to foster communication and trust among different industries and disciplines.
Distinguish between physical architecture and entrepreneurship; understand that bricks and mortar, steel, and glass are less critical than bits, bytes, and networks in the digital era.
Honor and build upon your unique regional culture rather than trying to replicate the success of others by copying their cultural aspects.
Recognize the limits of planning and be prepared to adapt to unpredictable events or black swans.
These lessons highlight the importance of fostering a supportive and interconnected ecosystem for innovation and the value of embracing local culture and being adaptable in the face of unforeseen challenges.
Conclusion: The Happily Ever After
In summary, Barry Katz’s insightful lecture offers valuable lessons on innovation and design, drawing from the success of Silicon Valley as a model for nurturing a vibrant innovation ecosystem. Countries like Ukraine and others can establish their unique niches in the global innovation economy by understanding the importance of organic interconnections, fostering collaboration, embracing local culture, and prioritizing design thinking. Rather than attempting to replicate Silicon Valley’s success, regions should leverage their distinctive strengths and assets to create a thriving, sustainable innovation ecosystem that propels them forward. Ultimately, the key to innovation lies in embracing adaptability, fostering cross-disciplinary collaboration, and recognizing the immense potential of design thinking in addressing complex challenges and creating products that resonate with the needs and desires of the global market.
