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November 1, 2015

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Environment, talent essential to innovation hub

By Elton Huang | November 1, 2015, Sunday | Print Edition

SHANGHAI has laid down the gauntlet, aiming to have the foundations of a global innovation center in place by 2030. Success will involve multiple factors, however; making advances in three key areas will prove particularly significant. These areas cover the business landscape, smart investment, and attracting talent.

Shanghai is already a global economic center, driven by a combination of state owned enterprises (SOEs), privately owned enterprises, (POEs) and multinational corporations (MNCs). Fostering a business community that increases connectivity between each of the business types is an excellent way to encourage innovation. Cross-pollination of opportunities will enable new start-ups to tap into the expertise, processes, and networks of established companies in the city, providing a distinct advantage, especially during early phases of development.

It is also worth noting that SOEs contribute approximately half of Shanghai’s current GDP, and as a result their significance in driving innovation cannot be understated. Shanghai’s government will play a key role in shaping the future landscape, as companies look to an environment in which firms from each pillar engage with optimal efficiency. And with true innovation often requiring 10 years or more to come to fruition, defining long-term metrics that guide innovation are going to prove advantageous. Consequently, the development of benchmarks for both organizational and individual influences on innovation may become increasingly widespread.

In addition to connectivity, Shanghai has a lot to gain from its many incubators. There is a good case for continuing to build more, while increasing promotion of existing sites to attract the best innovators. Opportunities also exist with incubating new businesses in mature companies. For instance, creating smaller teams within an overall corporate structure can facilitate “in-house entrepreneurship.” Being flexible on where incubation takes place is an important factor for success.

Innovative start-ups will always require access to funding, and Shanghai has excellent supply of venture capital (VC) and private equity (PE). The task will be to ensure that the market is enabled and optimized to identify and invest in innovations. Such innovations could cover technology, products and services, processes, as well as management, and in both start-ups and established organizations.

Innovative ideas

Due to an abundance of quick exit opportunities, investors in Shanghai have not been motivated to scour the market in search of breakthrough innovations in the same keen manner they do in other economic centers. To achieve maximum potential, Shanghai will benefit from VC professionals identifying and increasing investments in innovative ideas at earlier phases. Therefore, an imperative will be developing VC talent with expertise in recognizing potential high-impact innovations, and specifically technical innovations that are ripe for commercialisation. This takes time, and also comes with a degree of risk. It’s important for businesses to recognize there will be failures along the path to innovation.

Innovation in Shanghai could also be helped by the extension of investment and support to surrounding cities, for example Suzhou, Hangzhou, and Wuxi. New enterprises would initially be able to take advantage of lower operational costs, before gradually merging into Shanghai’s central orbit. Greater connectivity could also help focus efforts on cultivating diverse hubs of innovation that build on areas of strength, for instance clusters in pharmaceuticals, logistics, and finance.

When it comes to cultivating innovation, attracting talent is critical. Today, Shanghai boasts excellent universities and research laboratories with an international field of expertise. In order to become an international center for innovation, the volume will need to be increased even more. In addition, by embracing technological advances, Shanghai can explore creative new ways to expand access to global talent, potentially by developing and exploiting a virtual talent pool.

A range of steps are being taken to attract talent, including plans to reduce labour
restrictions. Wider initiatives in civic design will also help attract newcomers. Developing public spaces, cultural facilities, safe habitats, and advanced education facilities all help to advance appeal to innovators and their families. Further, the Shanghai government has identified policies to encourage entrepreneurship. One instance includes allowing university researchers to form start-ups while enabling university students to participate on a part-time basis. These efforts form a solid base on which to develop, by nurturing existing talent, while ensuring the city is more attractive to newcomers.

 

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