Twelve Principles for a Regional Innovation Hub
Introduction
At Franklin Solutions, we are enthusiastic about the many federal programs focused on regional development in one form or another. The Tech Hubs (U.S. EDA) and Regional Innovation Engines (NSF) RFPs are two examples of possibilities for initiating some form of regional innovation hub. Below we offer a set of principles for launching a regional innovation hub premised on our experience doing so (co-founding the Institute for Advanced Learning and Research in Danville, Virginia and the New Jersey Innovation Institute in Newark, NJ) and in founding and leading a national learning network (Transformative Regional Engagement Networks) of major universities and organizations many of whom had done so. As our rationale will illustrate, pre-ordained recipes are poor answers to questions about ways to bring stronger regional economic and civic performance to the many unique U.S. regions. Principles offer flexible concepts applicable anywhere. To level-set with a few assumptions before introducing our principles, here are some core concepts:
The Need to Define Context - Federal policies centered on regional innovation are notable because, with a few exceptions, regional geographies have not been the target for economic development policy formulation. Unlike two notable exceptions, the federally established Tennessee Valley Authority and Appalachian Regional Commission, the new regional innovation policy is NOT context specific. This flexibility in framing context raises questions about how one creates boundary conditions and custom-designed interventions into a distinctive portfolio of programs that fit each region’s unique geo-economic situation.
The Need for Place-based Opportunity - As a policy approach, regional innovation hubs become a strategy to extend opportunities for increased economic performance to underperforming regions, be they rural or more urban. Each grant program’s target outcome may vary by its federal agency’s mission. However, the general policy goal calls for broad, effective strategies resulting in strengthening a region’s capability to attract new opportunities, a bigger traded economy (dollars from outside the region). Unlike classic sector strategy policy, regional innovation policy brings into play an explicit geographic dimension. The focus on geography requires linking and leveraging assets and building capacity to create a clear regional competitive advantage from an unclear one.
The Need for Capacity-Building Strategies – A regional innovation hub must bring new capacity and new capabilities to the regional geography, with the corollary benefit of strengthening the U.S. economic competitiveness. In contrast to a narrowly constructed approach to industrial recruitment, or a focus on leaning out costs, regional innovation hubs are about attracting core assets and investments that reinforce competitive advantage (talented people, startups, investment capital, technology development, etc.), and increasing revenues at the top line. Building a competitive advantage requires an innovative, capacity-building posture.
The Need for Place-Based Results - The impact of a successful regional technology hub needs to include a well-paying job base, leveraging university research and new technologies along with the highly valued talent products of graduate schools, establishing a thriving entrepreneurial ecosystem, and retaining and developing a workforce with skills to support industries paying a living wage or better. These economic outcomes will follow the places new investments in regional capability are made. It requires asking and answering questions such as:
· How does our strategy serve to attract new economic and civic opportunities to our region?
· What place-oriented investments can our region reasonably make that will result in competing effectively in a target industrial sector(s)?
· What quality of life dimensions will be needed to support competing in those sectors?
· What is our theory and practice of change in which better local economic and civic performance are the result of launching a regional innovation hub? What is the causal chain leading to better regional economic and civic performance?
The Need to Leverage Higher Education and Other Capacity-Building Organizations - Finally, in launching a regional innovation hub, it makes enormous sense to leverage higher education and other capacity-building organizations (e.g., incubators, accelerators, research and workforce organizations, etc.), which by their very nature are institutions adding valued inputs to a region’s competitive advantage. With well-designed governance and financial policies (sadly, not many get this right), these asset rich organizations can support and accelerate the regional strategy. By doing so, this strategy of partnering with public institutions builds resonance, scale of impact, and ensures the integration of newly developed program capability with the region’s existing asset base.
One merely needs to reflect on the impact of the Morrill Act (creating land grant universities and bringing into the mainstream agricultural and engineering curriculum), the Hatch Act (creating agricultural extension and research stations), or the National Science Foundation’s use of research universities to lead in U.S. basic research (most importantly, to create a highly-trained technical workforce) to realize how effective a strategy that leverages higher education can be when executed well through comprehensive, thoughtful policy. The Morrill Act, Hatch Act, and National Science Foundation leveraged higher education to revolutionize our agricultural and high-tech economies. Both economies lead the world. In the case of agriculture, the sector has produced exponentially more food while employing a fraction of the workforce (now accounting for less than 1% of U.S. employment after employing most Americans just a century ago). No similar policy for transforming rural job opportunities through capacity-building has occurred…until now.
Twelve Principles for a Regional Innovation Hub
1. Define the Region’s Challenge to Target Performance and Inspiration.
2. Shape Regional Players into a Team Pointed at the Challenge.
3. Keep the Regional Vision Independent from Any Single Public Funding Source.
4. Frame Governance Structure(s) for Intermediate and Longer-Term Collaboration.
5. Generate Substantial New Resources from Multiple Public and Private Sources
6. Design a Program Framework Capable of Achieving Increased Regional Performance and Transformation.
7. Implement Business Models from the Start Capable of Sustaining the Strategic Program Framework after the Initial Grants are Spent Down.
8. Embrace Experimentation -- “Systematic Improvisation” – as the Best Path to Achieve Both Performance and Change When Optimal Choices are Unclear.
9. Use “Enlightened Self-Interest” as a Leadership Principle to Guide Regional Collaboration.
10. Engage Regional Capital and Institutional Interests to Align Leadership Drivers and Accelerate Performance Change.
11. Embed Agile, Creative, Collaborative Process(es) in the Center of Leading Strategy, Program, and Collaboration Development Efforts.
12. Celebrate Success and Encourage “Runaway Passion.”
A Condensed Rationale for the Twelve Principles
1. Define the Region’s Challenge to Target Performance and Inspiration - Engage willing regional players in a series of interviews and conversations that are inclusive, lend insight into shared purpose and collective interest, and result in an emerging consensus for a regional transformation agenda. The agenda surely will require change; however, stronger economic and civic performance must remain the guiding star. Capture the essence of the region’s challenge in an opportunity-focused framing question and vision that inspires the energy and time investments required to accomplish a transformative effort.
2. Shape Regional Players into a Team Pointed at the Challenge - Break down in-region silos and rivalries by engaging regional leaders with interviews, briefings, and agile strategy work that build regional identity and a collective sense of “We.” Many regions’ histories offer challenges in recognizing common interest because sub-regional identities have been fractionalized by a “Friday Night Lights” mentality (HS sports rivalries) or by perceived jurisdictional tax base spoils resulting from all-in industrial recruitment strategies. Overcoming these mindsets is critical to creating a regional team.
Confront the counterproductivity of sub-regional identities by finding leadership drivers and appealing to “enlightened self-interest.” Trust emerges from a pattern of doing work together. To take personal responsibility, participants need to feel they are heard, and their interests are included. Harmonize agenda elements to minimize either/or thinking and build win-win opportunities to create new, shared value. Start by developing a coalition of the willing so naysayers cannot veto early initiative. Build early wins to elevate the fear of missing out in doubters. Credibility and trust will develop, as well as authority for change, which are all critical to the effective teamwork necessary to advocate and implement a regional transformation agenda.
3. Keep the Regional Vision Independent from Any Single Public Funding Source – Public funding provides critical seed capital for most regional innovation hub initiatives. It parallels investment capital in the private sector. However, with the large-scale tech hub and regional innovation engine-type grants currently being competed, there is significant risk of using the criteria for winning the grant to become the central strategic frame for increasing regional performance. And they are not necessarily the same!
In regional transformation, context matters, multiple revenue sources matter. Multiple program efforts matter. Each region is unique and needs its own formula for success. The regional vision must assume primacy with each federal, state, or other grant source fitting into the larger strategic approach. The overall effort will be stronger by following this principle. Grant proposals, no matter how large, can be written to score well against the evaluation criteria without losing the larger vision for what your region’s success looks like.
4. Frame Governance Structure(s) for Intermediate and Longer-Term Collaboration – Effective collaboration requires trust. Inevitably, new resources will be needed to implement a program resulting in regional transformation. New resources will emerge from regional networks through the assets and political capital of those committing to the regional team’s success. Winning new resources comes with decisions about how they are spent. Shared understandings about the manner and conditions in which those resource decisions are made is a prerequisite for maintaining and growing trust over time. Over the long term, the work to accelerate regional performance benefits from transparency and a defined means to ensure shared decision making for future resource decisions. Agile decision structures best serve immediate and intermediate governance needs. Loose hierarchies, shared metrics, and pathfinder projects are early mechanisms for learning and risk management. Use them well. However, long term performance increases the need to be institutionalized in a collaborative, more enduring governance structure. Without it, the spirit to collaborate and sense of a collective “We” will wither and die.
5. Generate Substantial New Investments and Resources from Multiple Public and Private Sources – Launching a regional innovation hub will require substantial new resources to develop programs and facilities that permit a region to compete in ways leading to better civic and economic performance. New funds, one-time and recurring, will be needed from federal, state, and local government, local philanthropy, local private sector sources, and fee-for-service revenues produced by the business model. By expanding its networks of individuals and organizations, other physical, political, programmatic, and human resources will emerge. In our past work, we have created a matrix with elements of the strategic program framework along one axis and resource/funding source along the other. Each cell in the matrix can then be used to track funding strategies and sources for priority programs. This approach allowed us to coordinate the optimal funding source for each program element, as well as avoiding multiple requests from our initiative to a single source when unwise. As stated above, public funding, especially federal funding provides critical investment capital. Early investments will be needed to write winning grant proposals. However, those proposals will be far more effective if local assets have been identified and aligned, as well as advancing a coherent business model for supplementing public investments and identifying a path for long term sustainability.
6. Design a Strategic Program Framework Capable of Achieving Increased Regional Performance and Transformation – Increased regional economic and civic performance resulting in a transformative impact will not be easily achieved. Regional communities represent highly complex interactions between citizens, governments, businesses, private capital, and civic organizations. The people, systems, and vested interests committed to “the way things are” represent a considerable level of community inertia, not easily redirected with uncoordinated solo efforts. Metaphorically, a symphonic sound requires an orchestra. In this context, a silver bullet strategy is not sufficient. Impatience is counterproductive. Playing favorites kills enthusiasm. Real progress takes time to manifest!
Regional economic and civic transformation requires a strategic framework of synergistic programs that leverages regional assets and opportunities across multiple dimensions. Think of these as portfolios of initiatives targeting major objectives (e.g., talent, innovation, entrepreneurship, or a quality, connected community) or the three to seven things that are your initial focus. In doing so, recognize that each community brings its own history, its own situation from which to start. The program framework should be customized. It needs to build from regional assets, so inventory and engage them early in your effort. It needs to be designed with enough thrust to impact key indicators of better performance while simultaneously eliciting the full support of the community. Transformative means major economic and civic performance change, not fluffy, feel-good sideshows. We encourage recognizing principles of diversity, equity, inclusion, and access in the design of your strategic program framework. Within the context of a global economy, these principles are easily tied to better overall regional performance. In the early years of your regional effort, design, fund, and implement a symphony of high-impact, synergistic programs that together build the momentum and change needed to achieve better regional performance.
7. Implement Business Models from the Start Capable of Sustaining the Strategic Program Framework after the Initial Grants are Spent Down – The principle of long-term sustainability should be designed into each piece of the program framework even though many of these individual programs will be funded initially through grants (and I won’t get bogged down here in tactics to handle “program revenues” within CFR specifications). This principle should become a discipline because even large grants such as those proposed by the National Science Foundation’s Regional Innovation Engine will be spent down. More importantly, this approach rarely effectively engages the private sector without matching a business model aligned with private sector needs (Manufacturing USA grants represent both good and bad examples of this potential misalignment).
In many instances, the discipline required to sustain strategic program activity becomes the rationale to create an intermediary, non-profit-type organization, implicating Principle 4 about designing a governance structure. Intermediary organizations are vehicles for aligning regional investment and efforts. Universities have great potential to serve as a backbone institution in the initial phases. However, this means explicitly moving away from treating early funding simply like an academic research grant. Typical university research grant management frameworks, with one or more principal investigators, do not represent self-sustaining business models (or collaborative governance); they are simply a means to spend down sponsored funding in accordance with the proposed program. This approach rarely rises to the challenges and warrants of regional transformation!
8. Embrace Experimentation -- “Systematic Improvisation” – as the Best Path to Achieve Both Performance and Change When Optimal Choices are Unclear – As the introduction above should make evident, in launching regional innovation hubs, effective program solutions are difficult to determine at the start because best practice is still being refined for these large-scale initiatives. Variations in regional context require tailored solutions (sometimes without a fully knowledgeable tailor designing the hub initiative). To be successful, the regional innovation program framework and investment model need to be designed to encourage experimentation. Strategic Doing 2.0 builds experimentation into creative design and early implementation processes through pathfinder projects and using design-do cycles to learn what works, while also building teamwork and collaboration. Much like a startup learning to market its product, the idea is to fail fast, learn from both the failures and successes, and incorporate these new learnings as the initiative moves forward. Beyond synergies and momentum, one of the reasons for using new and varied combinations in a program framework involves its ability to test multiple interventions for their effectiveness.
Furthermore, performance success through experimentation will need to be institutionalized. When developing the Institute for Advanced Learning and Research, we gave this tactic a name, “systematic improvisation.” By doing so, it became an explicit part of our modus operandi. Where appropriate, budget devices, such as challenge funding pools can provide project-level design competitions and increasingly deliver performance results to inform the financial commitment process. With feedback in hand, new program approaches will emerge, and longer-term commitments can be provided.
This principle argues strongly against dividing a grant budget between submitting partners prior to proposal submission. If better regional performance is your North Star, experimentation accelerates the journey to knowing how that will be accomplished… before your investment funds are fully committed. Experimentation needs to be a part of your effort to launching a regional innovation hub, and a rich set of tools exists to assist in the process.
9. Use “Enlightened Self-Interest” as a Leadership Principle to Guide Regional Collaboration – The various individuals, businesses, organizations, and governmental bodies making up a region represent numerous financial and social interests. Some of these interests possess an affinity toward one another and others may view their fellow participants as competitive. Regardless, in seeking to construct a collaborative platform, it is a reasonable assumption that each “actor” in the regional play will behave in a manner that favors his/her/its perceived self-interest. Hence, aligning a threshold level of support from these “actors” becomes an ongoing challenge in fostering a sense of collective “WE.”
In the conversations and interviews used to define the regional challenge, we suggest emphasizing “Enlightened Self-Interest” in one’s leadership posture. This principle suggests that an ongoing responsibility of the initiative leaders involves enlightening each participant to the specific benefits accruing to them by succeeding with the regional change agenda. By doing so, everyone should recognize the benefits to their self-interest from effectively addressing the regional challenge. Once accomplished, it stands to reason each participant will become more responsible for their own performance to bring change because it is in their self-interest when viewed from an enlightened perspective. Critically, time and energy will be offered more willingly, offering staying power for the change agenda.
10. Engage Regional Capital and Institutional Interests to Align Leadership Drivers and Accelerate Performance Change – Metaphorically, change begins from both the top and grassroots levels of a region. It begins from a group of citizens who organize and influence in ways that build from a humble start to major regional change. It also begins with business and institutional leaders using their networks and bully pulpits to focus regional efforts on an agenda for change. Regardless of how and where it starts, the regional change initiative will eventually need to engage powerful and influential people, businesses, and institutions (including local government). It eventually will be a public issue requiring public support. So, an effective agenda for launching a regional innovation hub needs to be aligned with the “enlightened self-interest” of a region’s leadership drivers and vested economic and civic interests and organizations.
Recall the truism, “follow the money.” Research on the power structure of communities and regions suggests concentric circles of power beginning with capital interests in the central, or most powerful, position. The third layer out includes elected leaders with the second layer being trusted liaisons linking and communicating between capital and political interests. Institutional leaders (healthcare, K-12 education, higher education, philanthropies, etc.) comprise the fourth notable layer of power within a community. The two outer layers are more visible to the layman and public; however, the greater power rests in the circle’s center.
These four layers of power become leadership drivers for anything of substance that either happens or gets shut down within a region. Aligning these leadership drivers with a regional change agenda initially requires identifying and engaging these capital and institutional interests, discovering the source of their enlightened self-interest, harmonizing between their interests, and bringing their leaders onto the regional team.
Let’s consider the following lenses for finding a region’s leadership drivers. Capital interests can be considered in two major categories: industry sector leaders and local capital leaders. The latter includes interests vested in increasing the region’s traded economy, such as local business ownership in banking, real estate, media, construction, architecture and engineering, and trucking oil, gas, and garbage. All these local capital interests stand to benefit from a healthier traded economy and more money coming into the region. As the region grows, their businesses grow. Examples of industry sector capital include: pharmaceutical companies around a cell and gene therapy technology hub; major utilities and grid operators in a Carbon Zero initiative; or racing and automotive companies around a performance engineering innovation hub. When geographically aligned industries constructively engage regional change, they represent regional jobs and bring a powerful response. Both local and industry capital represent meaningful leadership drivers and are critical to engage.
Since civic institutions also benefit from growth and represent jobs, local institutions also serve as important leadership drivers. “Eds and Meds” as a development strategy builds from this recognition. While critical to engaging public appropriations, political leaders stand for election on short term cycles, a process that requires campaign funds and puts a premium on near term wins. Conversely, capital and institutional leaders offer longer term perspectives on regional priorities, often provide reelection resources to politicians, and provide a critical orientation for establishing regional political priorities.
All four layers of the power structure are important leadership drivers. Engage them all! Discover their “enlightened self-interest.” However, recognize that when applying this principle, leadership truly is an art. It is critical to understand the way these power players interact and become aligned with an agenda that includes launching a regional innovation hub. Align the power in your region because leadership drivers accelerate change and become critical to orienting a public agenda for long-term transformation.
11. Embed Agile, Creative, Collaborative Process(es) into the Center of Leading Strategy, Program, and Collaboration Development Efforts – Even with a committed team of leaders, moving the needle on change that produces increased economic performance is difficult. Regions contain many diverse, diffuse interests, as well as tacit skepticism left over from past initiatives and frustrations with attempts to make things better. As Peter Drucker suggests, “Culture eats strategy.” Regional innovation hub leaders with foresight will recognize that, beyond a great strategy for governance, programs, business models, and more, they will need to foster collaboration, bring others into their agenda, develop creative, new strategies, and affect the dominant regional culture with their vision, narrative, and spirit.
The mandate to shift the regional culture requires embedding an agile creative, collaboration process into your initiative from early on. There needs to be a means to build new collaboration skills and “pro-social” patterns of behavior. Mindsets need to move from a vertical to more horizontal orientation and result in a greater sense of individual agency. For example, we use Strategic Doing (SD) and Strategic Doing 2.0 (which brings Performance-Driven Change into synergistic alignment with SD). While we are proud of our long-term and strong relationship to SD, we also deploy Design Thinking, Creative Problem Solving-Buffalo, and elements of traditional strategic planning. New strategies, new program ideas, fresh, meaningful language about change, along with proven methods that support a sizeable group sharing ideas and making decisions are part and parcel of these agile methods. Training facilitators, educating members of project teams, and deploying efficient and effective ways for groups to work together will pay enormous dividends as the initiative unfolds and moves into implementation.
Shifting human attitudes and generating commitment are far more art than science; however, embedding a proven process into the work of launching a regional innovation hub will uncover hidden assets, engender commitment and support, result in more creative ideas and better strategies, and support positive, optimistic narratives, and “runaway passion.” When a group process sputters, time and effort will be withdrawn. The region’s culture will not change itself. Arm yourself with modern tools and techniques for accelerating the work leading to culture change.
12. Celebrate Success and Encourage “Runaway Passion” – As trust, credibility, authority, and the identity of “We” build, the discretionary effort offered to the initiative will grow exponentially. To accelerate this process, celebrate success early and often in meaningful ways. Recognition reinforces motivation and caring within the initiative’s participants. Changing the trajectory of regional performance takes enormous levels of vision, positivity, creativity, persistence, and effort. Celebration recognizes intermediate victories and sustains the motivations of participants.
“Runaway Passion” dovetails here by giving language and offering permission for participants to share their enthusiasm for the perceived benefits of greater regional performance success. Growing enthusiasm, belief, and commitment across participants becomes infectious, accelerating both soft and tangible asset investments, and providing a hedge against skepticism about the initiative’s prospects for success. Real performance change will take years, even decades to manifest fully. As the initiative moves across phases, the time commitment and effort of the regional team remain critical inputs leading to success. So, don’t take them for granted; celebrate success and encourage the heart.
What About Your Regional Innovation Hub?
It is our hope that these twelve principles are helpful to many who are somewhere in the process of seeking transformation for their community and region. Our principles offer a flexible framework for guidance because each region is unique and needs to customize their specific strategies. While we have learned much from our direct practice, we would like to expand our experience as well. We would like to talk with you about your region and its opportunities and aspirations. Please give us a call if you think we can help your community. We would enjoy the conversation…and perhaps make a difference together.