Innovation hubs are becoming more protective than innovative

LinkedIn cofounder Reid Hoffman spoke this past May at the Tech Alliance luncheon in Seattle, and something he said got me thinking about Silicon Valley – and all innovation hubs — in a different way.

While interviewed on stage by angel investor Sarah Imbach, he called Silicon Valley “myopic” and urged people to pay attention to what’s going on in Seattle, the other tech hub where he now spends time as a startup investor and Microsoft board member.

Myopic is exactly right. And with that Silicon Valley and other innovation hubs risk losing their edge.

The innovation ecosystem in the Bay Area comes together like a non-linear neural network. There’s the perception that it is all self-organizing and efficient. They have ideas, networks, partners, teams, capital, and customers — it’s all there, and innovation can quickly scale.

But, at times, a myopic view can result in a follow-the-leader mentality. A case in point: In some instances venture capitalists give the appearance of a herd mentality by investing in trends they all see, at the same time.

In a place like Silicon Valley, resources do come together quickly. And what’s dangerous is pushing the same idea forward by a multitude of investors and entrepreneurs.

Oftentimes, everyone wants to jump in for fear of being left out. This is human nature. This attitude can result in VCs and entrepreneurs not taking risks and instead pursuing what the VC or entrepreneur next door is doing. The VC’s goal is to aggressively participate in the financing feeding frenzy at the right time so they can get a return. The entrepreneur might look for a fast and easy exit. This is where bubbles come from.

But a return or an exit is not innovation.

The problem is this: You cannot innovate with a consensus mindset.

Of course, there are still new and original ideas that completely transform a market. Examples include ride sharing and Netflix, but these are rare.

Mostly what we are seeing is that networks too often come together to do incremental things. They are not creating the next transistor chip or laser or next energy source. Certainly not with the frequency you would expect or we desire.

Innovation is more than just cool new apps.

An incremental mindset does not create breakthrough ideas. It creates, simply, temporary market penetration.

The Silicon Valley ecosystem itself – and Seattle too — can at times act like a big risk-averse company with a big balance sheet it’s trying to protect.

It’s Clayton M. Christensen’s Innovator’s Dilemma, applied to the whole network instead of a company.

Here’s the Innovator’s Dilemma: Once a company has successfully developed and launched an innovative product, it wants to produce it in a more efficient and profitable way rather than invest money in new, innovative, disruptive ideas. The dilemma is between investing in something new that could cannibalize the business now and letting upstart rivals run with the lower-end disruptive innovation that could blindside you later.

Some companies are working to break free of this dynamic that chooses scale over innovation.

Google is leveraging its success via Alphabet. Internet search is becoming progressively less profitable, so they are focused on innovative new areas like life sciences, robotics, and home automation.

Amazon is succeeding around retail and looking at it from different angles; case in point: its recent purchase of Whole Foods. Amazon is leveraging its expertise around operational efficiency to innovate in very different ways from the moonshot approach.

It’s time to change the myopic approach to innovation ecosystems. If we don’t make adjustments now, we’ll be talking about how the Innovators Dilemma is no longer an issue just for companies.  It wil instead be an issue impacting innovation regions and entrepreneurial hubs like Silicon Valley and Seattle.

The time is now to disrupt the actual innovation process.

[The views expressed here are the personal opinons of the author and not those of the University of Washington.]

Vikram Jandhyala is Vice President for Innovation Strategy at the University of Washington, Executive Director of CoMotion, and co-Executive Director of the Global Innovation Exchange (GIX). He is a professor and former chair in the Department of Electrical Engineering and serves on the advisory boards of The Technology Alliance, Washington State China Relations Council, UW Foster Business School’s Buerk Center for Entrepreneurship, and Partners for Our Children. He founded, along with his students, Nimbic (acquired by Mentor Graphics) and was an early employee at Ansoft (acquired by Ansys).