Departure of Swiss pharma lab prompts hard look at where Singapore could improve to be a Silicon Valley
A month ago I spent a week visiting the campuses of some top universities in the East Coast of the United States. I was taken a bit by surprise by a question that I was asked several times: Was the closure and transfer from Singapore to California of Novartis' research centre on tropical diseases a symptom of an underlying problem with Singapore as an innovation hub?
The Swiss pharmaceutical giant announced last month that it is moving the Novartis Institute for Tropical Diseases (NITD) to Emeryville, California, next year. The move was part of "a broader global strategic plan", Novartis Institutes for BioMedical Research president James Bradner had told The Straits Times.
I personally thought it was a pure business decision limited to one company. But it made me reflect whether we could improve on Singapore's position as a place to develop innovations that make a difference for the world.
What makes the success of an innovation hub? All over the world, governments have wondered how to recreate a new "Silicon Valley". In the early 2000s I did research on what made innovation hubs successful. And I concluded that Silicon Valley, as well as hubs like Haifa and Tel Aviv in Israel, the cluster around Cambridge in Britain, and well-known places such as Munich in Germany, Linkoping in Sweden or Sophia Antipolis near Nice in France, performed quite well on six common dimensions.
THREE AREAS WE DO WELL IN
The first of these dimensions is a robust and performing technical infrastructure. Reliable and sufficient communication bandwidth, and excellent universities with laboratories that can help in the development of new products and systems, as well as a good supply chain and logistics network, all contribute to the quality of that technical infrastructure. This costs lots of money, but it is relatively easy to put in place. Singapore's Government early this year announced it had committed to an investment of $19 billion in the research and technological infrastructure through the Research Innovation Enterprise (RIE) Plan 2016-2020.
The second dimension is the depth of human talent. That does require good universities educating great scientists and engineers. But not everybody can, or should be, a top researcher. You also need technicians who can translate research into real products and systems. You need creative designers who can shape these products into iconic concepts, business specialists who can imagine the business model and salesmen and marketeers who can convince the customer to buy. The education system needs to be performing at all levels, be it technical education, polytechnics, business education, or in the arts and design.
A third dimension is the legal framework in which companies operate: Is it easy to start and stop a business, can one enforce contracts, can intellectual property be protected so that an innovator can reap the rents from his or her investment?
There is no doubt that on these three dimensions Singapore scores very high, probably better than any other region in this world. We are not perfect but do very well. But what about the next three?
WHERE WE COULD DO BETTER
The fourth dimension is the degree to which the providers of finance are able to accompany the risk-taking entrepreneurs. Obviously you need to have the business angels, and perhaps government support, to invest in the very early starters. But you need also the venture capitalists who are prepared to invest in second, third, fourth, and other stages of financing.
You need financial engineers who understand business risks, who are willing to guide and support the entrepreneurs in their arduous journey to grow the company. They know where to find capital that is prepared to take risks, and are masters at limiting the cost of capital for the entrepreneur to the minimum possible.
My opinion is that Singapore has sufficient support for start-ups. We have an excellent banking system to support mid-size and larger companies. But I often hear that in between those two financial communities, we miss the sophisticated group of financiers that can help in the growth of a start-up.
The fifth dimension measures the degree to which the society is rewarding creativity and celebrates the role models of innovators and entrepreneurs. This is about creating a culture that appreciates innovation and entrepreneurship.
It also requires large local companies to accept that a small local start-up can be their supplier.
Or that the Government is willing to buy from smaller companies, even though they are not the cheapest or the most reliable.
It is often argued that Hewlett Packard created Silicon Valley through its procurement: it was prepared to buy from small unproven start-ups and work with them to improve their products.
We have made significant strides in Singapore in developing such a culture. Since the late 1990s, I have seen a major change. Parents are prepared to let their children take risks. Not all expect their offspring to take a government job or a job in a multinational corporation upon graduation. And young Singaporeans are considering forgoing well-paid jobs to take risks.
The Government is investing in the supporting infrastructure, such as incubators and innovation fairs. I see a real momentum, though we still lag behind some of the best-performing innovation hubs in the world. Cultures don't change that fast. And our "box-checking" attitude to procurement processes has crippled many an entrepreneurial start-up.
The sixth dimension is the access to markets. In some cases, that means that innovators have large home markets. That is clearly the case in China, Indonesia, India or the US. But smaller countries such as Israel, Finland or the Netherlands have found ways around it. They partner with players in these big markets.
For the bulk of Israeli companies, the real market is in the US. They have developed strong partnerships with friends in the US who can do the marketing and distribution for them. This is the Achilles' heel for Singapore innovators. Our local market is too small, our real knowledge about neighbouring markets is limited, and our networks in large overseas markets are underperforming.
Still, Singapore is doing well on all six dimensions. But will this be enough? A good-to-excellent performance on these six dimensions is probably necessary, but not sufficient to be a great innovation hub.
It is not simply about ticking the boxes. We also need passion for innovation, tolerance for a bit of messiness and creativity, a great openness to the world, and the modesty that we cannot be good at everything.
As a scholar, I do research on how to innovate. I have met many innovators in my life. They share some characteristics - some nice, some not so nice. In fact, some of them have really unpleasant personalities. Whoever has read a book about that great innovator Steve Jobs will know that he had many great strengths. But very few, if any, in his professional environment would have described him as nice.
Innovators are driven, have passion for their concept, and are often ruthless about collaborators or competition. Are we sufficiently passionate here in Singapore to have the ambition to change the world? Do we instill such passion in our young people?
The reality is that innovation is messy. It does not follow strict development paths, it may not happen in the appropriate department, it can be slow and unpredictable. Can our organisations cope with that messiness? Is creative chaos allowed?
All innovation hubs happen to be in places with a good quality of life. It is not difficult to understand why: Creative and entrepreneurial people usually have a choice where to live and can adapt to very different environments. They tend to drift towards places where it is good to live. And all of these places strongly value diversity.
Accepting diversity does not mean that we try to hide our differences. Accepting and managing diversity means that we talk about the differences, and see how we can get synergies out of being different. I hope that we can keep a similar openness for diversity in Singapore, so that we can attract the best talent from the world to our shores.
And we should not expect that such talent will stay here forever. Innovation hubs are dynamic places: talent flows in and out. We should not be surprised that labs like the Novartis one leave us after more than a decade of good work.
But did we optimise their impact on Singapore while they were here? That is, for me, the real question.
Finally, we may have to make choices about which technologies and systems we can excel in. It is a simple strategy of differentiation and focus. As a small nation, Singapore must choose some niche areas in which it wants to be the best.
The writer is president of Singapore Management University.
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