With the recent travel restrictions imposed not only due to the coronavirus but changing immigration attitudes, there appears to be growing physical constraints as to the global relocation of individuals. While there are many who would state that physical constraints are a severe impediment to innovation, there are others who would state that thanks to changing norms and technology, geographic proximity is less important than before.
Many would argue that the success of Silicon Valley is due not only to the availability of high quality education but the geographic proximity of high quality personnel as well. While one can view geographic proximity in a very limited scope, its definition needs to be both expanded and narrowed when discussing innovation.
Looking at the narrow definition of geographic proximity, Silicon Valley is in a prime position for innovation. Not only does it have several top tier post-secondary institutions such as UC Berkeley and Stanford University but it has been at the epicenter of government innovation with laboratories such as Lawrence Berkeley and Sandia. While some may not believe these are critical components, they are the foundational elements required for innovation and growth.
Top tier post-secondary institutions are definitely needed to build a strong foundational populace. Having the ability to train a high number of individuals to think differently as well as to associate with others who have diverse perspectives is critical to innovation success. Not only do post-secondary institutions and their diverse populations act as a crucible for testing ideas in a safe environment but it saves investors over the medium-term by having to spend less time and resources on “not ready for prime time” ideas.
Multinationals and startups not only rely on post-secondary institutions to provide new scientific breakthroughs and new business models but thought processing power (i.e. graduates) as well. It is not a unidirectional flow, however, and some post-secondary institutions have managed to effectively create a highly advantageous bi-directional flow.
The most innovative and financially successful post-secondary institutions have managed to create a 360 degree cycle that is mutually beneficial to all participants. Former graduates and current executives have the ability to not only attract new talent and find new innovations to continually power their organization’s growth but they have the individual opportunity to benefit by joining as faculty or guest lecturer to relay their experiences to the next generation. Faculty and students benefit by establishing their networks that will be critical in developing their startup ideas as well as accelerate commercialization efforts related to their scientific breakthroughs.
While geographic proximity has proven itself in the past and in today’s current state, is it something that will be a critical deciding factor for innovation in the near future? A number of factors besides the concerns over the coronavirus and the rising constraints over immigration are potentially reducing the necessity of geographic proximity.
One of the biggest factors that is reducing the importance of geographic proximity is the rise of cheap and effective communications technology. From email to video conferencing, technology is becoming ubiquitous around the globe. Whether someone is in a rural area or a cosmopolitan urban center, everyone has access to some form of communications technology to enable them to access the globe in the comfort of their own locale.
There are many who would state that the need for face-to-face communications will always be critical to building trust and smoothing communications across cultural divides. While there is no doubt that there is a need for face-to-face, particularly from a sociological and psychological perspective, the reality is that those norms are slowly changing and potentially accelerating in light of recent events.
While the coronavirus and latest immigration restrictions are new accelerators, there has been a shift in social norms over the past decade as technology becomes an integral part of our daily lives. Just like the phenomenon of children returning to an empty house due to both parents working led to the development of the term “latchkey kid”, the growing importance of technology in the daily lives of young children has led to the term “digital native”.
As “digital natives” begin to enter the work force, they will not only start influencing why we work but how we work as well. While video conferencing and email were put in place as productivity measures versus wholesale attempts at changing corporate culture with “digital natives” there is an increasing expectation that “digital first” will be the norm leading to a dramatic disruption of corporate culture. Indeed, particularly in technology based organization, we are seeing the rise of distributed teams regardless of organization size.
Driven thanks to the rise of multinational corporations and globalization of back office processes, a number of organizations are moving towards distributed teams. No longer is it necessary to centralize front office and back office operations in one location. Increasingly, corporate executives and startup founders are finding it extremely advantageous to be close to their major investors, usually in high cost of living areas, while at the same time locating their back office teams in lower cost of living areas.
Economics and technology are not the only things driving this movement towards distributed teams. Whether you call it work life balance or a realization that the best work done by individuals is done in environments they are comfortable with, individuals are demanding the ability live and work in locales that fit their individual needs and personalities. Organizations with an increasing need for smart and adaptive talent are willing to accommodate these individuals to ensure they remain competitive.
What does this mean then for geographies that have benefited for the need for geographic proximity? While they will remain supreme over the long term, they will increasingly be under pressure from other geographic regions that weren’t thought of as potential innovation centers thanks to technology and changing societal norms. Such a trend may not be a bad thing over the long-term.
Not only could it potentially alleviate some of the issues plaguing today’s large urban centers but it could allow for a greater and more even distribution of benefits across geographies. It may also force greater action by governments to address long standing issues to accommodate these changing social norms. Large urban centers will have to address issues such as homelessness and other quality of life issues to remain competitive while state and national governments will have to determine how to address the infrastructure gap between urban and rural.
In the end, geographic proximity will continue to be a powerful force in business. The fundamental reason for that is due to the fact that any organization, whether multinational corporation or startup, is run by human beings. Human beings as such require face-to-face communication and while communications technology will help to supplement, it will not replace the need.
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