Cities and the Innovation Economy

In preparation for the Governing’s California Leadership Forum, ELGL has sent out a survey to gather community insight on the Innovation Economy. As a software startup which works directly with local governments, we are intimately connected with the Innovation Economy.

We are also believers of transparency—it is one of the five core values in our company—so we thought we should publicly respond to their survey on what cities can do to promote innovation. You should absolutely contribute your voice by taking the survey.

Should local government devote resources to encouraging the development of the Innovation Economy?


Provide examples of deliberate policies that cities can pursue to support innovation.

1) Modernize purchasing processes for city departments.

Everyone wants to live and work around people who share their values. If you want to attract innovators, your city needs to engage and embrace them in its day-to-day activities.

If the city itself is stuck in the past, how could they possibly empathize with the practices and challenges of innovative businesses?

It is easiest to empathize with those you work closely with. No innovative company wants the hassle of antiquated RFPs, bureaucratic decision making (there should be one clear leader with the final decision), or expensive and drawn out contract processes. Make it easy for companies to help and they’ll jump at the opportunity.

We have talked about innovation and accountability in purchasing before both on this blog and elsewhere, so read those for more details.

Suffice to say that without embracing technology and advocating for innovation from within, innovative companies will be skeptical of cities’ calls for them to build nearby.

2) Define what you’re city is looking for.

What exactly do you mean by “the Innovation Economy”? It sounds like it would be hard to find anyone who is anti-innovation, but obviously some cities are more open to it than others.

Defining your values and making them public sends a strong signal for what’s important to you. Do you want companies that create jobs? Ones that improve government services? Healthcare? Biotech? Software startups?

Innovation can happen anywhere. We build Romulus in Redwood City because we know that the Bay Area has a strong focus on product innovation (and software in particular.) If we wanted to innovate in the financial industry or for federal government lobbying, we would probably go to New York City or Washington, D.C. respectively.

So define precisely the types of companies you are looking for. Yes, this means you will be ruling people out, but that is a good thing. You would much rather be the city for a certain field than mediocre at everything.

3) Sponsor Regulation-free periods to spur experimentation

Companies like AirBnB and Uber are controversial, especially with local governments, because they ignored many regulations that would have made their businesses impossible. Ignoring the law is not good, but we also wouldn’t like a world without Uber or AirBnB.

The truth is, AirBnB and Uber could both have been implemented by local governments. They provide access to flexible incomes and valuable city-wide public services. They should also be regulated, but starting with regulation and asking companies to innovate within those confines is impossible. You cannot create Uber under a medallion system.

Instead, run trial programs to test innovative ideas without regulating them first. See what the problems are, learn from them, and then build the regulatory framework for the successful ideas. Remember that innovation literally means something different from the status quo today. Asking companies to build tomorrow’s economies under today’s regulations is a catch–22.

What the biggest challenges facing cities that want to compete in the Innovation Economy?

1) Mismatched Values.

Innovation is a risk. You’re trying something new understanding that it may fail. Governments are about stability, so naturally have different motivations and means of operation than innovative companies. Learning to live together takes empathy and understanding.

If you’re asking businesses to take risks, you need to show them that you are a partner and not an antagonist. If they have to tackle an unknown venture and constantly worry that the government is going to be hounding them, it is too much. Companies are drawn to San Francisco and Austin as much by the culture as anything else. It’s one less risk, one less battle they have to fight. That can make all the difference.

2) Unclear goals and differentiators.

Why should innovative businesses come to your city? Sure, San Francisco or Austin are large cities, but take a look at Chattanooga or Kansas City. They made gigabit internet a priority—with public cheerleading for Google Fiber in Kansas City’s case and by building it themselves in Chattanooga—and are drawing interest from companies who need the bandwidth.

What are your goals? What unique value does your city provide? It isn’t enough just to want innovative companies. They need a compelling reason to choose you. As a wise friend once said, “if you want to be loved, you have to be lovable.”

Any final thoughts on the New Innovation Economy? What’s your call to action for cities?

Set out clear goals and values for yourself, then make them public. Once you do so, it will become clear to everyone where innovation fits in and how you stand out. Innovative businesses are not looking for you to be perfect, they just want to know that you understand who they are and making an effort to help them succeed.