Borders block creativity. What can businesses operating in the UK do to remain at the forefront of innovation?
London is an innovative powerhouse. The city holds a population of more than eight million and boasts an economy that’s roughly the same size as Sweden’s. It’s a leading centre for business, finance, creative industries, education and technology. It’s a place that attracts people from all over the world.
Will those people, essential to London’s distinctiveness and creative output, find the city appealing once Britain is outside the world’s largest political union? Will London still be a pioneering place of ideas?
“London today has many of the same attributes that made Renaissance Florence so successful 600 years ago,” says Michaël Bikard, Assistant Professor of Strategy and Entrepreneurship at London Business School (LBS).
The Italian city-state generated an abundance of new ideas and art. It was a wealthy trading centre, a magnet for merchants, artists, scientists and financiers.
“When you bring together people from different backgrounds,” Dr Bikard explains, “ideas are recombined in new ways: you discover new things. The recombination of ideas, such as finance and technology, can form entire new industries, like fintech.”
London benefits from different people sharing their skills, knowledge and social networks: new thinking emerges across industries, sectors, fields. What’s more, this diverse web of people can filter out bad ideas before they develop. Creatively, “good things can happen” because of freedom of movement within the EU, says Dr Bikard.
If Brexit limits this, Dr Bikard says companies will have to find ways to compensate: “One of the reasons recombination works in hubs is it’s cheap to mingle and meet new people in London. Borders can increase the cost.”
Not only do hubs foster creativity, they also amplify the dissemination of new ideas. Dr Bikard’s research with Matt Marx of MIT Sloan School of Management looks at what happens when multiple researchers in different locations publish “twin” papers – or simultaneous discoveries. They find people are more familiar with ideas that come from hubs. The easy flow of people in and out of London is, therefore, likely to increase the global impact of local ideas: “Ideas travel with people,” states Dr Bikard.
“It's hard to isolate different pieces of the Brexit effect,” says Keyvan Vakili, Assistant Professor, Strategy and Entrepreneurship at LBS. “But if I only think about innovation, there are three common inputs: talent, money, ideas.
“Creative people are among the most mobile talent pool in the world. It’s part of their training to talk to people and get close to the source of ideas.”
The second input to innovation is money. “That's a question for government,” says Dr Vakili. “For example, are they willing to contribute to research inside the UK as much as the EU?”
Third is ideas and knowledge. New ideas often are past ideas recombined. Exposure to diverse ideas and knowledge usually helps to generate higher levels of creativity.In reverse, a decline in the flow and diversity of talent may lead to less exposure to diverse ideas and therefore fewer novel ideas. However, there are ways businesses may be able to compensate for the Brexit effect.
Two ways to weather Brexit
1. Connect to other hubs
Companies can connect to other creative hubs – San Francisco, Berlin, Tel Aviv – to compensate for potentially lower rates of creative mixing in the UK. Berlin beckoned entrepreneurs last year when a German political party sponsored a van to drive around east London with the message “Dear start-ups, keep calm and move to Berlin”. Other cities will likely be just as welcoming.
Maybe businesses will set up subsidiaries in other key cities. Or connect virtually to talent. Creativity is not physically bound, so businesses could invest in enabling people or researchers to travel more regularly to and from London. Organisations will calculate whether the creative payoff is worth the costs.
2. Go niche, if you can
While recombining knowledge from different domains or industries is key to generating novel ideas, being a specialist can be more important in some fields. But the conditions are specific: “You have to be in a fast-moving industry. You have to be leading the way,” says Dr Bikard. For instance, computer scientists working in ‘deep learning’, a form of machine learning used by the likes Amazon and Netflix to decide what you want to buy or watch, may not see an immediate impact from Brexit.
Dr Vakili says: “Going niche at an early innovation stage can help a company survive. But then you need complementary resources, customers and a market to turn creativity into a viable product.”
So while developing high levels of expertise in narrow, important niches can be a superior strategy in fast-moving industries, it’s not necessarily a sustainable one. Companies operating in the UK still need to develop the tools for engaging in innovation for the long run.
Other creative cities might be rubbing their hands in glee, but the Londons and Silicon Valleys of this world are tough to recreate. They might have common traits, but they also have an ‘x’ factor.
“Creative hubs need smart people to make mixing possible, so they need the right institutions, like universities. They also need capital. But there are lots of places in the world that have smart people and money that don’t cut it,” says Dr Bikard.
This is how Silicon Valley became a creative superpower in IT in the 1990s while Boston didn’t: both had innovators and money in scores, but Silicon Valley also had informal networks in the tech sector. People operating in creative hubs are defined by their “willingness to take risks and learn from each other’s innovations and mistakes”, says Dr Bikard. “This,” he observes, “is the beauty of London right now.”
London will need all the ingenuity for which it’s famous to counter the impact of new borders on creativity.