Speech given by Tracey Grose at the German Consulate General, San Francisco, California, March 8, 2016
I consult on market and economic strategy and strategic foresight on behalf of business and public leaders. I’m particularly interested in the economic and social impacts and opportunities of technology-driven economic change.
My work includes regional innovation systems and their global linkages. I try to make sense of new business models and structural shifts in the labor market, the digital economy, and the energy transition.
I’m based here in San Francisco, but I spent nearly 12 years in Germany, where I completed my graduate work. From 1991 to 2002, it was an eventful time to be in Germany. In fact, I’ve been fascinated by economic and social change ever since.
I wear many hats. In addition to my consulting work, I serve as chair to California State Controller, Betty Yee’s Council of Economic Advisors. I serve on the boards of a software startup, SalesPhase, and a workforce development nonprofit, Growth Sector. I also co-chair the Cleantech Industry Group of the German American Business Association.
In 2014, my former colleague and I coauthored a report on cross-border entrepreneurship and innovation between the Bay Area and Europe. Germany stands out as a key partner.
- Germans make up 20% of all European-born STEM talent in the Bay Area. It’s second only to the United Kingdom.
- In terms of Europeans registering patents with partners in the Bay Area, Germany and the UK together top the list among European partners.
On the topic of Berlin, I think it would be useful to clarify some terminology. We hear a lot about startup hubs, technology and innovation hubs. The top technology hubs in the world have deep roots in technology and engineering, and often those roots are defense industries going back nearly 100 years.
The ones that have been most successful in the last 40 years have been those with:
- Open environments, where people and ideas easily mix across different domains,
- Risk taking is tolerated and attracts investment, and
- Ideas can be commercialized, as in, products and services with viable markets.
- Additionally, what people often overlook is the vital role of the specialized business services that help drive the commercialization process in an innovation ecosystem: law, accounting, branding & marketing.
Berlin for me represents a different model – and it’s a hopeful model for cities and regions seeking economic development approaches for the new economy. For years, Richard Florida has been telling cities to make their communities pleasant, vibrant places that will attract the young technical talent growing companies need. Berlin seems to be achieving that in a place that does not already have deep technology roots. In terms of levers for economic development for cities, Berlin offers a good example for other cities to follow.
What I would add to Florida’s thesis of cultivating livable places, is cultivating connections with other innovation hubs. In my consulting work around the US and in Europe, I have always heard the question, “How do we become the next Silicon Valley?” Well, replication is not an option.
Places need to examine the existing strengths they have and then see how they can leverage greater value – create an environment for innovation – by supporting the flows of people and ideas across different domains. For example, more often than not, the brilliant researchers at the local university or public lab have no interaction with the savvy business people who know how markets are changing.
There are many things that can be cultivated in a region which have grown organically in Silicon Valley. So in addition to growing and better leveraging local assets at home, a region can develop connections with other regions and leverage their assets as well. So, Berlin doesn’t need to have everything Silicon Valley has to be a success. It is witnessing its own success by doing what it does well and developing linkages with the Bay Area as well as other places.
Consul General Schluter and Vice Consul Bloos asked me to provide some impressions of Berlin from the local perspective. So, I reached out to my network, in an informal poll of sorts, of people who represent different facets of the innovation ecosystem:
- Technology executives
- Incubator mentors
- Corporate lawyers
- Consultants and strategic advisors
- Commercial real estate agents
Everyone seems to be aware of the active startup scene in Berlin, but in response to the question, “Is Berlin on your radar?” For one third of the people with whom I spoke, the answer was “No.” These people included the entrepreneur/startup mentor in fintech, the venture capitalist in telecommunications, the technologist/entrepreneur in artificial intelligence and internet of things, and the hardware engineer/entrepreneur.
The overriding takeaway from people is that the jury is still out on the strength of Berlin’s technology scene. Views they offered:
- Berlin is seeing more angel investment from the Bay Area but follow-on funding is more difficult.
- Specialized business services need to develop.
- Regulatory practices regarding formations and issuing shares are archaic and costly.
- From the view of commercial real estate activity, there are not a lot of Bay Area firms looking for office space in Berlin. Bay Area expansions into Europe typically start with London and then move to Paris and Berlin.
One investor expressed strong concerns about current public policy under consideration, especially in Germany and France, that he feels will asphyxiate the digital economy and therefore prevent investment in European companies.
- On issues such as the Right to be Forgotten and new regulations governing cross-Atlantic data transfers.
- As well as other issues: copyright and intellectual property, intermediary liability protection and censorship, privacy and security, and mobile infrastructure and services.
Berlin seems to be gaining traction on the consumer side of startup product and service development. This was confirmed by the corporate attorney seeing an uptick in acquisitions in ecommerce and sharing platforms.
Berlin is clearly drawing young technical talent from around Europe. SAP is growing its presence there (despite its HQ being in Wolfsberg), and tapping into talent from the Hasso Plattner Institute in Potsdam.
On one hand, Berlin doesn’t have the technology depth or breadth to develop a company that could take on a Salesforce or Oracle. It doesn’t have a large enough technical labor pool to scale quickly.
On the other hand, according to the consultant/strategist with a top tier consultancy: “I have been there several times in the past five years and I view it as one of the two or three most fertile start-up/innovation sites in Europe. I don't see it as pushing technology per se, but rather as a place that attracts people who are interested in finding innovative ways to apply technology. Definitely a rich source of talent.”
While the jury deliberates, I recommend we all regularly visit Berlin and take in its evolution and delightful vibrancy firsthand!