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Digital Britain: How Big Tech Can Help Start-Up Clusters

March 27, 2012
at 6:15 pm PST

Recently I was chatting with a couple of people at an event in Shoreditch about what makes a creative industry cluster — such as Silicon Alley and the East London Tech City — flourish and grow.  We concluded that there are some key ingredients required to fully develop the community; the presence of Big Tech, legal, accountants, VC’s, and of course start-ups operated by savvy entrepreneurs.

Take a look back at any of the prior successful tech business clusters around the world and you will find these elements, plus another — access to enabling broadband infrastructure.

I am starting to witness this phenomenon in London and others have noted the apparent similarity to where Silicon Alley was about 6 years ago.  I considered these comparisons and wondered if an emerging tech scene can not only be created organically, but artificially as well.

I recognise that people who launch new ventures typically have a strong profit motivation — all business leaders are looking at a return on their investment and whether a financial commitment fits with their own agenda.

Capitalising on Big Company Influence

On reflection of the above, Big Tech is important, as it often drives the initial interest around the start-up community.  If recognised names like Intel, Google or Cisco say they’re committed to a cause, then it’s inherently newsworthy.  These companies also have a wide network of key industry contacts, which they can also attract into the community — for the benefit of all the stakeholders.

But in reality, why does Big Tech need to help champion these nascent tech scenes, what’s really driving them to action?  I mean, let’s be honest, their charter is to make a meaningful profit for their shareholders.

Historically, they have two motivations. Primarily, they want to develop their core business — which can be achieved in a couple of fundamental ways:

  1. Sell their products or services to the start-up community, or help develop these new companies so that their customers will need more products or services.
  2. They are on the lookout for the most innovative start-ups that fit with their product development plans, so that they can acquire them.

In essence, they always seek a return on their investment from any significant effort. The question that I propose, is whether this is a good thing, or a potentially bad thing for the creative start-up community?

The Business Cluster Stakeholder Dichotomy

I believe that this scenario is full of differing agendas and some apparent challenges; a big company presence is required to accelerate the development of a tech scene, and yet the impact isn’t always positive — due to the variance in company cultures.

I’ll use an analogy to demonstrate the differences — within a business agility context.

Big companies are like oil tankers and start-ups are more like speed boats.  From an announcement to deliverables, big companies take a while to get into position, but once orientated, they move forward with incredible force.  By contrast, start-ups are more agile, can quickly change direction, but can become very frustrated by the slow progress of the more traditional industry players.

Also, we need to remember, that not all entrepreneurs are looking for the exit (to sell their business and move on), some actually want to make a difference in the world and change how things are currently done.  Sometimes, this objective doesn’t have a monetary value attached to it.

We also need to understand as well, there’s amazing talent in the start-up scene — I have written about this before — and they do not relate to the corporate way of doing things.

Tech Industry Cluster Development in the Future

From my point of view, Big Tech needs to reevaluate their influence on the start-up environment.

Given Michael Porter’s proclamation that Corporate Social Responsibility is dead and social entrepreneurship is the new CSR, maybe large companies should reevaluate their budget assignments, help to create some meaningful economic momentum and label it as a CSR or Social Enterprise activity.

Moreover, in order for a start up community to prosper, all parts of the community need to work in unison.  Meaning, big companies need to know what the start-ups really require from them, and start-ups need to know the whole truth about their involvement in the community.

Cisco’s CTO, Padmasree Warrior, discussed this topic at the BIG Awards launch. She sees this as an opportunity for Cisco to enable the start-up community in technology, so that Cisco can sell more products in routing and switching — and if the right opportunity comes along, then perhaps acquire businesses along the way.

I have to wonder, do other big companies in the East London Tech City area state their aspirations as open and honestly, and is this what the start-up community actually needs or wants to hear?

As always, I welcome your related thoughts or observations.

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