3 Key Insights from Innovation Cities Index 2016-2017

What if your city was a beacon for innovative ideas and businesses? Not fads, mind you, like Google Glass. Not architectural folly like the totalitarianism of Brasilia architecture, but rather, lasting innovation that delivers a benefit to city and citizens alike.

Think London’s marvelous tube system for people movement, or the San Francisco-San Jose start-up ecosystem, New York’s dominant Central Park, Los Angeles’ ubiquitous movie studios for entertainment (now moving to Atlanta), or Singapore‘s iconic Marina Bay or Gardens by the Bay.

The Innovation Cities Index measures which cities have the pre-conditions for these sort of innovations, and the 2016-2017 Innovation Cities Index was just released.

Amidst the unprecedented turmoil of last year, there have been a number of changes in the classification and ranking, meaning that this year’s results are very interesting. So here are three key insights I will share first with readers of The Place Brand Observer. Insights that may help your place strategy – more on this in a moment.

Top 10 Innovation Cities Index 2016-2017
Top 10 of Innovation Cities Index 2016-2017. Click here for full list.

How to measure innovation in a city: A short introduction

The Innovation Cities Index is about measuring the measurable drivers of innovation: the physical things and policies and services and many other things (physical or virtual) which form the pre-conditions for an innovation ecosystem. We use 162 indicators for this purpose and measure 500 cities, which makes the Index the most comprehensive available.

By measuring cities using our framework you can answer the question which cities in each region or country are the best places for innovation?

The top global cities are classified as Nexus cities, but you can also do your analysis by region or country, to identify relative leaders among those 500 cities.

Before I give more details on what the Innovation Cities Index measures in practice, let me share with you the following 3 key insights from the just released, 2017 version – our 10th annual index to date.

Insight 1: Smarter, innovative cities recover faster

In much the same way as London led the recovery from the Global Financial Crisis in 2008, smarter cities are now recovering, and our underlying data shows that innovation-led economic recovery should be occurring in these cities.

Barcelona’s return to the top of the Nexus city rankings shows a strong recovery, followed by Madrid.

Cities including Athens, Detroit, Buenos Aires and Mexico City are showing very strong recoveries in their ranking – in some cases improving their respective position in the final ranking by more than 100 places (although the classification band is more significant than the final ranking).

The lesson from this is to persevere city assets, to keep what works and to use economic measures as ‘medicine’ where needed, rather than have faith in a single ‘mega strategy’.

It’s worth pointing out that innovation presages other improvements in the broader economy, so this can be predictive of further economic developments. On this basis, as an example, our Index correctly presaged the past strength of German cities during the Global Financial Crisis, and now predicts a relative decline in innovation performance of German cities.

Insight 2: Innovation hubs on the rise

As the difference between the very top innovation cities and the rest has widened, so has the band of cities that form a competing set of Hub cities (second tier after Nexus).

This effectively means that if you can’t start an idea in a Nexus (first tier) city, a Hub city is your best bet, especially if you focus on industry segments with favorable conditions within that city.

Sometimes, Hub cities are more specialized in a specific industry than Nexus cities, so your idea can arguably have a greater chance of success there (for example, manufacturing in Shenzhen), albeit with more competition.

Another notable benefit of the growing number of Hub cities around the world is that it matters less where you are. Hub cities now span every major continent, and even poorer nations are represented. For the first time we have noted several Latin American Hub cities, as well as African and Mid-East Hub cities. In terms of innovation capacity and idea development, those are close if not equal to American or European cities.

Insight 3: It’s inside out, not outside in

For most cities, there is a need to return to focusing on local economic development from within the city, rather than buying in ‘outsiders’ to fix the city through competing for multinational headquarters or facilities.

Although there are specific cases where attracting outsiders works (the answer in all economics is it “depends”), and Dublin certainly exploited this strategy with great success, it’s not a strategy that survives copying. Another example where ‘outside in’ can work are the Olympic Games. But even here only a few cities have truly benefited in recent history – most predominately Barcelona and Seoul, and probably London (as a global reset).

For most of the cities with top ranks for innovation capacity, success came from within.

So, those are three key insights from the Index. You’ll find more details in the Innovation Cities Analysis Report.

What the Innovation Cities Index measures

The Innovation Cities Index is a 3 factor score for Cultural Assets, Human Infrastructure and Networked Markets. This maps the process of innovation, from idea to implementation and communication. Measuring these 3 factors shows how cities can progress ideas into implementation and global communication – what is often referred to as going ‘viral’.

Every city wants businesses and ideas that go viral. Even your place branding efforts want to go viral, and garner as much publicity as possible. Basically, going viral is when an idea is implemented, then globally communicated. For example, a worldwide hit song or a growing global business like Uber or AirBnB.

It’s no coincidence that many ideas start in London, New York, Tokyo, San Francisco, San Jose, Los Angeles, Boston, Singapore or Toronto before going ‘global’. 2thinknow have been mapping this process in the Innovation Cities Index for 10 years, and I have been one of the first people researching the process since 2004, first as a passion and now, a profession.

To derive the most recent Innovation Cities Index, we consulted 162 indicators of data prepared by our analysts that measure the city performance, which we combine with our complex proprietary trend analysis techniques to derive the 3 factor scores.

We continually review and refine the process of measuring innovation through indicators, and cities can commercially obtain all the indicators we hold on them. In 2016-2017 we have replaced six of the indicators with a direct focus on tax, and added even more indicators for startups and smart devices.

More details on the indicators used to measure innovation, the benchmarking and trend analysis are available on both our website and the report (available for pre-order).

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Christopher Hire

Christopher Hire is Director Data at 2thinknow since 2006, and creator of the Innovation Cities Program and City Benchmarking Data service. He oversees the innovation and city courses for place branding, informed by insights from 2thinknow's city data. He plays a mean game of Monopoly, and will connect on LinkedIn.

Christopher Hire

Christopher Hire is Director Data at 2thinknow since 2006, and creator of the Innovation Cities Program and City Benchmarking Data service. He oversees the innovation and city courses for place branding, informed by insights from 2thinknow's city data. He plays a mean game of Monopoly, and will connect on LinkedIn.