You Shouldn't Call Your City Innovative

Hard to find a city that doesn't call itself innovative. Economic development authority presidents seem to be paid based on the number of times they can say the word. And their claims are probably right, most cities have a number of innovative companies, which means these places are not setting themselves apart from their competitors in any meaningful way.

Innovation in and of itself is fairly common in any scientific industry. New drugs, new chemicals, and new semiconductors are brought to market every week. Creativity, on the other hand, is remarkably scarce. New business methods, new distribution ideas, new companies that make you think "how did they get that idea?" come around far less frequently than new product launches. For example, 45nm semiconductors with more transistors than previous gen 65nm ones, and 10% less total power consumption are innovative. But developing the light bulb, the graphic user interface, or starting the first major company to sell products on the Internet were all creative.

Some cities are great at innovation, but weak on creativity, while others are the reverse. Boston, for example, is probably the most innovative city on the east coast. It continues to produce new kinds of new medical devices, drugs, and data storage products. While useful, these aren't necessarily creative, they're mostly developed as extensions of existing technologies.

Seattle, on the other hand, is remarkably creative, but isn't any more innovative than most coastal cities. Its advances in distributing consumer goods, from Starbucks to Costco to Amazon, required more than taking an existing product and making it faster, cheaper, or more efficient. But it has done remarkably little in the computer hardware industry. Even its leading network equipment company, F5 Networks, has a strategy of wrapping commodity hardware around proprietary software, which itself was a creative business idea, but not particularly innovative. Microsoft too has been very creative on the business side, but hard to find anyone who thinks its products are all that innovative.

Creativity is worth far more than innovation. Innovative tech companies come and go, but of all the major Seattle brands mentioned above, how many have gone under? F5 competes against much larger companies like Cisco and Juniper, yet not only has it survived the last decade banging heads against bigger vendors, its got higher profit margins. Its gross margins of 79% last quarter were 14 points higher than Cisco's.

If Seattle, or King County, were to go out and market itself as innovative, it would be making a huge mistake, because there's at least 10 to 12 regions that can prove similar or greater claims. But on creativity, it's got few peers.