Those Darned Ecosystems...

Darwinian ecological concepts have been used to characterize California's Silicon Valley. Those analyzing the spectacular rise of Silcon Valley (and of course its occasional nosedives) have observed that the Silicon Valley is like an ecosystem where speed is essential, learning is by doing, failure is accepted almost as a "badge of honor", and creative destruction is the rule. An ecosystem is a system whose members benefit from each other's participation via symbiotic relationships -- relationships that provide mutual benefits, or are "positive sum" in nature.

Take the case of bumblebees. Mother Nature has guided these creatures into creating a nearly perfect ecosystem. Unlike most other species, bumblebees live in colonies and depend on each other for survival. For their sole source of energy, bumblebees extract pollen for protein and nectar from neighboring plants. Plants, in turn, rely on bumblebees to inadvertently brush pollen from one plant to another. This "salutary contamination" enables the plants' reproduction process to begin. The relationship between bumblebees and the surrounding flora is symbiotic. Each benefits from the other's participation. Through the year, the bumblebee hive goes through a lifecycle. In autumn, the queen bee lays eggs that are fed a different diet. These eggs turn into virgin queens and males. When the frost hits, the remaining worker bees die as does the queen. The virgin queens and males fly off, mate, and the males die. The inseminated queens seek shelter through the winter. The process then begins again.

Pretty drastic!

In techno-economic settings, while there are hardly any literal "deaths" of persons, the personifications of the entrepreneurs -- organizations such as startup firms -- do die.

In a techno-economic sense, Silicon Valley posseses most elements of an "ecosystem", quite similar to bumblebees and their surrounding flora. The entrepreneurial startup firms, the venture capital provders of Sand Hill Road in Palo Alto that fund the entrepreneurial industry, and the nearby technological mothership called Stanford University that supplies the talented human capital needed to develop innovative/creative ideas and technologies -- these are the bumblebees and flora of the Silicon Valley ecosystem. The goal of this ecosystem is to generate entrepreneurial ventures.

Once an ecosystem is established, and is able to take first-mover advantage, it becomes very difficult for other regions to emulate such success. The network feeds upon and nourishes itself -- like those cross-pollinating flora. These network effects create a lock-in. The switching costs associated with moving to another region are prohibitive. If another region offers incentives for firms to move, most entrenched players sniff at the carrots but look the other way. Entrenched firms have a clear incentive to remain, and new startup firms, venture capitalists, and students interested in the IT industry have a significant incentive to relocate to this region.

In India, Bangalore has developed an ecosystem friendly to and nurturing of the IT industry. There are well-established, high-quality educational institutions. STPI, an entity sponsored by India's federal government, provides reliable high-bandwidth telecommunications links as well as a single clearance window for all manners of government regulatory approvals. The lifestyle restaurants and bars of MG Road provide the young IT workers places to unwind and relax. The 3000-feet plateau provides relief from the blistering summer heat of the plains of India. Banks and venture capital firms that understand the IT sector -- while not prolific as in the Silicon Valley -- have started appearing in Bangalore. While sharing the general integrity and pro-education attitudes of South India, Bangalore also provides subtle advantages such as better English skills than the rest of South India.

And yes, in terms of the "bad" things -- crazy traffic, long commutes, urban sprawl -- Bangalore is no slouch either, and is beginning to rival Silicon Valley.

Other regions of India -- Delhi metropolitan area, Hyderabad, Pune, Chandigarh, Kolkata, Bhubaneswar -- are trying the create IT friendly ecosystems of their own. But it will be a long uphill battle. Those entrenched in Bangalore are unlikely to move. New entities would rather be in Bangalore, if they can afford it. Of course, India is demographically large, so some (though not all) of the aspiring ecosystems will take root.

There if of course also the question of the ecosystems suitable for the "next waves". Will the software-friendly ecosystem of Bangalore translate into equally supportive ecosystems for IT hardware, biotechnology, medical services, financial anaylsis, and so forth? Some aspects will translate and transfer. But the new industrial and technological waves would also create opportunities for other regions -- such as the quick move by Gurgaon region (near Delhi) to become the "Call Center" capital of India as multinationals scrambled to "offshore" this tedious but important business activity.

Those darn techno-economic ecosystems: you can't live without them, and you can't live (in peaceful trannquility) with them!

Nik Dholakia