The Frankenstein Effect_02

Rise of the Rest – The Frankenstein Effect

By Holger Dielenberg

When science breaths life and becomes a thing we can touch – We call this “The Frankenstein Effect”

Applied Technologies are where all of our innovations come together in watershed breakthroughs that launch new industries. We have arrived at such a moment in history.

Something is happening to the startup world which at the moment is largely defined by ‘app developers’. The Carsales and Rome2Rio growth stories may already mark the end of a purely internet focused entrepreneurial period. Technologies are maturing and combining to transform legacy industries like Health, Manufacturing and Energy into gold mines of the future.

Original founder of AOL, Steve Case saw the rise of the World Wide Web coming and formed the first internet company to go public. He rode the dot.com boom days and now looks to what is becoming commonly known as the third wave of technology. This is where the internet, technology and industries all begin to combine out in the real world of ‘things’ and ‘partnerships’. It will affect every aspect of our work and lives. Steve Case is typically ahead of the curve and he has the third wave of technology firmly in his sights. Since early 2016 he has been focusing his attention on what he calls ‘The Rise of the Rest’. It encapsulates broader technology developments in cities and regions outside of Silicon Valley and New York.

In time step with technology the entrepreneurial revolutions of the recent past have been built almost entirely on the foundations of the Internet, driven by the information and communications technology sector. This is evident in the overwhelming slant of entrepreneurial activity towards internet based ‘app’ development over the last twenty years. Indeed the highest exits of 100’s of millions have all been app startups and the billion dollar unicorn exits are also exclusively app oriented scale-ups.

At the same time that the internet is maturing, other new technologies and super materials are leaving the lab, major economies are transitioning to advanced manufacturing and industries are leveling up to higher knowledge based design and engineering opportunities.

When we widen the definition of the term ‘Startup’ to include Applied Tech – where technology is inherent in: the making of, the use of, and inside of physical products – we get this…

Applied Tech is a confluence of forces that is still in its embryonic phase and consequently can be best identified at the emerging level of commercial activity where startups and early adopters thrive.

Startup Genome‘s 2018 Melbourne report claims, “Looking ahead, the entrepreneurial revolutions of the present and future are taking us further beyond just information technology and Internet-focused businesses. While the prominent technology companies from the early 1990s to the 2000s have built businesses that live almost entirely on the web and mobile with things like search, email, social media, and video—the prominent technologies of the future will live in the “real world.” They will transform not only what we do online, but also what we do offline. Sectors affected will include transportation, healthcare, heavy manufacturing, agriculture, and many more brick-and-mortar industries.”

The report identifies sub sector strengths in Bio, Health Tech and life sciences and LaunchVic’s Victorian 2018 Startup Ecosystem Mapping Report identifies strong startup activity in Consumer Goods, Transport, Logistics, Food/Fibre, Design, Sports/Recreation and New Energy.

With strong tech, design and engineering capabilities, Melbourne is perfectly positioned to widen the definition of the term ‘Startup’ to include Applied Technologies.

While technology always creates winners and losers, today the gap between them is widening at a rapid pace. Technology is generating wealth and innovation at an exponential pace but only a handful of places in the world are capturing that value creation. Everywhere else, regions and people are falling further behind. Without immediate and aggressive actions to develop stronger startup ecosystems, this divergence will continue and more places will miss out on technological growth and dynamism.

Startups are the key vehicle by which regions and their citizens can take advantage of technological change, and startups depend on strong ecosystems. Ecosystems however can take years, even decades to develop.

President of GEN (Global Entrepreneurship Network) Jonathan Ortmans points out in the 2017 Startup Genome report that, “what became Silicon Valley did not come into being spontaneously, but was built over decades of strategic investment in a vision for an innovation driven economy.” You don’t just throw a one off cash injection at the problem and say, “Right, we gave you some money. Now grow.” Like startups themselves, a new ecosystem needs constant support, must be allowed to fail, adapt and evolve.

In his book Startup Communities, Brad Field posits that it takes about 20 years for a vibrant entrepreneurial ecosystem to develop in a city or region. The startup ecosystems life cycle can be described by the chart below – In Australia, in particular Melbourne, we have work to do and we must be consistent over the longer term.

Startup Genome’s 2018 global report shows, “In New York City where a vibrant startup ecosystem has coalesced in the last few years, the seeds were planted at least two decades ago and nurtured the entire time. Building on prior efforts, Israel and Singapore implemented innovative and aggressive policies in the 1990’s to spur the growth of their startup ecosystems. In Israel, Tel Aviv has been a top performing startup ecosystem for several years and in the 2017 Startup Genome rankings, Jerusalem was a close runner up. Singapore appeared in the top 10 ranking for the first time in 2015.” Melbourne is currently nudging below position 20 in global startup rankings.

The most interesting trends are suggesting that hybridization – or the merging of technologies with the real world is where the biggest growth will emerge. As technology and internet matures, startups that sit on top of legacy industries such as Health, Consumer Products, Manufacturing and Renewable Energy will be the strongest future players and those startups who only rely on tech or internet alone will decline.

With these trends we must accept that manufacturing is becoming a white collar industry that cuts across sectors and disrupts everything we have been taught to this point. We are at a watershed moment.

In Melbourne we clearly have to take the long term view in order to catch up with what some cities around the world saw already thirty years ago! But a new optimism is being championed by our youngest players. With Government and industry sector push to drive entrepreneurial growth in Victoria, we are seeing a strong desire to move away from mining and property – ‘homes and holes economy’ toward a sustainable economic future of ideas and productivity.

As we catch up, the trick will be to not just follow. We now have hard evidence from around the world on why and how to activate entrepreneurial startups to grow a future focused economy. It would be remiss to just follow and copy when we can catch up and lead.

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