Top 10 Cities for Corporate Innovation
Back in the 20th century, companies believed that the best environment for innovation was an isolated and well-landscaped campus. Parking was plentiful, and often there was a reflecting pool or a trail through the woods, so that scientists and engineers could think big thoughts.
The message was clearly, “Don’t bother the researchers.”
But in the 21st century, the urban bustle is growing in appeal. In cities like San Francisco, New York, and Boston, you can walk a few city blocks from Visa to Uber, from MasterCard to Google, or from Fidelity Investments to General Electric. A quick coffee meeting with an entrepreneur or academic researcher is seen as more valuable than chatting about the prior night’s baseball score with a colleague over java from the Bunn-o-Matic.
It’s hard, after all, to get a gut feel for the ever-present threat of disruption when you can’t even see a single neighbor.
General Electric chief executive Jeffrey Immelt made that point recently in explaining why he was moving the company’s headquarters from suburban Connecticut to downtown Boston.
“To look out the window and see deer running across, I don’t care about that,” Immelt told a gathering of his fellow CEOs in Boston. “I want some 29-year-old [graduate of] MIT to punch me right in the nose and say all of GE’s technologies are wrong and you’re about to lose.”
Something similar has happened at Visa, where senior executives—including the CEO—can now be found working out of the company’s waterfront offices in San Francisco, rather than its nominal headquarters in Foster City, 22 miles south. In Atlanta, in a single building, you can find innovation centers run by Southern Company, Delta Air Lines, Home Depot, Anthem, Panasonic, and AT&T. Reebok’s new headquarters on the edge of Boston’s harbor will be in the same building as a startup accelerator, MassChallenge, a new Stanley Black & Decker makerspace, and an architecture-focused innovation center run by the software company Autodesk.
All those cities rank high on Innovation Leader’s list of the top cities for corporate innovation in North America.
How did we build the list? We took into account five factors:
- Global 1000 companies with R&D labs or innovation centers, and their R&D investment levels
- Trend-setting tech companies with large partner ecosystems (e.g. Amazon, Facebook, Microsoft, Salesforce)
- Startup density, including accelerator programs, incubators, and co-working spaces
- The presence of top-tier research universities
- Conferences, trade shows, and networking events that foster interactions among corporate executives, entrepreneurs, and academic researchers.
And while much of the action may be shifting to city centers, we did take into account research labs or innovation outposts located in the greater metropolitan area. That means, for example, that our analysis of Washington, D.C. includes adjacent locales like Bethesda, Maryland and Arlington, Virginia.
1. San Francisco-San Jose
Well before chip companies like Fairchild Semiconductor helped the peninsula between San Jose and San Francisco attain fame as Silicon Valley, companies like Wells Fargo (the PayPal of its day) and Levi Strauss & Co. (which made the first pair of blue jeans in 1873) were innovating here.
The original accelerator program, Y Combinator, holds regular “demo days” featuring startups that are developing electric airplanes and dermatology apps. Walmart Labs employs about 2,500 people to build software for the retailer’s digital channels, and a new incubator, Store No 8, will bring in entrepreneurs under the supervision of Jet.com founder Marc Lore, whose company was acquired by Walmart last year. Target’s Open House Store in San Francisco’s South of Market neighborhood features an array of new connected devices, from Adidas’ smart soccer ball to electric skateboards to coffeemakers. Not far off is a Verizon Innovation Center, focused on smart city technologies, and Visa’s One Market Center, where the company prototypes the future of payment with the help of its customers.
Jim McCarthy, Visa’s Executive Vice President of Innovations, says that Visa’s management team moved into the facility in part so they can get a window on customer challenges. “In the nearly three years since One Market Center opened its doors,” he says, “we have honed our process for how we collaborate with our clients — tackling real-world challenges with real solutions built together.”
San Francisco stalwart Wells Fargo announced a major artificial intelligence initiative in February, and in March at the South by Southwest Interactive Festival, Levi’s unveiled a collaboration with Google: a denim jacket for commuters with navigation and phone controls built in.
In Menlo Park, the venture capital firm Andreessen Horowitz brings in executives from big companies, often CTOs and CIOs, for new technology briefings from startups in the Andreessen Horowitz portfolio. Incubators like Plug and Play Tech Center and Rocketspace offer opportunities for corporates to rub shoulders with the entrepreneurs who rent space there.
Tesla is in the midst of doubling the footprint of its massive and highly-automated factory in Fremont, across San Francisco Bay, in part to support production of its lower-priced Model 3 sedan.
Other carmakers, including Ford, General Motors, Volkswagen, and Mercedes-Benz have their own R&D facilities peppered around the area.
In the world of entertainment, San Francisco can lay claim to Netflix, Lucasfilm (now part of Disney), Pixar, YouTube, and Dolby Laboratories, which constantly rolls out new technologies to cinemas and home theaters. Life sciences companies like Celgene, Bayer, Illumina, and FibroGen have flocked to the city’s Mission Bay neighborhood to be close to the University of California at San Francisco—so much so that a 2016 headline blared “Biotech Hotspot is Running Out of Room.”
Down in Palo Alto, Stanford University’s StartX accelerator helps students and alumni build companies, and the affiliated Stanford-StartX Fund has, as of 2017, invested in roughly 225 ventures. At Berkeley, open innovation guru Henry Chesbrough teaches, writes, and helps oversee the Garwood Center for Corporate Innovation.
Let’s not forget the companies founded by Steve and Steve (Apple), David and Bill (Hewlett-Packard), Zuck (Facebook), Gordon and Robert (Intel), Larry & Sergey (Google), Travis (Uber), and Ev and Jack (Twitter.) Or big conclaves like TechCrunch Disrupt, Dreamforce, Lean Startup Week, and Oracle OpenWorld. As a result, the Bay Area easily walks off with the top spot on our list.
Boston is short on Fortune 500 companies, so GE’s decision to plant its headquarters a short stroll from Gillette’s headquarters—the original developer of the “razor and blade” business model—was big news. GE’s other neighbors include Fidelity Investments, the mutual fund giant; Zipcar, the car-sharing pioneer; MassRobotics, a shared facility for robotics startups; and Bolt, an investment firm and machine shop that supports early-stage consumer electronics businesses.
The city’s universities serve as watering holes that bring together academics, entrepreneurs, and executives at larger companies; it’s not unusual to run into Harvard Business School professor Clay Christensen, Dropbox founder Drew Houston, Staples CEO Shira Goodman, Toyota Research Institute president Gill Pratt, or GE Ventures CEO Sue Siegel at a campus event.
A big part of Boston’s corporate innovation landscape are the biotech and pharma companies that cluster in the Kendall Square neighborhood, on the edge of MIT’s campus. They include Novartis, which employs more than 2,000 people in Cambridge, Pfizer, Sanofi Genzyme, Johnson & Johnson, Eli Lilly, and Shire. A shared laboratory, LabCentral, offers sophisticated equipment to young companies—and is housed in a brick building that was once the private R&D lab of Edwin Land, founder of Polaroid Corp.
MassChallenge, an accelerator program founded by two former management consultants in 2009, has expanded beyond Boston to Israel, Switzerland, Mexico, and the United Kingdom. It also has a healthcare-focused spinoff, Pulse@Masschallenge, located not far from the city’s hospital district and Fenway Park.
Outside of town, Amazon Robotics designs and builds armies of mobile robots that make the company’s distribution centers more efficient.
The newest piece of the city’s innovation puzzle opens this summer: an incubator called The Engine, created by MIT to support “tough tech” related to energy, robotics, healthcare, artificial intelligence, or advanced manufacturing. Run by Katie Rae, a former venture capitalist and Microsoft executive, it has $150 million to invest in startups founded not just by MIT students, professors, and alumni, but by “other people in the region, if they want to be in Boston,” Rae says. “It’s a very hopeful project, in my mind—investing in important ideas over the long-term.”
3. New York
Manhattan has corporate HQs at practically every intersection, and the city is surrounded by R&D campuses run by companies like IBM, PepsiCo, and Celgene. Silicon Valley biggies like Google, Facebook, and Microsoft are tapping into the city’s deep talent pool, and media companies like ESPN, Viacom, and Bloomberg jointly fund forward-looking projects exploring virtual reality and immersive video at the NYC Media Lab in Brooklyn.
The venture capital fund Work-Bench provides office space and money to enterprise technology startups getting off the ground—and often brings in executives from big Wall Street firms to discuss the pain points they’d like to see a startup neutralize.
Mastercard prototypes the future of payments at a lab in Chelsea that opened in 2014; in SoHo, Cadillac House offers a coworking space and art gallery that invites consumers to re-evaluate the Cadillac brand; and on the edge of the East Village, apparel designers work in the back of a Lululemon “lab” store that opened in 2016. XRC Labs, an accelerator based on the campus of Parsons School of Design, brings in promising retail entrepreneurs and connects them with prospective partners like Lowe’s, TJX, and Best Buy.
And the city, which is already home to several medical schools like Columbia University and New York University, is watching a new academic institution rise on Roosevelt Island, in the middle of the city’s East River. Cornell Tech, a joint project of Cornell University and Israel’s Technion, is already attracting some of the world’s best grad students and professors in areas like human-computer interaction, artificial intelligence, and data modeling.
4. Los Angeles
The epicenter of corporate innovation here is Burbank, where for more than 75 years, the Walt Disney Company has been staying one step ahead of the rest of the entertainment industry, diving head-first—ears first?—into talkies, Technicolor, television, theme parks, videogames, and the Internet. Not everything has been a victory—the Go.com Internet portal didn’t endure, nor did DisneyQuest arcades—but the company never hesitates to experiment. That may mean asking the Imagineers to come up with an animated character that can banter with a live audience, or acquiring innovative rivals like Pixar, Lucasfilm, or Maker Studios.
At a conference last summer, Disney CEO Bob Iger spoke about the potential of virtual reality headsets and augmented reality glasses to become important new platforms for Disney. “Using technology to tell stories in much more compelling ways is very exciting,” Iger said, “and to tell stories in different places—making characters come alive in a child’s bedroom, for instance. You can imagine taking a walk in Tatooine and interacting with Star Wars characters.” His favorite recent demo? A virtual Tinkerbell character that could fly around the room dispensing pixie dust.
Disney also runs an accelerator program for startups working on media and entertainment concepts; L.A. is also home base for accelerators focused on music, aerospace, healthcare, and sports—that last one linked to the Los Angeles Dodgers.
Over on the coast, in El Segundo, toymaker Mattel is investing in and acquiring startups, and launching products like a $300 3D printer for kids. Margaret Georgiadis, a former Google executive, took over the top job at Mattel earlier this year.
Unilever last year paid $1 billion for Dollar Shave Club, the subscription service that persuaded men to stop buying razors, shaving cream, and other grooming products at the neighborhood drugstore. It grew to more than three million subscribers with fewer than 200 employees. Thousand Oaks is home to Amgen, the world’s sixth-biggest biotech by market cap, and over in Palmdale is the original Skunk Works, the secretive aircraft design lab owned by Lockheed Martin.
Oculus Rift, now part of Facebook, is working hard to popularize its $500 virtual reality headset. It has spawned a flock of startups eager to create virtual reality content—along with Intel, whose CEO announced in 2016 that it would open a virtual reality studio called the Intel Tech Experience Labs. While headquartered in Silicon Valley, Netflix has been revving up its creation of original movies and shows—and that operation is based in West Hollywood. The company says it will spend about $6 billion making its own content this year.
The Entertainment Technology Center at the University of Southern California convenes players like Fox, Paramount, Disney, and Sony to consider the future impact of technologies like 3D content and social media. With the recent initial public offering of Snap, Inc., maker of the Snapchat app, Los Angeles has a social media company it can call its own, not just “branch offices” of Yahoo and Google.
CalTech is one of the world’s top research univeristies, and NASA’s Jet Propulsion Lab, originally founded by Caltech faculty, builds unmanned spacecraft and robots that explore the universe.
To bring things full circle, Disney made some of the original TV shows in the 1950s that helped build public support for the space program.
Seattle’s innovation scene is anchored by a pair of tech giants, Microsoft and Amazon.
Microsoft’s campus dominates the suburb of Redmond, with buildings numbered 1 to 127; Microsoft Research, co-led by Peter Lee and Jeannette Wing, is located in Building 99. Amazon is responsible for an on-going multi-billion-dollar building boom in downtown Seattle. A 36-story tower dubbed “Day 1” opened in November 2016, with more on the way. The name references a Jeff Bezos quote that at Amazon, everyone should always act as if it is the company’s first day in business.
“Day 2 is stasis,” Bezos wrote in a recent letter to Amazon’s shareholders. “Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.” (Bezos’ office, naturally, is in the new Day 1 building.)
Seattle is also home to two of Amazon’s experiments in real-world retail: a bookstore and Amazon Go, a highly-automated urban grocery store.
The University of Washington boasts one of the country’s top computer science departments. Two accelerator programs are located on campus—Techstars Seattle and the Alexa Accelerator, encouraging development of new software for Amazon’s voice-driven Alexa platform—as well as Startup Weekend, which organizes events around the world that support participants as they create a startup in 54 hours.
Starbucks often pilots new store formats and technologies inside its headquarters, and Nordstrom has a track record of being one of few high-end retailers with a long-term commitment to innovation. Plus, there’s a Staples software development lab, Boeing R&D focused on manufacturing technologies, and the Cambia Grove, a healthcare collaboration space operated by Cambia Health Solutions.
Sometimes, all it takes is one committed catalyst to get a reaction going.
In Atlanta, that catalyst was the Georgia Institute of Technology, which in the late 1990s began buying up acreage and developing a blighted, underused zone between its campus and Midtown Atlanta. Atlanta has long been home to industry-defining global companies like Coca-Cola, United Parcel Service, Home Depot, and CNN, but this new neighborhood, dubbed Tech Square, became a petri dish for all sorts of new innovation activity.
The result is one of the few places in the world where you can ride an elevator or walk a few steps to go between 15 innovation labs run by companies like AT&T, Anthem, Southern Co., ThyssenKrupp, Panasonic, and Delta Air Lines. The Advanced Technology Development Center, a tech incubator created in 1980, is also located in Tech Square, as is Tech Square Ventures, a seed-stage investment firm that often backs Georgia Tech spin-outs. In March, a group of companies including Cox Enterprises, Invesco, and Georgia Power created a new $15 million fund and accelerator called Engage. It’s also located at Tech Square. NCR, the company that invented the cash register and also makes millions of ATM machines, is building its new headquarters complex nearby; it is in the midst of a shift from hardware to software and services, and CEO Bill Nuti has said he wants the company to be part of “one of the most dynamic tech communities in the world.” It’ll bring nearly 5,000 workers to the neighborhood in two phases, starting next year.
“At Tech Square, there’s an active student community organizing events, and a whole tech entrepreneur set of programs and activities,” says Greg King, Georgia Tech’s Associate Vice President for Economic Development. “Then, you’ve got the corporate innovation centers and the events they put on. Having Tech Square has created a focal point and the ability to convene people that didn’t exist before.” And Atlanta as a whole, he adds, has become “a talent magnet for people from the Southeast and the rest of the U.S.”
CivicX, an accelerator that helps launch social enterprises, oversees a 10-week program. Tech Village offers solo entrepreneurs and young companies a communal place to work.
Paper-maker Georgia-Pacific runs labs in the suburb of Decatur and an Innovation Institute focused on more sustainable and efficient packaging. Fast food chain Chick-fil-A offers visitors to its headquarters campus the chance to see its “Hatch” innovation center, which includes VR simulator spaces that allow it to test out new restaurant concepts and kitchen set-ups. General Motors runs an IT-focused innovation center in Roswell with about 1,000 employees.
And one of Atlanta’s oldest companies, Coca-Cola, has been a committed experimenter in the entrepreneurial realm: while it closed down its Founders program last year, it continues to interact with and support startups through an initiative called The Bridge, which also involves partners Turner Broadcasting and Mercedes-Benz. Nearly 30 companies have been through that program, including one, Bringg, that helps smaller retailers restock their shelves with Coca-Cola products. A test of that technology began earlier this year in six countries.
7. Washington, D.C.
The federal government grabs all the headlines, but the Washington metro area has grown into a major innovation hub. There’s the healthcare-focused Sibley Innovation Hub at Sibley Memorial Hospital, Capital One Labs, and Marriott’s “Underground” prototyping facility. Defense giants like Raytheon, General Dynamics, Northrop Grumman, and Lockheed Martin have a big presence here, and the Pentagon is home to DARPA, the legendary advanced research agency founded during the Eisenhower Administration.
Consulting firm Booz Allen’s downtown innovation center has an intense focus on cyber-security and bleeding edge technologies—but also hosts educational and entrepreneurial events. Steve Case’s investment firm, Revolution Ventures, puts money into high-potential companies like Sweetgreen, Optoro, and DraftKings. And D.C.’s hometown paper, the Washington Post, has been undergoing a major digital revamp under its new owner, Jeff Bezos.
At the White House, a new Office of American Innovation is trying to upgrade federal systems, with input from the CEOs of Apple, IBM, Tesla, and Facebook. Not far from 1600 Pennsylvania Avenue, the startup incubator 1776 provides mentorship and support for fledgling businesses targeting regulated industries or government agencies. President Trump hasn’t yet dropped by for a visit, but President Obama did.
Last summer, IBM and the automotive startup Local Motors began testing a 3D-printed autonomous shuttle bus, Olli, in the National Harbor development along the Potomac River; it’s also home to a Local Motors showroom and lab.
Down the road in Baltimore, there’s an Innovation District, an annual Baltimore Innovation Week in the fall, and the headquarters of Under Armour, which has been shaking up the athletic apparel business.
The Toronto-Waterloo corridor is so long—about 60 miles long—and traffic so bad that a commuter airline is planning to start 18-minute flights to get passengers from one end of it to the other.
But the traffic indicates a healthy economy, one that has been rebounding from the protracted decline of BlackBerry Limited, the Waterloo company that turned business execs and politicians into e-mail addicts in the early 2000s.
Much of the action centers on the MaRS Discovery District in downtown Toronto, a complex that is home to innovation labs run by Manulife/John Hancock and Johnson & Johnson, as well as a handful of venture capital firms and outposts of Etsy and Airbnb, the online marketplaces. Similarly, the Communitech Hub in Waterloo blends startups and bigger players like Thomson Reuters, the media company, and TD Bank Group.
Google has had an office in the city since 2012, and on the campus of the University of Toronto, the Creative Destruction Lab, with funding from Royal Bank of Canada and others, is home to about 50 startups focused on artificial intelligence and machine learning.
The Xerox Research Center in Mississauga, which has about 100 scientists who focus on advanced materials, is becoming a hub for that field, with a pilot production facility that startups can use. Co-located on Xerox’s campus are the Research Innovation and Commercialization Centre, which supports startups, and GreenCentre Canada, which seeks to commercialize green chemistry breakthroughs from academia and the entrepreneurial world. Coming soon: the Canadian Centre for Advanced Materials Manufacturing, a 40,000 square foot national lab.
“I think Toronto and Kitchener and Waterloo will eventually be seen as a single cluster,” says Paul Smith, a Xerox Vice President who oversees the research facility. “You could start to see this whole area becoming more like Silicon Valley.”
9. Minneapolis-St. Paul
How could we not include the hometown of the Post-it Note, perhaps the most innovation-abetting scrap of paper ever? (50 billion of 3M’s sticky squares are sold each year.) 3M, with $30 billion in annual sales, spends about $1.7 billion annually on R&D—a number that has been growing in recent years. The company opened a new R&D lab at its St. Paul headquarters last year, bringing together scientists who work on everything from Scotch tape products to grinding tools used in mining, the company’s original business.
Packaged goods giant General Mills has been one of the earliest and highest-profile practitioners of open innovation, using the General Mills Worldwide Innovation Network (G-WIN) to source solutions from outside the company.
In healthcare, medical device maker Medtronic has been developing an artificial pancreas to help diabetics manage their blood sugar levels, as well as a new wave of robots for the operating room. TreeHouse Health works with emerging healthcare startups, and insurer UnitedHealthCare has been collaborating with partners like Pfizer and the AARP to explore how older Americans are using wearable health and fitness devices.
Retailers like Target and Best Buy have been battling the headwinds in their industry, Target with an accelerator program and “connected home” showcase store in San Francisco, and Best Buy with a new program called Best Buy Ignite. Launched in 2016, it showcased cutting-edge products from startups—like pet cams and Bluetooth-connected padlocks—on the shelves of Best Buy.
There’s also the MN Cup, a statewide competition for startups that doles out $2 million in funding, organized by the University of Minnesota.
“Minnesota is sometimes seen as a flyover, but there’s a robust startup scene here, and you’ve got big anchor companies doing exciting stuff,” says Scott Mark, Director of Healthcare Innovation at Medtronic. “There really is this growing innovation community.”
The Motor City doesn’t make the list because of the breadth of industries doing R&D there, but rather because it is emerging as a hotspot for autonomous driving activity. This spring, Uber opened up a new research center focused on self-driving cars, and in 2016, the Toyota Research Institute set up a new facility and donated $22 million to advance artificial intelligence and robotics research at the University of Michigan. More than a dozen automakers use a 32-acre simulated city on one of the university’s campuses, dubbed Mcity, for testing their autonomous vehicles. And while companies like Facebook may have a shinier “innovation halo,” the three major carmakers headquartered in Detroit each spend more on R&D each year than does the social network.
The area is also home to fast-growing companies outside of the auto industry, like watchmaker Shinola and online lender Quicken Loans, as well as more than a dozen incubators and accelerators, including Ann Arbor SPARK, the Green Garage, and the Tech Brewery, located in a 19th century former brewery. There’s also Detroit Startup Week, held in late May.
“The story in Detroit is that you can bring your city back from the brink by engaging the entrepreneurs,” says Dave Drach of Techstars. Techstars operates the Techstars Mobility accelerator program in Detroit, launched in 2015, which focuses on startups that aim to change how people and goods move across all modes of transportation.
Up and Comers
These five cities are worth watching in the year ahead — each has a rising level of corporate innovation and R&D activity:
- St. Louis
- Portland, Ore.
Source: INNOVATION LEADER