Page 82 - Harvard Business Review, Sep/Oct 2018

In 2016,

The three options are not mutually exclusive—especially
since companies often need to keep in touch with several
General Electric announced that it was moving its longtime clusters—and each one involves substantial risks. But as the
influence of a handful of global cities continues to grow,
corporate headquarters from suburban Fairfield, Connecticut,
to downtown Boston. The company felt it needed to plug in these approaches offer a playbook to companies that find
themselves outside the action in today’s concentrated
to Boston’s high-tech young ventures and talent to become
more innovative and digital—and ensure that it would be on innovation geography.
the forefront of any emerging disruptive technologies. Jeff
Bornstein, then the CFO, summed up the advantage of Boston Option #1
to the Wall Street Journal this way: “I can walk out my door Headquarters Moves
and visit four start-ups. In Fairfield I couldn’t even walk out While we tend to associate innovation hubs with entrepre-
my door and get a sandwich.”
Leading cities have long had an outsize influence on neurs and start-ups, increasingly they’re the domain of
the global economy, but today the impact that top talent incumbents, too. Twenty years ago inventors working in the
clusters like Boston and San Francisco have on innovation top 10 cities for patenting activity accounted for fewer than
half the patents filed by America’s 50 largest companies;
is especially pronounced. In 2017, America’s 10 largest tech
hubs accounted for 58% of U.S. patents. Globally, cities such their innovations were developed mostly in corporate labs in
smaller cities. In 2017, by contrast, inventors working in the top
as Tokyo, Paris, Beijing, Shenzhen, and Seoul produced a
similarly large proportion. The increased clout of these hubs 10 cities accounted for almost 70% of the Fortune 50’s patent
filings. Corporations have gone from being underrepresented
poses a dilemma for companies that have historically located
their leadership and talent in suburban industrial parks. in tech hubs to exceeding the national average.
To some extent, this shift reflects the displacement of
Having a presence in innovation hotbeds is crucial, but it’s
also extraordinarily expensive—especially in the narrow legacy companies in the Fortune 50 by innovative firms such
as Alphabet and Amazon. But other incumbents besides GE
innovation districts within cities where most of the high-
tech activity takes place. are moving resources to tech hubs. In 2016 packaged foods
manufacturer Conagra, for instance, relocated its headquarters
How can companies most effectively harness the benefits
of these urban pools of knowledge and skills? In my work from Omaha, Nebraska, to Chicago in order to attract more
Millennials and recruit senior talent with experience in con-
on global talent flows, I’ve seen corporations take three core
approaches: At one extreme, they relocate their headquarters, sumer brands. While he praised Omaha, CEO Sean Connolly
told the Omaha World-Herald, “Chicago is an environment that
just as GE did. A less expensive and more easily reversible
way to establish a brick-and-mortar foothold is to set up an offers us access to innovation and brand-building talent.”
Though cross-state moves grab headlines, companies are
innovation lab or corporate outpost in a talent cluster. The
most conservative option is to organize executive retreats also migrating out of less-dense areas surrounding talent
clusters and into urban centers. In Boston, organizations relo-
and immersive visits there.
cating to the downtown area include Reebok, Converse, and
much of the local venture capital industry. A local recruiting
agency, WinterWyman, has reported that downtown Boston
and Cambridge accounted for more than 60% of recent tech
► Idea in Brief hires in the metropolitan area, compared with just 5% two de-
cades ago. Conagra closed a suburban Chicago facility so that
► THE SHIFT ► THE CHALLENGE ► THE SOLUTION it could move more of its executive team into its downtown
Leading cities have Urban innovation hubs Companies have three HQ. McDonald’s, Motorola Solutions, Kraft Heinz, and some
long had an outsize are extraordinarily options: Relocate their 50 other companies have also relocated to downtown Chicago
influence on the global expensive. How can headquarters to hubs; from nearby suburbs. Greg Brown, the CEO of Motorola, noted
economy, but today the companies harness the set up innovation that its HQ move would accelerate cultural change in the
impact that top talent benefits of their dense labs or corporate company and make recruiting software developers and data
clusters such as Boston pools of knowledge outposts there; or run scientists easier.
and San Francisco and skills in the most executive retreats and
have on innovation is effective manner? immersions there. The increased access to talent can be substantial, since
especially pronounced. the share of the local college-educated workforce engaged

82 HARVARD BUSINESS REVIEW SEPTEMBER–OCTOBER 2018