Page 84 - Harvard Business Review, Sep/Oct 2018

Navigating Talent Hot Spots
Follow the Money
1 2 3 4 5 6 7

Where are the global talent hot spots? Data on venture
capital investment and unicorn start-ups (those with
billion-dollar evaluations) point to these locations:

Metro areas with the Metro areas with
greatest VC investment the most unicorns
Walmart announced the construction of a new head office (since 2009) (since 2009)
in its longtime home of Bentonville, Arkansas. But even if
Walmart remains forever rooted in Arkansas, it has no inten- 1. SAN FRANCISCO 1. SAN FRANCISCO
tion of ceding the battle for the insights of talent clusters to the 2. BEIJING 2. BEIJING
likes of Amazon (Seattle) and Alibaba (Hangzhou). Walmart 3. SHANGHAI 3. NEW YORK
Labs, opened in 2011 in Silicon Valley, focuses on making 4. NEW YORK 4. LOS ANGELES
advances, ranging from voice-enabled shopping to crowd- 5. BOSTON 5. SHANGHAI
sourced delivery, on the frontiers of e-commerce. 6. LOS ANGELES 6. BOSTON
Many companies a small fraction of Walmart’s size have 7. LONDON 7. LONDON
opened similar corporate outposts in order to access important 8. SHENZHEN 8. SEATTLE
talent clusters in their industries. Such offices can serve a range 9. SAN DIEGO 9. HANGZHOU
of functions. Some simply house a small team that listens to 10. SEATTLE 10. CHICAGO
what’s going on locally and scouts out business development Source: Calculations from Source: Calculations
opportunities. Some establish an innovation lab like Walmart’s Thomson One data on from CB Insights data
venture capital funding
that works on new technology development. At others, com-
panies focus on corporate venturing—partly to make a finan-
cial return on investments, but more to have a better vantage
point on new advances.
Companies benefit most from innovation when they ac-
quire the best ideas, not when their average ideas are better.
A physical presence in leading clusters helps companies con-
nect with the most powerful concepts emerging in their sector.
Corporate outposts are relatively inexpensive to launch, at
least compared with HQ moves, and some companies effec-
tively buy one by acquiring a young tech start-up. An import-
ant step in the launch of Walmart Labs, for instance, was the
retail giant’s purchase of Kosmix in 2011.
Companies often want a presence in two or more clusters.
One never knows where the next top idea will emerge, and
firms can compete for talent better when they touch multiple
clusters at once. Microsoft Research, for example, has built a
network of labs outside Redmond, Washington, in locations
that include Cambridge, Massachusetts; Cambridge, England;
New York; Montreal; Beijing; and Bangalore. The Chinese
white-goods giant Haier has five R&D centers—within and
outside top clusters in the United States, Europe, Japan,
Australia, and China—which are helping it stake out a role
in the internet of things.
One of the major risks with outposts is being “penny-wise
and pound-foolish” when selecting real estate. Location mat-
ters even within cities. The costs of locating close to Sand Hill
Road or Market Street are substantially higher than elsewhere
in the San Francisco area—but so are the benefits. A study of
advertising agencies in Manhattan is illustrative. Manhattan’s
agencies create about a quarter of all advertising in the United
States. They rely on personal networking to share proj ect
work, splitting larger jobs into parts that can be independently
attacked by each firm. However, the study found that sharing
declines rapidly with geographical distance, disappearing

84 HARVARD BUSINESS REVIEW SEPTEMBER–OCTOBER 2018