The Lagging Indicator Trap: Why We Need 'Interaction Density' to Measure Growth.
In management theory, there is a distinct difference between "Lagging Indicators" (output) and "Leading Indicators" (input).
Currently, most Regional Innovation Strategies are governed by Lagging Indicators. Agencies report on GVA (Gross Value Added), Patent Filings, and Job Creation. While necessary for Treasury reporting, these metrics are, by definition, historic. They represent the result of decisions made 3–5 years ago.
Startup Genome’s Global Startup Ecosystem Report argues that the single highest predictor of ecosystem success is not capital availability, but "Connectedness." Their data shows that founders with high "Local Connectedness" grow revenue 2x faster than those with low connectedness.
Similarly, MIT’s Regional Entrepreneurship Acceleration Program (REAP) emphasizes "Stakeholder Interaction" as the primary driver of innovation capacity.
The Diagnosis: Data Blindness
The problem for Regional Directors is that you cannot measure "Connectedness" with a survey. It is "Dark Matter"—invisible activity that happens in emails, coffee shops, and closed corridors.
Because EDAs cannot measure it, they cannot manage it. They fly blind, pouring capital into gaps that might not exist, or ignoring silos that are stifling growth, simply because the GVA data hasn't shown up yet.
The Solution: Real-Time Interaction Density
Digital Infrastructure changes the physics of measurement. When an ecosystem operates on a unified platform (Community Lab), "Dark Matter" becomes visible data.
We can now measure Interaction Density:
- The Collaboration Rate: How many SMEs interacted with the University R&D cluster this month?
- The Network Health: Is the cluster "centralised" (everyone talks to the EDA) or "distributed" (everyone talks to each other)?
- The Skill Signal: What are companies searching for today? (e.g., a spike in searches for "Export Tariffs" signals an immediate policy need).
This allows EDAs to move from Autopsy Reporting (what happened last year) to Predictive Governance (what is happening right now).
Conclusion
You cannot improve what you cannot measure. If "Connectedness" is the leading indicator of growth, regions must deploy the infrastructure capable of measuring it.
Key References:
- Startup Genome. (2023). Global Startup Ecosystem Report (The Connectedness metrics).
- Budden, P. & Murray, F. (2019). MIT REAP Framework: Stakeholder Interaction.
- Nesta. (2018). Real-time indicators of innovation activity.
