What do 350,000 inter-galactic citizens, a spa in the middle of a powerplant and a brilliant space age vocalist have in common?  Iceland.

Most people think financial collapse when they think Iceland.  That’s a shame.  The people of Iceland are coming together, looking forward and doing some exceptional things.  We can all learn from their experience, but all we’re hearing about is that McDonald’s left the country recently after 16 years.

My colleagues from the Kellogg Innovation Network (KIN), a network of innovation leaders from across sectors worldwide, visited Iceland in December to discover what’s really going on and work with the country’s leaders to help map a path forward.  We were all energized by what we discovered.

Jorn Bang Andersen, a KINian from the Nordic Innovation Centre, part of the Nordic Council, arranged the visit.  Jorn and I built a team of Kellogg faculty, alumni and a couple of Jorn’s associates in Europe, including Patrick Crehan of CKA and the Club of Amsterdam.  We visited nearly 20 companies and met with members of the country’s ministerial and trade promotion staffs.  We’re in the midst of working with the Icelanders to develop our recommendations.  In the meantime, we’d like more people to know about Iceland’s exceptional story.

We were impressed by the creativity and scope of entrepreneurial activity in this country of 320,000 people.  Everyone has heard of Iceland’s primary export, Björk, so it’s not a surprise that the island nation has a vibrant creative community from product design to music.  We were struck by how many public buildings, offices, restaurants—really, everywhere—displayed original art.  The country is infused with the arts of all kinds, perhaps both inspiration from and response to the climate and stunning but often-barren landscape.

One online multi-player virtual world company, CCP, founders of Eve Online, boasts 350,000 subscription paying members worldwide-- more than Iceland’s population.  One of CCP’s 400 staff members worldwide includes a full-time economist who creates quarterly economic states of the universe reports for the Eve Online community.  True economic analysis of an emerging virtual world.

We also visited companies in the healthcare and industrial biotechnology sectors.  Ossur is a $400-milllion revenue orthopedics company considered top-of-the-line worldwide.  Their prostheses have been banned from use in various sporting events as many believe the limb replacement devices confer an unfair advantage.  A truly bionic quandary.  Orf  is a start-up biotechnology company growing genetically modified plants that produce high value research proteins, with plans to produce proteins for the cosmetics and nutriceuticals industries.  The company grows its products in specially-designed greenhouses powered by the Iceland’s green, astonishingly efficient geo-thermal power plants.

Geo-thermal energy is one of the most compelling components of Iceland’s economy.  As a result of ongoing volcanic activity at the confluence of the tectonic plates of Eurasia and North America, Iceland is blessed not only with nearly free energy, but also a long tradition of geo-thermal technology and know-how that leads the world.  Electricity is so cheap that aluminum producers such as Alcan have located massive factories in the country, given the high energy requirements of aluminum smelting.

But they do much more than just create cheap electricity.  Albert Albertsson, a director with HS Energy, one of the country’s leading electricity providers, explained that geo-thermal plants can create an entire ecosystem of opportunities for various ventures.  In addition to Orf, other companies locate next to the power plant to benefit from the electricity and copious amounts of hot water provided by the plant. 

The most compelling example is Blue Lagoon, a world renowned spa, clinic and skin care products company.  Blue Lagoon’s CEO, Grímur Sæmundsen, explained that people started frequenting the hot waters of the lagoon in the 1970s well before the spa was constructed.  The construction of the geo-thermal plant opened hot water and released a world of microorganisms, many of which people felt had significant healing properties, especially for people with psoriasis.  Sæmundsen and his partners founded Blue Lagoon to build a world class spa around the site.  They have since added a research facility and a range of skin care and beauty products. Blue Lagoon’s researchers have identified over 100 microorganisms unique to the lagoon as well as two primary organisms they believe to be responsible for the water’s healing effects.  Ongoing research with universities around the world is helping to develop the healthcare applications and the spa includes a wing for guests seeking longer-term treatment regimes.

Iceland has a long road ahead to pay down a debt equivalent to over 800% of GDP, but many Icelanders understand that the only good way out in the long run is to create substantial new value through innovation and entrepreneurship.  As one business leader put it, “We’ve been on our own in the middle of the North Atlantic for 1,000 years.  We’ll figure this one out, too.” 

 Read more from Robert Wolcott and Michael Lippitz on how corporate entrepreneurs can take their vision to market and help their companies Grow From Within.

Robert Wolcott and Michael Lippitz are leading authorities on innovation and corporate entrepreneurship at the Kellogg School of Management at Northwestern University, and co-authors of Grow From Within: Mastering Corporate Entrepreneurship and Innovation (McGraw Hill, 2009). In the past six years, they have studied more than 30 companies across industry sectors and developed an ongoing dialogue with them about corporate entrepreneurship through the Kellogg Innovation Network (KIN).