What can businesses learn from Silicon Valley’s success?
Silicon Valley has become synonymous with innovation – but what were the factors that led to its rise, and how can your business replicate its success?
What can today’s start-ups looking to accelerate their growth learn from Silicon Valley’s high tech boom of the 1970s and 1980s? In the space of just a few years, this southern portion of the San Francisco Bay area – centered on Santa Clara Valley – became home to so many high-tech computer companies that it earned the nickname “Silicon Valley” after the silicon chips these organizations were using. It has in turn become shorthand for the US digital technology industry itself.
Today, Silicon Valley has grown to encompass the entire San Francisco Bay Area. It remains a leading high tech hub and focus of a strong start-up ecosystem – attracting as much as 43% of US venture capital funding, and home to dozens of “unicorn” start-ups, worth over US$1 billion. Yet around the world, other clusters of start-up innovation have also sprung up – so many that Slate magazine jokingly created a map listing all the places dubbed “the new Silicon Valley.”
So what was it that turned Santa Clara Valley into Silicon Valley? Why here, in this once-remote and rural part of America? According to Bryan Pearce, Global Leader EY Entrepreneur Of The Year, and Jeff Grabow, EY’s US Venture Capital Leader, there are five key factors that converged to transform this part of San Francisco Bay into the world’s leading technology hub. Entrepreneurs can look to leverage these components of success in order to accelerate growth within their businesses.
1) A large pool of skilled talent
Major nearby universities – including Stanford and University of California, Berkeley – were highly active in science and engineering, producing graduates with the skills that the new high-tech companies needed in ready supply. Active outreach by these educational institutions helped forge connections with private businesses to give students hands-on experience.
Insight: The race to capture talent is pressing for many organizations, so seeking locations where talent is already clustering (both physically and virtually) makes increasing sense.
2) Educational support for entrepreneurship
Stanford and University of California, Berkeley encouraged the teaching of entrepreneurship and new technologies in its curriculum early on, and led the academic pack in adding courses in innovation and targeted technical skills.
Insight: Working with educational institutions and lobbying legislators to support the development of the emerging skills you need, as well as encouraging students to take these courses, can help secure the supply of talent you need for continued growth.
3) The development of efficient, flexible funding networks
Even today, capital raised by Silicon Valley start-ups is 32% higher than the global average thanks to a creative approach to securing funding from multiple sources. From angel investment, convertible debt and venture capital to crowdfunding and microfinance, Silicon Valley entrepreneurs were as creative in sourcing finance as they were in developing new technologies.
Insight: Without appropriate funding structures, even the best ideas can wither. Rather than rely on a single source of revenue to support the development of new ideas, seek out multiple funding streams and make sure your finance lead or CFO is fully involved in your drive for innovation and growth.
4) A culture shaped by a clear sense of purpose
Entrepreneurs based in Silicon Valley were more likely to be focused on changing the world through new technological discoveries, driven by intense curiosity and passion rather than a need to build commercial value and profits.
To affect such a significant change, they looked to work with those who shared their passion and interest, and sought partnerships with like-minded organizations and recruited individuals with a similar drive in order to achieve ambitious transformational goals. That shared ambition fostered distinctive workplace cultures, typified by a sense of purpose that ran from the top to the bottom of the organization.
Insight: Articulating a clear business purpose provides a focus to your business strategy. It also helps to galvanize your employees to create a shared and distinctive culture. That in turn drives employee engagement, productivity, staff retention and growth.
5) Collaboration and the convergence of knowledge
Success in Silicon Valley bred even more success – having built a reputation as a place of innovation and collaboration, more innovators were attracted, in turn boosting the talent pool and the opportunities to develop new ideas together. It wasn’t only a convergence of technical knowledge and ideas.
Being an entrepreneur can be a lonely business, so having access to a network of individuals in a similar position can provide opportunities for learning and development, and a sense of camaraderie. Whole ecosystems of personal connections have built up over the years that continue to drive innovation.
Insight: Seeking out like-minded organizations and networks of individuals to partner with can lead to fresh ways of thinking, while also bringing the benefits of diverse viewpoints. It can lead to new collaborative ventures, or more productive working styles.
Creating the Silicon Valleys of tomorrow
Silicon Valley was born in an age before the internet as we now know it. Back then physical proximity and work space were essential to exchanging ideas, collaborating and innovating. But is such a geographically fixed hub so necessary for the start-up clusters of tomorrow?
With new forms of instant messaging and social media, cloud technology, crowd-sourcing and crowd-funding all playing a role in today’s start-up culture it’s possible that the dynamics of innovation hubs or clusters may evolve significantly in the near future. That’s not even considering currently unknown developments in technology, newly emerging marketplaces and new ways of doing business. Whatever the future holds, the insights outlined above provide useful stimulus for those looking to grow their businesses in the next Silicon Valley, wherever that may be (this week).
There is one final lesson, according to Grabow: Silicon Valley’s success “is about courage to take risks and withstand numerous failures, access to a valuable ecosystem of smart people and institutions, capital and service providers that help entrepreneurs turn ideas into companies.”
Silicon Valley’s earliest founders broke away from their existing companies to set up new businesses, based on their faith in their innovative ideas. “This process has repeated itself thousands of times,” he says. If you want to be an innovator, “you need to have the courage to try something new.” If you don’t, someone else – perhaps even one of your employees – will.