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Entrepreneurial learning journey: Silicon Valley’s culture of innovation

November 23, 2015

This is my third blog in my entrepreneurial trek across America, and into Silicon Valley.

‘Silicon Valley’ is a nickname for the Santa Clara Valley area in the southern portion of the San Francisco Bay Area home to many of the world’s largest technology businesses. It is also a leading hub and startup eco-system for high-tech innovation and development, accounting for one-third of all of venture capital investment in the U.S.

It was in the Valley that the silicon-based integrated circuit, the microprocessor and the microcomputer were developed. Perhaps the strongest thread that runs through the Valley’s past and present is the drive to ‘play’ with novel technology.

Use of the phrase Silicon Valley is attributed to Don Hofler, who used the phrase as the title of a series of articles in the weekly trade newspaper Electronic News. The series, entitled Silicon Valley in the USA, began in the paper’s January 11, 1971, issue. The term gained widespread use in the early 1980s, at the time of the introduction of the PC and related hardware and software products for the consumer market.

A powerful sense of regional solidarity accompanied the rise of Silicon Valley. Stanford University’s leaders saw its mission as service to the West and shaped the school accordingly. During the 1940s and 1950s, Frederick Terman, Stanford’s dean of engineering, encouraged faculty and graduates to start their own companies. He is credited with nurturing Hewlett-Packard and other high-tech firms, until what would become Silicon Valley grew up around the Stanford campus. Terman, together with William Stockley, a founder of Bell Labs, are often called ‘the fathers of Silicon Valley’.

After World War II, to address the financial demands of Stanford’s growth requirements, and to provide local employment opportunities for graduating students, Terman proposed the leasing of Stanford’s lands for use as an office park, named the Stanford Research Park. Leases were limited to high technology companies. Terman also found venture capital for civilian technology start-ups.

One of the major success stories was Hewlett-Packard. Founded in Packard’s garage by Stanford graduates William Hewlett and David Packard, Hewlett-Packard moved its offices into the Stanford Research Park in 1953. Other early tenants included Eastman Kodak, General Electric, and Lockheed.

Fast forward to April 1974. The Homebrew Computer Club was an informal group of electronic enthusiasts and technically minded hobbyists who gathered to trade parts, circuits, and information pertaining to DIY construction of computing devices. It was started by Gordon French and Fred Moore who met at Menlo Park – where Thomas Edison had his labs – in Silicon Valley.

They both were interested in maintaining a regular, open forum for people to get together to work on making computers more accessible to everyone.

The first meeting was held March 1975 at French’s garage in Menlo Park. Steve Wozniak and Steve Jobs credit that first meeting with inspiring them to design the original Apple I computer. As a result, the first preview of the Apple I was given at the Homebrew Computer Club.

Silicon Valley is generally considered to have been the center of the dot-com bubble. After the dot-com crash, Silicon Valley continued to maintain its status as one of the top research and development centers in the world. Today, Silicon Valley is also home to a significant number of ‘Unicorn’ ventures, referring to startup companies whose valuation has exceeded $1Bn.

Google is one of today’s global tech innovators in Silicon Valley, established at Menlo Park, in January 1996 as a research project by Larry Page and Sergey Brin when they were both PhD students at Stanford. The domain name for Google was registered on September 15, 1997, and the company was incorporated on September 4, 1998. It was based in the garage of a friend in Menlo Park.

While conventional search engines ranked results by counting how many times the search terms appeared on the page, the two theorised about a better system that analysed the relationships between websites. They called this new technology ‘PageRank’, it determined a website’s relevance by the number of pages, and the importance of those pages, that linked back to the original site.

Page and Brin originally nicknamed their new search engine ‘BackRub’, because the system checked backlinks to estimate the importance of a site. Eventually, they changed the name to Google, originating from a misspelling of the word ‘googol’ the number one followed by one hundred zeros, which was picked to signify that the search engine was intended to provide large quantities of information.

In just over 16 years – how time flies when it comes to online innovation – Google has gone from a company with one product to one with more projects than you can name, touching the lives of billions around the world every day. How can a company, especially one as big as Google, maintain a spirit of innovation year after year? Nurturing a culture that allows for innovation is the key, with guiding principles. Google’s Chief Social Evangelist, Gopi Kallayil, recently outlined the key principles of innovation at Google, and how they can be applied to any organisation:

1. Innovation should come from everywhere It is the job of everyone to innovate, whatever their role and from anywhere in the business. Enabling each employee the opportunity to contribute to big innovative ideas, you will get some surprising results.

2. Focus on the user, not the competition Product design decisions should always be made around solving customers’ problems, not by how much money it will make. Design a great useful user experience, and the revenue will follow. ‘Launch, then keep listening’ was Google’s early ethos, leading to iterative learning and development (see point five below).

3. Think 10X If you come into work every day and improve your process a little each day, you only achieve incremental progress. If you want innovative change, you need to think about how to change things by 10X. Think bigger than what you think is possible. No matter how ambitious the plan, you have to roll up your sleeves and start somewhere, but then think big. A 10x goal forces you to rethink an idea entirely. It pushes you beyond existing models and forces you to totally reimagine how to approach it.

4. Bet on unique insights Every organisation has unique insights because they see the world through a certain lens that no one else has. Don’t get stuck innovating your own existing products when you could have the next big idea, look across other domains for business model innovation.

5. Launch and Iterate Some firms only ship when products are flawless. The problem is that no product is ever perfect. Once it hits the users, there are always issues and fixes. Take a leap of faith and release your next product as a reasonably functioning prototype and let your users provide all the feedback in less time. Iterate, then relaunch, then iterate and relaunch again. The most important button on any product is the feedback button.

6. 20% Time Give your employees 20% of their time to focus on the items they are most passionate about. You may be worried they will waste their time on frivolous side tracks, but when the ideas are shared around, people spend their 20% devoting their time and resources to the best ones, creating a self-governing and self-regulating environment. This truly allows everyone in the organisation the time to act on their innovative spirit.

7. Default to open By opening up your development to the world, you are tapping into a huge community of all the top minds in the world. Tap into the collective wisdom of the people that use your product as well. They use it, so let them come up with your marketing ideas and strategies. This openness helps to move the needle forward for everyone involved.

8. Fail well There should be no stigma attached to failure. You’re not pushing the boundaries of innovation if you’re not failing. The moment you stop taking risks is the moment you get left behind. Google was renowned for this fast-moving experimental innovation approach, epitomised in this quote by the head of its AdWords service: If you’re not failing enough, you’re not trying hard enough….If it doesn’t work, move on.

9. Have a mission that matters The most important principle for innovation in your organisation is having a purpose that people can believe in. Work can be more than a job when it stands for something you care about. Google’s mission is to organise the world’s information and make it universally accessible and useful. Having a sense of purpose gets people in the door every day with the need to be innovative.

10. Use the 70/20/10 model Google were firm believers in a concept introduced in the early days of the firm: the 70/20/10 model. Simply put, it means that:

  • 70% of projects are dedicated to the core business
  • 20% of projects are related to the core business
  • 10% of projects are unrelated to the core business

They had a few goals in mind here. One is that this model is a helpful way to allocate resources as they thought about the big picture of the business each year. It held the focus on core needs while also encouraging a healthy stretch into new and related areas.

Just as importantly, the 70/20/10 model supports a culture of ‘yes’ rather than ‘no’. It promotes ‘what-if?’ thinking. This positive framework feeds the core business while also encouraging new ideas and big dreams that can become huge wins for the company – those 10x moonshots. In the long run, a few of those unrelated 10% ideas will turn into core businesses that become part of the 70%.

For any company that wants to keep innovating, the first step is to get the culture right. Google has been well known for its unique approach to innovation – from its open culture, its radical work environment in its Googleplex campus to its methods for innovation.

The Google ‘20%’ story – now replaced with a more formal innovation system – is a good reminder that an innovation system needs to evolve with the business it supports as that business develops and expands.

A firm’s innovation system encompasses key practices such as the strategic focus for innovation, processes for idea development, selection and implementation, as well as the working culture and key resources, such as employee time and recognition for innovation.

The nature of a business’s value proposition, its customer/client set, organisation and culture can all change over time and the innovation system needs to change with them. Google’s changes in its strategic innovation focus, necessitated changes in its underlying processes and culture – including its famed ’20%’ – but they retain the spirit of Terman and Shockley, the founding fathers of Silicon Valley.

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