Self-organized clusters

Not a monolithic blob of geeks

One of details about Silicon Valley is how it is self-organized into clusters of technology, not unlike the traditional service clusters in New York or London. Silicon Valley is best think of as a series of circles each anchored by a leader and these overlapping allows easy cross-pollination to create new companies.

Advantage of proximity and diverse clusters

Proximity to critical mass(es) of diverse skill set is a vital part of new idea formation. Having a deep portfolio of ecosystems within a two hour driving radius, it allows for a solid support infrastructure. If you need to file a provisional patent? If you need to set up your VoIP system? If you need to find co-founders? There are plenty of good patent agents, IT administrators, and start-up soul-mates to be found.

With the overlapping technology and industry ecosystems, as people interact with each regularly, general technology diffusion and the likelihood of finding and applying aspects of known technologies/approaches to a new arena are also much higher.

Until fairly recently, many Silicon Valley VC's have opined that part of their success is due to the fact that they never have to drive for more than two hours to source, monitor, and exit their portfolio investments.

A two edged sword

On the other hand, overlapping clusters has its problems given Silicon Valley's at-will employment.

For starter, if your idea or your execution is sub-par, it is easy for people to leave and find a comparable position. Even if your idea is good and your execution above average, sometimes people leave to join a hotter opportunity. For example Google announced in November of 2010 an across the board 10% salary increase because people, so it seemed, was decamping for Facebook. Finally, for the same infrastructural advantage of clusters, people also leave to start their own companies.

Ecosystem intersections that CFO's will pay for.

What is the ROI

Given the potential benefits of exploring technical and business innovations, companies pay good money to engage in these activities. Below is a sample of different ways interactions can be facilitated.

Company driven

At a company level, many will have a Silicon Valley office. For example, Honda Research Institute has a campus in Mountain View where they active work with other organizations.

Industry driven

In most industry conferences and tradeshows, there will be time dedicated to explore new ideas and technology. For example, RSA, a security conference has a half-day program called Innovation Sandbox to showcase upcoming technologies. Another example is the Demonstration Street area at Printed Electronics USA where novel product ideas are on display for attendees to ponder.

Venture Competitions

Blame it on American Idol, there seems to be a new conference announced every week to let startups compete for a conversation with VC's. Cleantech Open is a good example.

Another twist that combines aspiring startups, funding opportunities, rapid development, and quick financial exit that is gaining a lot of attention lately is Y Combinator with its current focus on "social" related innovations.

Supporting Services

Banks, accounting firms, and law firms are part of the critical infrastrcuture of any economy. In Silicon Valley these firms play an unique role in facilitating cross-industry conversations on topics that are not limited to an industry sector. For example, on a quick check, Orrick, a law firm, is hosting a discussion on the topic of leadership succession planning on February 17, 2011.

Academia

Stanford University is one of the major universities in the area and it has been actively engaging Silicon Valley ecosystems since the early days. Stanford Technology Ventures Program is an example where it allows ideas, experiences, and mentoring to mix.

Another key organization within Stanford that people often don't think about is its Office and Technology Licensing. Did you know that Serge and Larry (Google founders) tried to sell the Google search algorithm through Stanford's OTL and did actually find a buyer?

Making connections

How does it work in the tranches

A question that I often get is "all these ecosystems sound good, but how does it work in practice?" In other words, being a CTO, a VP of Innovation, a Head of (New) Business Development, or a founder is not unique to Silicon Valley; why is that people seem to play openly, nicely, and productively.

The give

As compelling as the the BMW + Google connection may be, not all ideas are winners. Therefore, before the next good idea strikes, everyone is looking for practical insights ready for immediate application.

Benchmarks are always nice, i.e. we allocate X% to support our innovation efforts. Best practices are usually poplar, i.e. this is how we ensure smooth transition to a BU that owns the distribution. Business model often brings on spirited discussion, i.e. after trying X, Y, Z, this is what works for us.

The Take

Beyond sharing, the same forum can provide a safe environment to ask questions. Quetions on organizational changes, i.e. we are moving to a new organizational structure, what is the likely to impact my work? Questions on new ideas, i.e. I want to propose an initiative, what are good ways to get buy-in? Questions about an industry/application, i.e. we are exploring ways to offer excess capacity to this industry, what do you think?

The specifics may differ, but your cohort understands your issues and has your back. And, through this process of give and take, you know who to call when a flash of brilliance hits.

Connections

To paraphrase what Ron Burt of the Structural Holes fame argued in his recent book Neighbor Networks, being a node in the network, i.e. a stack of the bsueinss cards from the formal ecosystems, is nice but what you bring to the network, i.e. the give and take to help each other, is what makes your connections robust.

One last point worth noting is that this willingness to share is in part driven by the only certainty in Silicon Valley which is that future cannot be known a priori. It was not obvoous that Google should beat out Yahoo. It was not clear that e-reader will take off with Kindle. Today, with Facebook replacing Friendster in a handful of years, who is to say what social buying will be like in another handful of years.