by Prof. Nikolaus Franke
Silicon Valley is one of the world's drivers of progress. With their innovations, unicorns such as Apple, Facebook, Amazon or Google have, within short periods of time, not only created unimaginable value but also disrupted established industries and changed the lives of us all. Silicon Valley never stands still. Established companies constantly reinvent themselves, and startups with new ideas, products, technologies and business models emerge all the time - driven by ambition and an optimistic attitude when it comes to achieving breakthrough success.
Yet, what makes Silicon Valley so special? What is this dynamic ecosystem's secret of success? What can we learn from it? In the following, Prof. Nikolaus Franke, Academic Director of the Professional MBA Entrepreneurship & Innovation, analyzes the 3 most striking elements from an academic point of view:
To begin with, there are the institutions themselves. Stanford University, the tech giants, the big venture-capital companies and many other players are impressive in their own right when it comes to their levels of performance and professionalism. But it is only when you look at the close interplay between them that you can really understand the phenomenon that is Silicon Valley. Here, science and real-world applications, technology and business, capital and entrepreneurship, established companies and start-ups mesh like cogs in a machine. Barriers are low, but people’s open-mindedness and their willingness to exchange knowledge and ideas with one another are high. What is more, incubators, accelerators, consultancies and co-working spaces help the machine run smoothly. They serve as its lubricant, if you will. As a result, innovation experiments are carried out all the time. It goes without saying that some of them fail, but they give rise to new ideas, and people perceive them as learning opportunities. In Silicon Valley, the positive attitude towards errors is tangible. Many of the experiments take off and develop into something big breathtakingly fast. Airbnb was started only 11 years ago, does not own a single building and is already more valuable than the largest hotel chains. At 10, Uber is even younger. It has no car of its own and produces nothing. Still, it is worth more than most carmakers.
Complementary exchange also happens at the individual level. People stay with their employers for much shorter periods of time than their European counterparts. Under California law, it is possible for individuals to change jobs incredibly quickly. Taking things to extremes, we might say that if, in the morning, you get bored working on a project or you realize that your ideas do not meet with a favorable response, you can start working somewhere else by the afternoon of that day. Unlike in most other countries, you can even join a competitor, and many employees do just that. As a result, knowledge spreads throughout the system at an enormous pace. Constantly, new combinations of people, technologies and ideas emerge. No less an authority than Schumpeter described the creation of new combinations as the essence of innovation. In Silicon Valley, this essence is brought to life on a daily basis.
Companies do a lot to facilitate exchange. The offices of established players such as Facebook, SAP or Google are reminiscent of modern university campuses with an open architecture, much light and plenty of room for collaboration. If you have an idea, you can immediately share and discuss it with others—not only virtually but also face to face. Project teams are formed in an organic and decentralized manner. Ideas that have potential can develop very quickly.
People are the pillars of this system. Silicon Valley is like a magnet. Many of those who work here were not born here but have moved to this place on purpose. In almost one household in two the language of habitual use is not English. But despite their differences, people have some characteristics in common, such as open-mindedness, optimism and self-confidence. There is no place for understatement and despondency in Silicon Valley. “Think big” is a philosophy shared by many, and people are enthusiastic about innovation. Autonomous cars drive in the streets. Robots wait on you in the cafés. And when you visit the Amazon Go Shop, there are no queues; there is not even a checkout counter—you simply take the products off the shelves and leave. For seconds, you feel like a shoplifter, but then you get the bill on your mobile. This climate is conducive to innovation.
While Silicon Valley is a paradise for entrepreneurs, not everything about it is perfect, of course. There is no light without shadow, and in some respects we do better than the Bay Area, where you can see undeniable signs of overheating, such as traffic jams, roads in bad repair, widespread homelessness or skyrocketing prices for housing and accommodation. Ideally, then, we should try to copy what is positive about Silicon Valley - e.g. its open-mindedness, its emphasis on cooperation and its culture of innovation - without neglecting our own strengths, like thoroughness, a focus on quality and a commitment to relative social equality.
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