Generally, people regard Silicon Valley and the companies there as technology vendors creating and selling the latest hardware and software innovations. In short, they sell pieces of the latest stack of technology that does whiz-bang things used by companies like yours to improve productivity or facilitate innovation through expedited sharing or other efficiency gains. But a shift in occurring as Silicon Valley companies increasingly deploy disruptive products that alter the competitive landscape.
So many broad-based business model disruptions have emanated from Silicon Valley, according to Mark Zawacki, founder of 650 Labs, based in Mountain View, CA—the heart of Silicon Valley—that he has been able to build a successful consulting practice helping large companies understand the trends coming out of Silicon Valley with the goal of helping them stay competitive. At a minimum the insights his clients gain should enable their organizations remain relevant. Included among 650 Labs’ prominent customers are Microsoft, Cisco, Intel, VeriSign—companies widely regarded as technology industry trend setters even if not exactly denizens of Silicon Valley.
Even for these companies, “we help them navigate through and around disruption in order to sustain market share, grow revenue, and remain relevant for the long term,” says Zawacki. His non-high tech clients include McDonalds, MasterCard, Citi, Rabobank, Volvo, Norsk Hydro, Occidental Petroleum, and Swisscom.
Of course innovation can happen anywhere and game changing innovation regularly comes out of the Boston-Cambridge (Kendall Square, around MIT) area, Texas, and Israel, dubbed Startup Nation in the bestselling book of the same name by Dan Senor and Paul Singer. But even among these innovation hotbeds, Zawacki insists Silicon Valley is different.
The usual IT research and analyst firms follow Silicon Valley doings regularly, but Zawacki insists it is not the same thing, that they have missed a subtle shift that occurred. Generally, people regard Silicon Valley and the companies there as technology vendors creating and selling the latest hardware and software innovations. In short, they sell pieces of the latest stack of technology that does whiz-bang things used by companies like yours to improve productivity or facilitate innovation through expedited sharing or other efficiency gains.
The shift Zawacki has detected, however, is the change from selling pieces of a technology stack—a bunch of technology tools—to using their own technologies and innovations to disrupt industries and segments while keeping the profits for themselves. “They have gone from being arms suppliers to being mercenaries that will take a share of the profits,” Zawacki observed. Apple’s iTunes was an early example of this. Instead of providing capabilities to the recorded music industry iTunes has made Apple a major player in that industry in its own right and is generating considerable revenue from it.
This, he believes, represents a portentous shift in direction that few are talking about. As CFO or as any top executive you want to know what innovation will dramatically disrupt your industry and which unknown little company, maybe one with an oddball name, will suddenly capture a major piece of your industry’s action. They won’t be selling you the tools to compete; they will be competing against you and most likely winning. Just think about it for a moment.
What’s the most unsettling scenario you face if you are a large multinational in a slow-growth mature industry somewhere in the world? How about a well planned, focused attack by a fully venture-funded, below-the-radar disruptor that simultaneously:
--> Takes on the risks of re-envisioning how your industry can operate and grow
--> Builds a product or offers a service that is deemed much better by your customers than your current offer
--> Focuses on efficiently tearing away your most profitable customers with a better value proposition and/or business model
--> Undercuts your cost structure with advanced technology innovation
--> Outflanks your every response with a superior battle plan and strategy
The Silicon Valley culture embraces an unrestrained competitive marketplace and is not hindered as you might be by a bureaucratic infrastructure, by the lack of an innovative culture, or by a high cost structure that is slow to respond to competitive thrusts.
So what’s the solution? It comes down to a variation of the old adage if-you-can’t beat-‘em-join-‘em. In this case it means getting some boots on the ground in Silicon Valley, people who will wire themselves into the culture and watch out for your interests. Their mission is to find and connect with people who can leverage your resources to make you part of this game. At the same time start building out an innovation lab or embedding strategy teams there.