Everyone has heard of Silicon Valley. In the public eye, it has become somewhat of a cult phenomenon made famous by films like ‘The Social Network’, and Mark Zuckerberg’s journey from drop-out to deity: a modern-day Cinderella story. The term ‘Silicon Valley’ is tossed around liberally as a synonym for innovation and entrepreneurship, but many remain in the dark about the inner-workings of its complex infrastructure and where the recipe for such prolific- and seemingly exponential- success lies. To most, Silicon Valley remains an unexplored and mysterious platform only accessible to the technological elite.

Silicon Valley: 20 Miles of Magic

However, one of the most valuable assets of the Valley is not based in technology or software itself, but rather the mindset and outlook that its’ people nurture– a shared sense of purpose geared towards pushing innovation barriers, and a continuous drive to just make things… better. This perpetual betterment relates to everything from software innovation, to personal development, to overall quality of life in a global sense. The Valley thrives off a zealous passion for entrepreneurship which permeates all facets of life– even when the working day is done. The Valley mindset is a lifestyle: RIP the 9–5. This entrepreneurial aspiration is so infectious that corporations are starting to seek advice from startups, and not the other way around (as has traditionally been the case).

“The Valley mindset is a lifestyle: RIP the 9–5”

This mindset is based on 3 crucial laws, discovered by the legendary investor Mike Maples, which prove the exponential growth capacity of technology.

Mike is explaining the 3 laws in his Stanford lecture. See here

The first is Moore’s law, the cornerstone of everything that’s happening in todays’ tech world. It’s the observation that the number of transistors in a densely integrated circuit doubles approximately every two years. In technology, this refers to exponential growth and innovation in computing. Essentially, the statement guarantees a continuous supply of new great tech companies. With the advent of cloud computing, wireless communications, IoT and new discoveries in quantum computing, the potential for infinite growth has become far more evident than a decade ago, when people thought the power of computing was approaching its limit. Now, the door is wide open for companies to explore new opportunities to capture market share in places they have never accessed before.

The second, Metcalfe’s law (or the power of Network Effects) basically means that with each new ‘node’ in a network, growth increases exponentially. The value of the network expands proportionately to the square of the number of its’ participants (devices, applications, or users). As a result, the more connected a network is, the more powerful it is. Take a wireless network; if you have 2 mobile devices, they’re only able to communicate with each other. However, if you have billions of mobile devices, you have billions of connections, and opportunities rise dramatically. This phenomenon is not only reshaping markets, but offering new opportunities to individuals in the form of services and corporations in the form of more sophisticated products. Take Tesla’s self-driving car– the more cars that are connected to the cloud, the more data Tesla receives from those vehicles, so the better and more reliable Tesla’s service becomes­­– which then attracts more users and so on.

Lastly, there is the Power Law, or ‘Category King’ (as the founders of PlayBigger call it). This is where the outcome of the largest company in a set of companies exceeds the outcome of every other company in that set combined. Surprising, isn’t it? Inevitably, a Category King will emerge in all market categories to form an exclusive group: they will become the only companies that consumers talk and think about, whilst their competitors will be left at the wayside and forgotten. A recent study by PlayBigger showed that the vast majority of post-IPO value creation comes from the Category Kings who are carving out entirely new niches; think of Facebook, Airbnb, and Uber. These are distinctly “winner takes all” companies, who have managed to carve their own niches and obliterate all competitors.

Unsurprisingly, Category Kings capture 76% of the market, and they are known to make a series of rapid iterations and successes in order to monopolise their market niche as fast as possible. Looking at Tesla again, it is becoming the obvious Category King for autonomous vehicles in the minds of the general public– and the rest of the automotive industry. They might not necessary kill every other competitor, but they will surely make it harder for others to position themselves as a substantial competitor in the industry. To have a chance, competitors would need to innovate even faster than Tesla is already, and maybe even come up with their own ‘category’ to move ahead of the competition and generate higher returns. An example of this is Corning, the creators of Gorilla Glass. Their technology was available long before it became the standard for smartphone screens, but by combining their efforts with Apple, they created their own unique category and therefore, their own niche market for their product for which they exist as sole leader.

So Silicon Valley is clearly a magical place when it comes to innovation. It all comes down to the mindset which is held by each individual, and therefore by the entire community as a whole. The insatiable entrepreneurialism and drive to be better is embedded in the decision making processes of all those who reside in the Valley, allowing them to compete in an unprecedented way with large corporations that want to ‘go digital’. One problem that large corporations face is that many top-tier executives can’t make decisions fast enough: it’s just not in their mindset. They do not consider digital transformation or the benefits that it provides. Whilst they might view this as self-preservation, it is really self-sabotage as we are hurtling rapidly into the age of information. Technological innovation is based on speed, so it is unsurprising that large corporations are falling behind whilst being overtaken by new and innovative tech-based companies with no fear of change. There does exist a ‘special’ 10–20% of companies who, once they achieve a certain percentage of sales in the digital channel, wake up and realize the importance and value of technology.

There’s often a lot of frustration surrounding project execution. In order to thrive (or even survive) in todays’ environment of technological innovation, it’s crucial to identify and source the correct resources as early as possible. Once you hop on the digital train, having the right people with the right mind-set, skills and ability to deliver are the most critical factors for success. However, it is worth noting that precision and taking the right strategic approach is extremely important as well, because moving quickly in the wrong direction is worse than just doing nothing.

Industry feedback reveals that managers view their traditional, corporate culture as one of the largest barriers to achieving impact from tech initiatives. Culture, of all the organizational elements, is by far the most important for successful, economic performance. And as we all know with regards to culture, corporations tend to be highly risk-averse, structurally rigid and prone to a singular (and thus very limiting) perspective, rather than viewing an issue from all angles. Taking risks, experimentation and open perspective are all important features, imperative for success in today’s digital world. These elements are the ones that large companies struggle with, but which Valley entities religiously live by. It is a pity that such a mindset is exclusively found in those 20 square miles when it should be a global phenomenon.

When you look at the economic pressures that digitization is putting on all industry sectors, it is evident that a large percentage of companies will struggle to remain economically viable once digitization reaches its full progression. This would not have to be the case if traditional corporates open themselves to the mindset of Silicon Valley, or at least some aspects of its culture– be it from collaboration with external sources and third-party entities, or restructuring from the inside. This way, companies can bypass incumbents and overcome cultural resistance to new tech, opening opportunity windows that they couldn’t even have imagined existed. Now that start-ups and Valley entities have figured out the attitude to take, companies that have resisted technology will have to take note, follow suit and embrace the leap of faith– or they will die. It’s just a matter of embracing the waves of change.

So the question is, how can a company so deeply rooted in its culture and processes adapt to such a comparatively radical mindset, without disrupting its structure? Unfortunately, disruption is a prerequisite of change– but it does not have to be viewed negatively. Sure, there have been success stories outside of Silicon Valley and away from its mindset, but so far, nobody has managed to replicate even a fraction of success at their scale. It is the intangible– behaviour, mindset, attitude, perspective and network of the right-minded people that make difference. So whilst the Silicon Valley mindset should not be contained, it would be an impossible task to physically replicate the community, resources and overall situation in all its intricacies anywhere else on the globe. However, it is fully possible to extract the power, attitude and know-how from the Valley and apply it to other localities, both cultural and professional. Applying Valley attitude and knowledge into traditional companies would avoid their total disruption from inside, yet facilitate new windows of opportunity and innovation.

Hackerbay lives with and operates by this mindset of infinite possibility, “Hacker Culture”, every day, during every project and task. We firmly believe it should be shared with everyone. Once companies realize that technology has radically altered corporate and social landscapes forever, Hackerbay can educate them to be more flexible, adaptable and open to structural disruption. Changing ingrained practises takes time and we know that, but when you identify a unique opportunity for growth in today’s competitive landscape, you’ve got to reach out and grab it. Once you do, innovation will start sprouting from seeds that you didn’t even know you planted.