"If your company is going to grab more than its fair share of the new wealth, it has to learn how to bring the energy and ethos of the [Silicon] Valley inside. The choice is simple, really. You can sit back and wait for the Valley or some other hotbed of innovation to spawn the revolutionary company that buries your business model. Or you can bring the Valley inside and capture the vast economic benefits that flow from unfettered imagination and unbridled ambition."
Those stirring words are from a stimulating article, "Bringing Silicon Valley Inside," by Harvard Business School professor Gary Hamel in the September-October issue of the Harvard Business Review. Hamel is also a professor at the London Business School and chairman of Strategos, a consulting firm based in Menlo Park, CA, so he is eminently familiar with the energy and ambition that characterizes Silicon Valley in this era of the explosion of dot-com companies. It's an article that's well worth reading—and noting for action.
Many executives are jealous of the apparently overnight successes of Silicon Valley companies started by bright and energetic twenty-somethings, but few devote much time to thinking how they might engender that same entrepreneurial spirit in their own employees. Often, such executives think the Valley is filled with geniuses while their own companies cannot attract such visionaries. As Hamel notes, "Where employees are called upon to do no more than service the existing business model, you will indeed find a company filled with witless drones. . . . In most large companies . . . ideas, capital, and talent are indolent. They don't move unless someone orders them to move."
And such conditions may even exist in some well-established and successful Silicon Valley companies. Hamel cites the example of Andy Bechtolsheim, one of the founders of Sun Microsystems, who, when he could not get internal support for his new ideas, quit the company to develop an inexpensive computer workstation. When Sun executives later saw Bechtolsheim's new prototype, they quickly invited him back, and the cheaper workstation soon outsold every other product in the Sun line.
The problem, says Hamel, is that traditional companies are based on a business model of resource allocation whereas Silicon Valley companies are based on resource attraction--the attraction of ideas, talent, and capital. Resource allocation is usually done very conservatively. The suits want a detailed business plan with all the t's crossed and the i's dotted. By contrast, many successful Silicon Valley venture capitalists fly by the seat of their pants. Hamel quotes Steve Jurvetson, a hot young Silicon Valley venture capitalist, as saying, "I never run the numbers or build financial models. But I spend a lot of time thinking about how big the thing could be." Resource allocation is about minimizing risk. Resource attraction is about taking big risks—and often failing. Out of 5000 ideas, a typical Silicon Valley VC firm will invest in perhaps 10. Half of those companies will be failures, three will be modest successes, one will double its initial investment and one will return the investment 50 to 100 times.
Many companies have the capital available to invest in new, risky entrepreneurial ventures. And the ideas and talent to exploit them are often latent within those same companies. Virtually all companies have a defined process for capital allocation, but where is the process for talent allocation? How many companies do you know that even assess the talents of their people, much less try to tap into those hidden resources? Employees who are suffocating in stagnant businesses will either switch to autopilot or quit for more exciting—and greener—pastures. But senior management must come to believe that wealth creation comes from giving ambitious people their freedom rather than by tying them to businesses that have already reached their sell-by date.
Hamel concludes, "You can do your best to ensure that you never put a dollar of capital or a great employee into anything that doesn't come wrapped in an ironclad business case. But in the process, you'll surrender the future and its wealth to more-intrepid souls." Think about it: is your company working to bring Silicon Valley inside?
Jeffrey Bairstow | Contributing Editor
Jeffrey Bairstow is a Contributing Editor for Laser Focus World; he previously served as Group Editorial Director.