Do you know the way to San Jose?
I had the pleasure of joining Boardman's Silicon Valley Experience, a one week visit to the Valley by a group of Finnish growth companies and larger corporations. The program consisted of a variety of events as well as visits to selected companies. The purpose of the visit was to create an understanding of how Silicon Valley works and how Finnish companies could do business and start companies in the Valley.
The visit was covered in a number of excellent blog posts, like this one.
Three things made the visit particularly enjoyable for me:
In this post I'll reflect on a few topics related to point #3.
Mr. Clayton Christensen talks about how traditional companies focus on the "wrong kind of innovation", putting too much effort into sustaining and efficiency innovation and not nearly enough into empowering or disruptive innovation. As a result, established companies are producing solid financial results, thanks to the sustaining and efficiency innovations they employ, but they aren't renewing. Companies then have an increasing amount of available capital, but have trouble finding good targets for investments.
Silicon valley is all about disruption and finding new innovation. Silicon Valley and traditional companies exist in two very different worlds, with capital as the only connection as traditional companies funnel more and more of their money to be invested in Silicon Valley. In other words, companies don't know how to invest in renewal, so they channel funds into Silicon Valley or to their owners.
With the software business spreading across all industries via digitalisation, impacting value propositions, chains, industry strucutures, etc, it's more important than ever that all companies figure out how to renew themselves and how to build new innovations. One of the main challenges companies face arises from existing culture & governance. Trying things out is often an unfamiliar concept, and Excel-based ROI models and decision-making typically require certain and short payback times, instead of uncertain investments over a 3-5 year time frame.
So the key question here is: How can traditional companies adopt Silicon Valley culture as well as new ways of working and ROI models that would allow them to continiuosly renew themselves and balance their investment portfolio between empowering, sustaining and efficiency innovation?
Another closely related theme is addressed in a book called Team of Teams: New Rules of Engagement for a Complex World. In it Stanlety McChrystal & co explain how the modern world is becoming more and more complex and unpredicatable, and how this results in significant challenges to traditional leadership and management models, which are based on prediction, planning and linearity. According to the book, an environment becomes complex and unpredictable when both the number of connections and speed of interaction increase. This phenomenon is apparent in Silicon Valley, which is a rather tight community with high connectivity and fast interaction.
McChrystal explains how traditional organisations need to renew themselves in order to thrive in this kind of world - they need to build transparency to achieve collective situation awareness and move from silos and hierarchy into networks, from hierarchical decision-making into individual initiative and responsibility.
Personally, I feel privileged that I have the opportunity to experience first hand the things Christensen and McChrystal write about, almost daily here at Futurice. We help established orginisations adopt ways of working utilised by start-ups and build up their own innovations and innovation culture.
Turning brilliant ideas and thoughts into reality is extremely rewarding work.