Cultural roots of prosperity in the Innovation Age

10 Sep Cultural roots of prosperity in the Innovation Age

Those of us who want to see a “Silicon Valley Class” entrepreneurial community grow here in the “New North” often identify our region’s risk-averse business culture as a major challenge. But, unfortunately, the cultural challenge is bigger than developing more tolerance for risk in business. A lot bigger.
I am currently reading a book by Annalee Saxenian titled Regional Advantage: Culture and Competition in Silicon Valley and Route 128. About 10 years out of date, the book explores how and why Silicon Valley emerged as the global hub of venture capital and technology-driven entrepreneurship, despite not getting in the game until well after the Route 128 region outside of Boston – the home of the first modern venture capital organization and the center of the emerging computer industry in the 1950s – placed its claim on that title. Nevertheless, “Regional Advantage” is a book anyone interested in the New North evolving into anything but a pale reflection of the “Old North” should read.
Risk tolerance
Saxenian’s well-researched book does indeed point out the importance of a risk tolerant business environment in Silicon Valley’s success. But there was – and is – a lot more to it than that: indeed, the business community’s tolerance for risk in Silicon Valley was not all that different from the Route 128 business community’s tolerance for risk. The fact is, business tolerance for risk is a necessary, but far from sufficient, prerequisite for any region that aspires to foster a world-class high impact, innovation-driven economy. And yes, it is something we haven’t had in the DNA of the business community here in the New North since the pioneers who built the paper industry a century and more ago. But that’s the challenge we already knew about.
Saxenian identifies several business and social cultural factors beyond business tolerance for risk to explain Silicon Valley’s emergence as the greatest engine of technology innovation in the world – factors that are consistent with my own experiences in the Valley in the 1980s, and my conversations with Valley colleagues since. Factors that led me to, at one point, put the book down and think to myself “I never should have left the Valley.”
What are some of those factors? In terms of the business culture one key factor in Silicon Valley was a largely “flat” management paradigm, which contrasted sharply with Route 128’s (and the New North’s) more traditional hierarchical management paradigm. Largely a product of World War II’s center-dominated “command and control” economy, the business culture in Route 128 continued, after the war and even today, to focus on vertically organized and centrally controlled distributions of power and responsibilities. This dynamic was reinforced by the region’s conservative and much more class-conscious social structure. Sound familiar? It should.
Another key factor explaining Route 128’s decline was the social culture itself. Albeit to some extent a matter of risk tolerance, and surely related to the region’s hierarchical management paradigm and class-conscious social structure, the social dimensions of the “one career, one company” paradigm that produced the giants of Route 128’s technology community also resulted in the inbreeding that ultimately destroyed most of them (think DEC, Data General, Wang, etc.). My own career path – my wife often jokes about my “semi-annual career changes” – is entirely consistent with Saxenian’s finding that the average career stop in Silicon Valley is … two years. I wonder how long it is in our valley.
Saxenian goes on to quote a successful entrepreneur in Silicon Valley that “when you ask someone around here where they work, they are as like to say “the Valley” as to name a particular company.” When people ask me about my career, I always start off with something like “I began my career in Silicon Valley” not “I began my career at Cooley Godward,” the firm that paid my salary. Go ahead: ask some people in the New North where they work, or got their start, and see if anyone says “the New North.”
Not cool
Beyond dulling their own firms, the in-breeding and corresponding lack of mobility of key entrepreneurs, engineers and managers in Route 128 essentially choked off the natural source of supply for later generation start-ups. Think about it: even today the roots of most of the major, and a good chunk of the emerging, semiconductor firms in Silicon Valley – for example Intel, Cypress, AMD, etc. – can be traced, sometimes directly, more often via multiple interim stops, to Fairchild Semiconductor, or, as it is still often referred to even today, “Fairchild University.”
How many comparably important firms can trace their roots to DEC? Or, closer to home, Kimberly Clark? The bottom line is it wasn’t/isn’t “cool” to strike out from an established firm in Route 128 and, as several entrepreneurs have told me here, it’s not cool in the New North, either. (The next time someone leaves Kimberly Clark to launch a new, high-risk business here, consider asking them “what took you so long” rather than “what happened.”)
Back to the business culture. Route 128’s decline – and the New North seems to be headed down the same cultural dead end – included a “silo” and “if someone wins, someone loses” approach to business innovation and success. Route 128 companies were well known for being tight-lipped places loath to cooperate with competitors or partner with suppliers. Again, this should sound familiar. (It may seem far-fetched to think of Kimberly Clark cooperating with Proctor & Gamble, but everyone knows that there is no love lost between Microsoft and Bill Gates and Apple and Steve Jobs, but Microsoft played a critical role in Apple’s turnaround several years ago with a major capital investment in Apple.
And today, Microsoft is cooperating – and competing – with major suppliers of open source software that squarely target Microsoft’s most strategic and profitable businesses.) People talk about “Open Innovation” as if it is something new. It’s been going on in Silicon Valley for 50 years, as often between competitors as allies: indeed as often between firms that are both competitors and allies.
Easily offended
No doubt this essay offends people, probably a lot of people. Well, that’s another cultural advantage enjoyed in Silicon Valley: people are valued for taking all kinds of risks, including the risks of speaking their mind even when they know what they say will not be popular. Even when they know what they are saying can be fairly critiqued from any number of angles. So go ahead. Get angry. Dispute my thinking. Be passionate about it.