For tech giants and startups alike, Silicon Valley success is grounded in core business values and processes rather than technological know-how — with a unique twist.
Recently, I had the good fortune to participate in a tour of San Francisco Bay Area technology companies, led by my colleague and coauthor on this piece, John Gallaugher, who over the past decade has run 25 such events. Our group visited a total of 24 companies, ranging from large, established technology giants to late- and mid-stage startups to various venture capital and finance companies.
Many executives experience similar types of company-sponsored learning experiences, and I had taken part in the same program four years ago. This return visit, however, showed me a perspective I didn’t see during that earlier visit. It was clear just how much things keep changing in Silicon Valley, particularly when compared to the rate of change at most established companies. If you visited most traditional businesses four years ago, they would likely be fairly recognizable when you returned today. In contrast, the Silicon Valley environment is noticeably different. This relative pace of change between West Coast tech companies and more traditional ones suggests a potentially ever-widening gap between digitally driven companies and the rest.
One notable shift was in the maturation and expansion of the current digital giants. In 2013, Facebook’s dominance was open to question — profits were down, its stock had spent a year below IPO price, and mobile revenue was nearly nonexistent. Today, Facebook’s revenues are up over 500%, with the bulk of them coming from mobile. The “move fast and break things” company has matured to “move fast with stable infrastructure.” And Google isn’t even “Google” anymore — it’s Alphabet, a company with a fast-growing cloud business, moonshot innovation from self-driving cars to life science, and a company-defining focus shift that pins its future to leadership in AI and machine learning.
Smaller companies were also notably different. Many have adapted their business model significantly as the technological environment evolves. For example, mobile payments company Square Inc. has moved beyond credit card processing to provide an entire suite of small business tools . Likewise, WePay Inc. has shifted from a group payments model to a B2B, marketplace-focused model that helps platforms such as GoFundMe and Care.com process payments. Even companies that I’d written off as dead, such as gaming company Zynga Inc., are adopting a more disciplined and sustainable business model. This pivot led Zynga’s stock to rebound 50% in the past year.
What’s the same?
Other things, however, remained the same — specifically, the focus on the four core business elements of culture, structure, talent, and mindset. Certainly, both digital and non-digital companies focus on these aspects of business, but Silicon Valley companies appear more likely to point toward these factors as an important source of advantage. There was considerable variation in exactly how these aspects played out at each company, but it was these four non-digital aspects of the business that many digital companies highlighted as critical to their success.
Nearly all companies touted their culture as a key driver of the company’s mission. These cultures were often wildly divergent from one another — whether it be the gamers of Zynga, the sports fans of Fanatics.com, or the design culture of Airbnb — but each had a very clear identity, and most companies pointed toward this identity as an important part of accomplishing their mission. Specific aspects of the culture did not seem as important as its intentional development and central role.
A surprising number of companies also emphasized the importance of an organizational structure that is strategically aligned to their goals, even though, again, those structures often vary widely. Whether it was an emphasis on flat, decentralized teams at the secretive Palantir Technologies Inc., the trust cultivated through transparency at Facebook, or the unity provided by a single company-wide profit and loss statement at Apple, organizational structure was often identified as an important part of the company’s competitive advantage.
All of the companies we visited were relentlessly seeking new talent. While tech talent is certainly in demand, companies are also looking for workers who are simply engaged and eager to learn. Yet, even the best and most desirable companies in the world must take active steps to compete for the best employees. We’ve witnessed a migration of that talent away from Silicon Valley toward San Francisco over the past few years. In response, many companies moved to or established outposts in San Francisco, and most big Silicon Valley organizations now run Wi-Fi-enabled shuttles to bring talent from the city to their campuses.
Perhaps the greatest difference between traditional companies and those in Silicon Valley, however, is how they view the future. As we drove away from the Facebook campus on the final day of our trip, the back of the sign welcoming us sported the logo of Sun Microsystems Inc., the one-time tech giant that previously occupied this location. Facebook keeps this old logo in place as an intentional reminder to its employees of how quickly things can change. With few exceptions, the companies we saw were relentlessly focused on digital disruption — even if it meant digitally disrupting themselves.
While established companies are waiting for evidence they might be disrupted by digital trends, Silicon Valley upstarts assume this is happening even if they don’t see immediate evidence of it. They use current business success to drive further growth, either in the form of dedicated innovation time and space or venture investment arms in startups. It was this view of the inevitability of future change that most clearly demonstrated the distinctive factor of Silicon Valley. These companies are willing and able to reinterpret their core identity and mission in response to changes in the digital environment.
Traditional companies can also adopt this mindset. For example, General Electric Co. has launched GE Ventures Inc. to support promising startups that are aligned with the strategic objectives of the company, meant to scout advances and partnerships, by providing them access to funding and GE expertise. As incumbents seek to operate in an increasingly digital competitive environment, this change-oriented mindset might be the most critical factor.