Friday, May 1, 2020

8 Keys To Real Innovation Outside of Silicon Valley

oracle-silicon-valley-industry-redwood-shoresIn my experience, the Silicon Valley startup model, focused on disrupting established industries, has treated the USA well and created some great global businesses. Yet many of you are telling me that we are all missing big opportunities by not recognizing the unique challenges faced by startups in developing countries, where infrastructure is lacking, and talent is not so concentrated.

In effect, Silicon Valley needs to take a more global perspective. It has played almost no role in the emergence of current non-US bred startups, including Alibaba in China, Waze from Israel, Paytm in India, and many more. From my consulting with entrepreneurs in Europe and other countries, I’m convinced that we all could benefit from adapting to meet their environments.

I found these challenges and opportunities outlined well in a new book, “Out-Innovate,” by Alexandre Lazarow. He comes from a background in venture capital from inside and outside the Valley, as well as entrepreneurship work with startup efforts around the world. I second his list of top innovation challenges and strategies to capitalize on untapped global startup opportunities:

  1. Create new markets rather than disrupt existing ones. Silicon Valley is focused on disrupting established industries, but in many parts of the world, innovators must create new sectors, such as education, health care, financial services, and energy. Competition is not always a bad thing, and the real purpose is often to make the world a better place.

  2. Design the full stack, not just a new software element. In Silicon Valley’s classic model, startups must start “asset light.” That means they look for focus on a single piece of the value chain, to limit capital required, people, hardware, and complexity. The idea is to build excellence in one area, and get the rest from the ecosystem.

    In other parts of the world, innovators often need to develop both the ultimate product or service, as well as the enabling infrastructure that underpins it. Even here, Elon Musk faced this issue with Tesla, needing a support ecosystem as well as new technology.

  3. Build for sustainability and resilience, as well as growth. With a singular focus on building unicorns, very rapid growth has been a key metric. But for many other innovative startups in emerging markets where shocks are frequent, a focus on sustainability and the longer view are more key to success. Indeed these principles are good for all startups

  4. Connect ideas and networks from around the world. With today’s pervasive Internet, the best ideas traverse continents and improve with successive waves of adaptation, through diversity in experience, culture, and worldview. Thus Uber’s ride sharing evolved to Gojek in Indonesia, to include delivering food, packages, and even financial services.

  5. Target a global market rather than a local from day one. Even Silicon Valley is running out of local markets large enough to sustain scale. Today’s smart innovators target a large opportunity from fragmented regional markets around the world. It’s also a good defensive move, to preempt competition, which is bound to come world-wide.

  6. Assemble a distributed A-team from top world talent. Silicon Valley’s conventional model is to integrate local experienced engineering, product development, and marketing people for the big push. The distributed model draws on a diverse pool, helps manage costs, and captures regional insights and focus necessary to win local customers.

  7. Manage risk – don’t just “move fast and break things.” Managing risk is about determining upfront which risks are acceptable and which are non-negotiable. Many global ecosystems don’t have the tolerance for legal negotiations and recovering from mistakes. Even consumers here in the US are demanding a more responsible approach.

    Witness the recent backlash against Facebook and Twitter for the non-transparent use of customer data, and for enabling foreign election interference. Facebook’s market value tumbled many billions in 2018 due to users’ decreased confidence in the platform.

  8. Develop new venture models for tougher ecosystems. Without easy access to venture capital, entrepreneurs might have a very innovative idea, but no way to get it off the ground. Investors must learn to appreciate the value of global diversification, be less restrictive on timelines, and prioritize social impact as well as business growth.

I see more and more evidence that that the larger potential for you today as an entrepreneur is to create new industries on a global scale, rather than disrupt old ones. That requires a redefinition of startup and funding best practices and focus, including building new ecosystems, a focus on resilience, societal challenges, and diversity. The global entrepreneurial age is upon us.

Marty Zwilling

*** First published on LinkedIn on 04/14/2020 ***

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