Silicon Valley Master Plan: The six success factors behind the digital transformation mecca

In my first blog post “Inside Silicon Valley: There´s only MAKE“ I have introduced two most important learnings of our LeadershipGarage Experience. However, what is so special about the Silicon Valley? What are the hard facts behind the myths surrounding Silicon Valley? And much more importantly: Why are the Silicon Valley-based corporations and start-ups the pioneers regarding innovation and development?


Silicon Valley’s six success factors


To understand Silicon Valley you first need to understand its very own essence. This is the result of the contribution given by Prof. Keith Devlin, head of Stanford University’s H-Star Institute, and one what was a stunning revelation for me: Silicon Valley’s success story is not simply down to chance; it has not developed because of a series of lucky circumstances and accidental encounters between certain IT pioneers. On the contrary, it is the result of a sophisticated master plan. The current importance of the world’s most innovative economic and scientific region can be attributed to six critical success factors.


1. Government subsidies: Silicon Valley’s nucleus is the Moffett Federal Airfield, which was the region’s main military airfield after the end of the Second World War. Massive support from the US government encouraged many aviation companies involved in military research to base themselves in the vicinity of the airfield. The area itself only started to become known as Silicon Valley in 1971. These governmental fundings caused, that new enterprises received a financing possibility for themselves and their ideas even without the chance of venture capital.


2. Available space: One of the founding fathers of Silicon Valley (and pioneer of today’s venture capitalists) was Frederick Terman, a former dean of Stanford University. He conceived the idea of making it easier for people to start businesses by providing them with money and allowing them to use the university’s large unused tracts of land. Students William Hewlett and David Packard were among the first beneficiaries of this program. Terman helped them establish their electronics firm as far back as 1939, laying the foundations for Silicon Valley’s civilian nature as we know it today. Terman had moved from Boston to the West Coast in the 50s because it offered conditions which other regions had tried to implement but with far less success.


3. Infrastructure: With two large airports, its proximity to the coast and major universities such as Stanford, San José and Berkley, Silicon Valley offers the perfect infrastructure for innovation and growth. A carefully selected region and infrastructure, with enough room for innovations to grow yet small enough to create density and energy. Moreover, very well equipped universities guarantee both highly qualified university graduates and a stock of young professionals and experienced executives.


4. Capital: At the beginning of the 70s, the original government subsidies which had attracted experts, scientists and founding pioneers were joined by professional venture capital. At the end of the 70s, the government subsidies were increasingly cut back, paving the way for the development of what is now the world’s strongest venture capital scene. Apple’s IPO in 1980 gave the Valley a new dimension in terms of capital procurement for young, innovative technology companies. The fact that the most valuable brands are now based in the Valley is no coincidence and the result of systematic infrastructure management.


5. Talents: Established professionals and young university graduates alike are attracted by the ideal conditions in Silicon Valley. The knowledge transfer process first started in 1955 with William Butschke Shockley (who was later awarded the Nobel Prize for physics) and has never stopped to this day. Hardly any region in the world now has so many high potentials working in such a small area. It offers a unique environment where people can easily switch between the best companies in the world. “Highly fluid workforce” has a special meaning of its own here.


6. Spirit: In the IT industry’s very own heart center predominates a culture of start-up and failure, knowledge is naturally shared, and innovations originate through cooperation and networking – day by day, you learn from the best. Moreover: For Prof. Keith Devlin “Failure is a badge of honor”, defining a radically different culture of dealing with mistakes compared to German/European companies. Mistakes hold no stigma. To fail doesn’t mean to lose everything. There a many more employers providing you with new job opportunities. It is quite the contrary: Anyone attending a job interview who is unable to cite at least two serious mistakes from which he has been able to learn appears less than credible and has failed to understand the benefit of being open about his strengths and weaknesses.


Thus, while the colossal number of way over 40,000 start-ups since the mid-50s is in large part based on planned structural support, the real decisive factor is the spirit which prevails in the Valley. A concentration of high-tech companies has only evolved to become the mecca of digital transformation thanks to a combination of high risk propensity, huge dynamism, strong networking and disruptive thinking. This is first and foremost a cultural transformation, and one that is possible in any company of the world. However, one point should be respected: Every company is unique and must therefore adapt those cultural qualities, which fits to its very own individuality.


Have you already started to change the culture within your company? What challenges are you facing?


Photo Credit: Christian Rondeau via flickr

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