Here’s how Silicon Valley can avoid Detroit’s fate

By Alex Lazarow

In the 1950s, the cutting-edge technology of the day was automobiles, not computers. At the time, Detroit was on top of the world. The top three global car companies were headquartered there. The world’s leading entrepreneurs flocked there for access to talent, capital, and culture. Detroit was leading the way in automotive technology, which promised to reinvent the ways we built our cities, organized our society, and lived our lives. Then innovation started to take root all over the world. Car companies emerged in France, Italy, Germany, Poland, Sweden, and Japan. Over time, certain regions specialized, and in time surpassed Detroit. Italy became the home of the best and fastest sports cars, and Germany to raw engineering. Silicon Valley and Shenzhen are the leaders in electric cars. The playbook on car making was also rewritten abroad. Toyota, for instance, pioneered the transformative approach of “just in time” manufacturing. Detroit was left behind.

Silicon Valley may be headed for a similar fate. Again, we’re seeing innovation today taking root everywhere. There are over 480 startup hubs around the world and 1.3 million startups. The best place in the world to create super-apps is China. The largest digital bank is in Brazil. The largest robotic process automation company was started in Romania. The world of tech is global, and to thrive in the next few decades, Silicon Valley will need to regroup, retool, and reinvent itself to stay on top—or at least stay relevant.

Especially during the ongoing global health crisis and subsequent stay-at-home orders, employees are learning how to work remotely, and companies are weighing some of the costs and benefits to this new remote world. Many companies in the Bay Area have already drastically expanded their work-from-home policies, some like Facebook have banned group meetings over 50 until 2021, and Twitter has gone so far as to allow remote work for all employees indefinitely. If a new normal includes such liberal remote work policies and the limited ability to congregate, Silicon Valley may lose some of its purpose as a technology hub as teams get distributed across the country and even the world.

But this doesn’t mean that Silicon Valley is destined to slip into irrelevancy. There are still opportunities to maintain its dominance in the tech world, including:

Focusing on different industries: Silicon Valley needs to refocus its strengths in innovation aimed at solving global challenges. By one count, only 18% of U.S. unicorns focus on solving problems in healthcare, education, financial inclusion, and agriculture. These are untapped opportunities with huge upside and impact potential. For instance, there are 55 million Americans that are underbanked and over 80 million who have no or limited health insurance. Additionally, these needs are critical to the well-being of the general populous, and many innovations in this space will continue to progress even through a potential downturn, as spending starts to slow on luxury or excess consumption.

Innovation from diversity: Silicon Valley has long been obsessed with disrupting existing but inefficient industries with new software-based tools. The future opportunities will come from creating solutions for the mass market and particularly for the underserved. This change will not just be philosophical. It will also require greater diversity in both hiring and capital distribution. Companies need to continue to bring more people in from all walks of life for all types of positions. They need to capture the talent and perspective of those that understand problems intimately and from a unique angle. Venture capitalists too will need to look outside of their typical bubble of hopeful technology stars in the Valley, usually led by white American men.

Rethinking talent: To access this talent, Silicon Valley will need to think beyond just hiring A players, often star engineers or project managers from “FANG” or other top tech companies. Instead, companies should focus on building A teams that can succeed over the long-term. It will need to widen its recruiting lens and focus on retention and growth rather than accepting a revolving door of talent as part of the business model. Distributed teams will be increasingly important to tap the world for talent, as technology skill sets grow globally and remote work becomes more of the norm. This may require companies to stand up to legislators that are leaning toward protectionism and reducing immigration quotas if they want to make their people their most valuable asset.

Resilience, not growth at all costs: Critically, solving the world’s hardest problems won’t be possible with a growth-at-all cost mentality. There will be a lack of appetite for business models that include subsidizing costs as part of its way to incentivize and gain customers. Instead, Silicon Valley will need to refocus on building startups that are sustainable, resilient, and built to last. Firms in cutthroat industries will have to differentiate on quality and strategy. No longer will startups have such a long leash for using promotions.

Silicon Valley has an incredible capacity for innovation and can remain a center of opportunity, but only if it changes its focus. When the world goes through seismic shifts like the current one, people, companies, and governments all have to pivot to stay relevant. In a world where geography is becoming less important for success, Silicon Valley may be required to spread its influence and brand globally through its products, services, people, and strategy.

Otherwise Silicon Valley will have had its moment, like Detroit.

Adapted from Out-Innovate: How Global Entrepreneurs–from Delhi to Detroit–Are Rewriting the Rules of Silicon Valley (Harvard Business Review Press).

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