Starting from this year, European School of Management of Technology (ESMT) in Berlin offers two elective tracks: Management of Innovation and Technology (MIT) and Global Sustainable Business (GSB). As part of their all-expenses paid international field trip, Russian student Dimitry Krasnozhon shares with GMAT Malaysia his impression of the Silicon Valley. For more information on ESMT full-time MBA program, visit http://www.esmt.org/eng/mba-emba/full-time-mba/.
By Dimitry Krasnozhon, ESMT MBA 2011 candidate
Whenever coming across the term Silicon Valley, I was struck by the question of its origin. What stands behind this name is unfamiliar to vast majority of people, although it is impossible to imagine modern civilization without inventions ranging from HP pocket calculator to lasers that came from this area. The ten-day field trip to Silicon Valley was a strong nudge to learn about the history of the place before meeting its business and academic luminaries in person.
The name Silicon Valley was first mentioned in 1971 by Don Huefler, Microelectronics News editor, as a title of article about semiconductor industry developed next door to Stanford University. The reason is surprisingly simple: silicon is the material for producing semiconductor chips, a product which gave the Valley its current technological edge. Silicon Valley is an evident example of what bright individuals with scientific background and business mindset can achieve if given proper financing, creative freedom, all of that backed up by wise state economic policy. As Thomas Mahon, author of “Charged bodies: People, Power and Paradox of Silicon Valley” put it: “the Valley is an economic and cultural frontier where successful entrepreneurship and venture capitalism, innovative work rules and open management styles provide the background for most profound inquiry ever into the nature of intelligence”.
Over the past 60 years Silicon Valley has become a global technology powerhouse giving home to more than 10 thousand companies and employing more than one million people. Which factors led the valley to success? Are they exportable? Can these conditions be recreated in Russia, my homecountry, which once stood at the forefront of innovations in microelectronics, aerospace, and nuclear physics? These questions were of my major concern throughout the trip.
I was particularly impressed by the executive summary that Lisa Sweeney, Director of Stanford GSB Center for Entrepreneurial Studies, gave us. She sees the “Secret Sauce” of Silicon Valley prosperity as a blend of four ingredients: Unique Culture, Free Markets, Stable Legal System, and Reliable Infrastructure. Indeed, the culture is one-of-a-kind in terms of risk and failure tolerance. Venture capitalists invest where others fear, whereas on average only one in 20 companies succeed. The good thing is that if you fail, you can try again. In other cultures usually you do not get the second chance. “Proper” failure is acknowledged in the same fashion as success because it gives valuable lessons. The common philosophy is that a start-up is not a tech company, but rather a learning tool. In this respect, both venture capitalists (Khosla Ventures) and serial entrepreneurs (Krish Ramakrishnan of Blue Jeans Network) echo each other’s words: failure is tolerated if it results from from unsecured financing, product ahead of the market or lack of commercialization skills. However, poor execution and lack of commitment will most likely leave a black mark on the entrepreneur similarly to other more conservative environments. Another striking cultural aspect is the readiness of Valley’s residents to share ideas and collaborate, thus creating an uncommon mix of partnership and competition, which at the end of the day determines the success of the whole valley.
However, this culture would not have formed without Stanford University, the nucleus of high-tech industry in Silicon Valley. Founded by railroad tycoon Leland Stanford in 1887, the university became the main source of engineering specialists for local businesses. In mid twenty century Stanford Research Institute was formed. This research park leased land in Stanford vicinity to high-tech companies on favourable terms, and this is when the real binding between the university and the companies took place. Many high-tech pioneers including HP moved their R&D centers to the park making it a worldwide model for a handful of other high-tech clusters.
During the field trip meetings, none of the speakers explicitly mentioned the role of the US Government in supporting the Valley, leaving us under the assumption that the main benefit currently given by the state is its non-interference. However, state support played a vital role in the early days: military spending represented about 70% of integrated circuits in sixties. Pentagon still remains an important purchaser of latest technologies. In addition, the area has secured a modern legal framework that accounts for favourable tax regime for start-ups, intellectual property protection, and hiring the best talent including foreign specialists. For instance, more that half of Silicon Valley companies were initiated by people born outside of the US.
Finally, the Valley’s infrastructure – utilities, transportation, high technology penetration, backed by mild Mediterranean-like climate create an environment highly appealing for work and life. Throughout the trip I have been reflecting on how this innovation cycle can be replicated in other geographical areas. Which elements are “exportable” and which are not? History knows a few successful examples like Silicon Wadi in Tel-Aviv and Central Taiwan Science Park, but also a multitude of less prosperous examples, such as Sophia Antipolis which has been micromanaged by French government for years and Shenzhen Technology Park. The latter research center attracts brightest local students but according to Margaret O’Mara, Professor of History at University of Washington, they do not intend to build companies in the area upon graduation. The most recent ongoing attempt is Russian President Medvedev’s Skolkovo Science Park on the outskirts of Moscow. There are certainly many legal, cultural, and infrastructure issues that will prevent this project from becoming a success story overnight. The good news is that Russian leadersWhenever coming across the term Silicon Valley, I was struck by the question of its origin. What stands behind this name is unfamiliar to vast majority of people, although it is impossible to imagine modern civilization without inventions ranging from HP pocket calculator to lasers that came from this area. The ten-day field trip to Silicon Valley was a strong nudge to learn about the history of the place before meeting its business and academic luminaries in person.
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And, I leave you with this song "Going to San Francisco" by 92.7 edit
Jimmy Low
Dimitry and his ESMT MBA classmates in San Francisco
Over the past 60 years Silicon Valley has become a global technology powerhouse giving home to more than 10 thousand companies and employing more than one million people. Which factors led the valley to success? Are they exportable? Can these conditions be recreated in Russia, my homecountry, which once stood at the forefront of innovations in microelectronics, aerospace, and nuclear physics? These questions were of my major concern throughout the trip.
I was particularly impressed by the executive summary that Lisa Sweeney, Director of Stanford GSB Center for Entrepreneurial Studies, gave us. She sees the “Secret Sauce” of Silicon Valley prosperity as a blend of four ingredients: Unique Culture, Free Markets, Stable Legal System, and Reliable Infrastructure. Indeed, the culture is one-of-a-kind in terms of risk and failure tolerance. Venture capitalists invest where others fear, whereas on average only one in 20 companies succeed. The good thing is that if you fail, you can try again. In other cultures usually you do not get the second chance. “Proper” failure is acknowledged in the same fashion as success because it gives valuable lessons. The common philosophy is that a start-up is not a tech company, but rather a learning tool. In this respect, both venture capitalists (Khosla Ventures) and serial entrepreneurs (Krish Ramakrishnan of Blue Jeans Network) echo each other’s words: failure is tolerated if it results from from unsecured financing, product ahead of the market or lack of commercialization skills. However, poor execution and lack of commitment will most likely leave a black mark on the entrepreneur similarly to other more conservative environments. Another striking cultural aspect is the readiness of Valley’s residents to share ideas and collaborate, thus creating an uncommon mix of partnership and competition, which at the end of the day determines the success of the whole valley.
However, this culture would not have formed without Stanford University, the nucleus of high-tech industry in Silicon Valley. Founded by railroad tycoon Leland Stanford in 1887, the university became the main source of engineering specialists for local businesses. In mid twenty century Stanford Research Institute was formed. This research park leased land in Stanford vicinity to high-tech companies on favourable terms, and this is when the real binding between the university and the companies took place. Many high-tech pioneers including HP moved their R&D centers to the park making it a worldwide model for a handful of other high-tech clusters.
During the field trip meetings, none of the speakers explicitly mentioned the role of the US Government in supporting the Valley, leaving us under the assumption that the main benefit currently given by the state is its non-interference. However, state support played a vital role in the early days: military spending represented about 70% of integrated circuits in sixties. Pentagon still remains an important purchaser of latest technologies. In addition, the area has secured a modern legal framework that accounts for favourable tax regime for start-ups, intellectual property protection, and hiring the best talent including foreign specialists. For instance, more that half of Silicon Valley companies were initiated by people born outside of the US.
Finally, the Valley’s infrastructure – utilities, transportation, high technology penetration, backed by mild Mediterranean-like climate create an environment highly appealing for work and life. Throughout the trip I have been reflecting on how this innovation cycle can be replicated in other geographical areas. Which elements are “exportable” and which are not? History knows a few successful examples like Silicon Wadi in Tel-Aviv and Central Taiwan Science Park, but also a multitude of less prosperous examples, such as Sophia Antipolis which has been micromanaged by French government for years and Shenzhen Technology Park. The latter research center attracts brightest local students but according to Margaret O’Mara, Professor of History at University of Washington, they do not intend to build companies in the area upon graduation. The most recent ongoing attempt is Russian President Medvedev’s Skolkovo Science Park on the outskirts of Moscow. There are certainly many legal, cultural, and infrastructure issues that will prevent this project from becoming a success story overnight. The good news is that Russian leadersWhenever coming across the term Silicon Valley, I was struck by the question of its origin. What stands behind this name is unfamiliar to vast majority of people, although it is impossible to imagine modern civilization without inventions ranging from HP pocket calculator to lasers that came from this area. The ten-day field trip to Silicon Valley was a strong nudge to learn about the history of the place before meeting its business and academic luminaries in person.
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And, I leave you with this song "Going to San Francisco" by 92.7 edit
Jimmy Low
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