Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Silicon Valley's Crown Is Not "Up For Grabs"

Posted by Tom Foremski - May 4, 2009

The BBC's Maggie Shiels finds one source: Tom Siebel, the retired founder of Siebel Systems, to come up with a long story and an eye catching headline: Silicon Valley crown up for grabs

"I think Silicon Valley has been toppled from its pedestal," he told BBC News. "I think information technology is much less important in the global picture today than it was even 10-20 years ago."

We've heard this one many times before, that innovation can now be done anywhere, and that Silicon Valley is going to be far less important. It's an old argument that has been used each time Silicon Valley goes through a downturn.

Yet each time Silicon Valley goes through a bust cycle it comes back stronger than before. I've seen several boom and bust cycles since 1984, such as the PC bubble bust; the CD-ROM multimedia bust, the dotcom bust, and the four-year bust cycles of the entire chip industry, plus periodic busts in IT, data storage, and biotech. Each time Silicon Valley rebuilds and becomes larger and more important.

Silicon Valley's success as a global engine of innovation takes nothing away from growth in other regional centers of innovation. It is not a win/lose equation, all centers can grow -- yet journalists continue to poke for holes in Silicon Valley's prospects.

Silicon Valley has its challenges but there's no place that comes close to rivaling this region. I'm constantly hearing of companies moving their HQs to Silicon Valley from all over the world. For example, at a recent SF New Tech event I met the CEO of French firm blueKiwi Software, Carlos Diaz. He was in the middle of moving himself and family to Silicon Valley.

Loic Le Meur, founder of Seesmic did the same thing about eighteen months ago, moved his company and family to Silicon Valley.

Here is an excellent view on Silicon Valley from Bill Coleman, a Silicon Valley veteran. He recently sold BEA Systems, which he co-founded, to Oracle for $8.5 billion. We met earlier this year, here is part of our conversation:

BillColeman21.jpg"I have a basic theory that Silicon Valley reinvents itself by inventing a new platform layer every 10 years." Bill Coleman says that Silicon Valley was lucky to develop information technology (IT), a technology that is now becoming cloud computing, a new platform. Information technology is also vital in driving the development of two additional disruptive technologies: nanotech and biotech. And fortunately, Silicon Valley leads in all three industries.

Silicon Valley also leads in green technology, a large and growing market. But green technology is different -- it isn't a disruptive technology. He says that a disruptive technology has to have a characteristic of the Peter Drucker rule in that it provides ten times the value of what it's displacing.

Cloud computing doesn't need government incentives because it is a disruptive technology, says Mr Coleman, especially the next stage, beyond what he terms "Cloud 1.0." As the cloud computing platform becomes more sophisticated, he predicts that there will be an acceleration in the use of the cloud driven by a "quadruple conversion." Video, audio, and IT data all become IP based, and productivity applications become integrated with social networks.

About 18 months ago I met with a large Russian delegation on a trip to Silicon Valley to learn some of its lessons. They have plans to establish multi-billion VC funds around several innovation centers across Russia.

They asked lots of questions about how things worked around here but they told me that they didn't want to copy Silicon Valley.

"We don't want to build a clone of Silicon Valley, we know that wouldn't work. But we believe we can learn how to avoid some of Silicon Valley's problems and eliminate its bottlenecks," said Yuri Ammosov, a senior policy officer in the Russian Ministry of Economic Development and Trade.

They also didn't want any regulations such as Sarbanes-Oxely, which they clearly saw as a very heavy load on startups.

I told them I would tell them Silicon Valley's biggest secret. I paused for dramatic effect. As if on a cue, they all leaned in a little closer.

I I told them that Silicon Valley's biggest secret is: "Failure. Silicon Valley tolerates massive amounts of failure." Less than one in ten startups succeeds.

I felt at ease sharing this vital secret because it's something that can't be stolen. Who would want to steal the idea of tolerating massive amounts of failure?!

Yet it is this tolerance of failure is what allows Silicon Valley entrepreneurs a second and seventh chance to fail again and again and eventually succeed. In other cultures, failure is often punished, you rarely get another chance. Here, failure is an important part of our culture of entrepreneurism.

Innovation centers can be built anywhere there are good universities; and small amounts of seed investment can startup a lot of companies these days because capital costs are very low. But a culture of entrepreneurism is something that can't be bought -- and it's not easily developed or transplanted.

For example, the Russian delegates said that they have a big problem: Russian startups won't disclose their business ideas because they don't trust the Russian VC funds and think the officials will run off with their ideas.

The Russians have a lot of work to do in building up their local culture of entrepreneurism. And that's also true everyplace else that's not Silicon Valley.

Silicon Valley's crown is not up for grabs. No one comes close.

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Please see:

Thought Leader: A Conversation With Valley Veteran Bill Coleman About The Economy And The Business Of Disruption . . .

Turning Oil Into Innovation: Russian Delegation Seeks Silicon Valley's Lessons

The disruptive tectonic forces at the intersection of technology and media

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