Ten Thoughts from MIT Sloan’s Silicon Valley Tech Trek
Each year, we at the MIT Entrepreneurship Center at the Sloan School of Management travel to Silicon Valley for a three-day immersion program with our MBA students who have a very entrepreneurial spirit and interest. While we make visits during other parts of the year, this is different in that it is a 24×7 analysis of what is going on in Silicon Valley. We visit dozens of companies, hear guest speakers from the venture capital sector as well as entrepreneurs, attend receptions with other universities in the area (Stanford and Berkeley), connect with alumni in the region, and visit multiple incubators.
While all of this is fantastic, the most fun is the discussions that we all have with each other in the cars, at meals, and at night. These discussions are an analysis of what was heard by the hundred-plus students and staff on this trip. They often carry on and develop over multiple days, and we all get to retest our hypotheses through the many interactions we have each day. We start in the morning together and then spread out over the Valley to multiple companies in groups of usually 4-8 to visit companies and often hang out in common areas in Palo Alto, San Francisco, Menlo Park, or another Silicon Valley spot. We then come back together at night and share our findings.
Within three days, we get a sense of what the new buzz words are and then we gain an understanding of the underlying core concepts—and then, we quickly start to see their limitations and tire of them. Last year it was “pivot” and “lean startup” and this year it was “social graph” and “repotting.” But more importantly, we get a real visceral sense of what the latest trends are that we could not have gotten from anyplace else or a quick drive by. In this vein, here are some of my personal observations:
1. Quora: Wow! Man is this company hot! It is a far from a foregone conclusion that they will be the next huge thing but I would not bet against it. A very quirky company in many regards but they have harnessed a potential major force that we have known about for a while—crowdsourcing—and seem to have found a high quality way to execute it unlike anyone else before them. They have taken the next step to hybridize a key element of Facebook and Wikipedia and are executing on it very well so far. If they can establish themselves as the standard, there are definitely networking effects that could make them the next eBay, Facebook, or YouTube. I had heard their name before but did not realize what a powerhouse this company has the potential to be. They also have Academy Award–winning software developers leading the way. Oh by the way, it is not just me that thinks they are hot, the people in the know loved them too.
2. Facebook Approach vs. Google Approach. While these companies might seem to be similar in many ways, there is a fundamental and profound cultural difference in their approaches. This was pointed out by one very astute entrepreneur and then we tested it for the rest of the trip and it rang true. Google’s approach to problems is a technology-centric solution, i.e., we can solve this with a smart algorithm or some sort of powerful technology breakthrough. Facebook on the other hand has a product-centric solutions approach. This is not to say that Facebook does not have some incredible technologists, they do (and vice versa – Google has some great product people), but rather Facebook’s mental model starts with the product and they see solutions emerging from the underlying execution (which includes technology). In the end, the product is valuable not just because of superior technology but because of what it captures (e.g. the social graph). This is very subtle but it made more sense the more we saw.
3. In a Theoretical World Championship Bowl, Now, It’s Facebook with a #1 Ranking vs. Google with a #2 Ranking. Surprisingly people see the future (with good reason) as being Facebook. The knowledge of the user and his/her preferences (the social graph) is what is going to be the most valuable in the future. Having uncustomized searches will become more and more a commodity or at least of significantly less value. Customization comes from the social graph. Besides, people are spending more time with Facebook than Google these days. Where is Microsoft, you ask? Falling in the rankings and definitely less relevant. The interesting thing about Microsoft, however, is that they have a consistent flow of cash that will be around for a long time; Google on the other hand could see its cash flow move away much faster because the switching costs are much lower. IBM (note: I am a former IBM person from 20 years ago, when they dominated the industry so much that the Justice Department filed antitrust suits) seems to have either shut down its program or moved to Division III and will not be getting even consideration for the bowl game. This just shows how quickly things change in this industry. Apple, see below.
4. The Future Is Mobile, but Will It Be Android Dominated? Smartphone adoption is now outpacing PC adoption. The iPhone and iPad (despite its limitations) are seeing market adoptions rates that are unfathomable when viewed historically. That being said, the surging popularity of Android (funded by Google’s deep pockets) could overtake even the rapid rise of the iPhone. If Apple is not careful, what happened in the PC operating system market could repeat itself with the mobile world: Apple gets points and some devotees for being artistic and the pioneer but someone else runs off with the majority market share because their system is open and runs on multiple platforms. I know Apple has the huge market cap today, but trends are usually more important than absolute position. Oh by the way, isn’t it amazing how mobile innovation used to be most associated with Korea, Scandanvia, Japan and else where but now the center of gravity for innovation seems to have come back to the US.
5. Clean Energy Investing and Entrepreneurship is Much More Rational. The crazy “greentech”/”cleantech”/”enertech” movement has settled down now with a chastened and much wiser approach from investor and entrepreneurs. This was an obvious evolution of the market but a lot of the “save the world” emotion has been worked out and people realize that sustainable environmental solutions require sustainable business solutions. Sustainable businesses cannot be build on guilt relief or hype surfing, but require solid fundamentals and calculations verified in the market place.
6. Less Self-Absorption. Maybe this is a kind of variation of Heisenberg’s Principle whereby when you measure something, you change the outcome. But Silicon Valley seemed much less absorbed with itself this year—i.e., I saw more recognition that there was an important world beyond Silicon Valley. I may have altered the data we saw because I quickly express a disdain for this East Coast vs. West Coast rhetoric as soon as I think it is starting. Neither place has a monopoly on great entrepreneurs, entrepreneurship, or venture capital. I also think location is becoming less important as technology “flattens” our world. We are all connected to each other and your company can and should have a presence in many different regions. Groupon, the biggest story of 2010, symbolized this in spades as it came out of Chicago. As one entrepreneur said, “it couldn’t have happened here; we just couldn’t see that kind of business model with our supposed wisdom.” Maybe this was just wishful thinking, but I sensed a more inclusive and broader perspective.
7. They Can’t Figure out Groupon Either. Oh yeah, as I just mentioned, the biggest story of 2010 is a mystery to the really smart people out there too. Not only did they not see it coming, it is very unclear where they go from here.
8. Rich Wong of Accel Partners is a Superstar. Yes, I will admit I love a guy who is an engineering geek, logged some time in a large company (Procter and Gamble), then became an entrepreneur and has an MIT degree, but he is so entertaining and humble. Rich had a busy year with the Admob investment closing, and investments in Atlassian Software and SunRun. Rich’s firm, Accel Partners, also had a busy year, with all that’s going on with Facebook, Groupon, Etsy and the like. That makes for a good year, and I am very confident that more are to come.
9. China: They May Call This the Year of the Rabbit But Maybe Gorilla is More Appropriate. You can’t go anywhere in Silicon Valley without becoming overwhelmed when the discussion turns to the business opportunities in China. The sheer magnitude that China represents is mind-boggling. We had one student on our tour who had over 400,000 people following him on the Internet (I have those zeros right) but since it was in China, he did not think it was such a big deal. The IPOs for 2010 were dominated by Chinese companies or companies serving the Chinese market and that has been noticed by the powers that be.
10. MIT Sloan MBAs Are the Best, But Boy Do They Need to Learn to Market Themselves Better. The good news is that it blows me away each year how intelligent, diligent and professional these MBA students in their late 20s are, and what incredible accomplishments they have had already. They are such a great group who are fun to be around and so supportive of each other, it is truly amazing…and they get better every year (applications have been up 57 percent over the past five years, higher than any other business school). The questions they ask and the qualifications they have are just what the world needs now for the new innovation-based economy. But now the bad news, they need a massive upgrade in personal branding. Their understanding of how to present and sell themselves holds them back. We will work on that this year but this trip reminded me of why they are so wonderful and successful here at MIT and after they graduate.
I feel like I just got a refresh of my data base, a new version of my operating software, and drank a few cans of Red Bull…and now I am geared up and ready to go. Bring on 2011!
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