In business, volatility used to be more limited to the realms of finance and high tech. But as the tech wave has continued to sweep the globe, the environment for all organizations, including non-tech ones, has shifted from stability and predictability to rapid, unpredictable change. Innovations like Amazon price checks, or changes to healthcare or shipping enabled by mobile phones, are becoming commonplace. The only sure thing, especially when it comes to technology, is continuous discontinuity. Organizations need to enhance their design and capabilities to survive and stay competitive in a world where innovation matters more.
How can you build your organization’s ability to sense and respond to rapid improvements in technology? Many large, successful companies are creating offices in California’s Silicon Valley to spot big new trends and learn how they can transform their organization in ways they couldn’t otherwise imagine. It’s no longer good enough to wait for change to come to your industry; you need to be out there where it’s happening. And a lot is happening in Silicon Valley.
Consider General Motors, which is looking to Silicon Valley for innovative ideas and technology that could give it a competitive edge. GM established a corporate innovation group in Silicon Valley in 2010 to look at advanced technologies related to the Internet and mobile connectivity, “infotainment”, and self-driving cars. Now it is providing critical early-stage funding to entrepreneurs and offering to be the first customer for startups in a wide variety of sectors, from advanced materials to alternate fuels.
So suppose you want to follow the over 200 multinationals across a multitude of industries that have set up a strategic beachhead in Silicon Valley. What would your Silicon Valley office do? How might it identify the big ideas that are important and bring them into your legacy organization?
My friend Mark Zawacki, founder of 650 Labs, which advises companies on leveraging Silicon Valley, has identified three approaches: idea scouting, venture investing, and traditional product research and development. These approaches show how companies are going beyond simply establishing an outpost in Silicon Valley to creating, instituting and sustaining different “operating models.”
Swisscom AG is the major telecommunications provider in Switzerland. With a big market share in a small country, Swisscom has decided to grow by providing new services to Swiss citizens. Their strategy is to get out in front of ways that mobile phones will change healthcare, education, and shopping. The job of Swisscom’s Silicon Valley team is to find the very best ideas from the giant marketplace of mobile innovations and introduce them to headquarters in Bern, Switzerland. To describe her role, Ursula Oesterle, vice president of innovation, uses the metaphor of throwing and catching a ball between her team in Silicon Valley and headquarters. To make sure the various headquarter divisions in Bern can catch and use the ideas they “throw,” they’ve developed a give-and-take synching process. The process has gone through an evolution: at first the Silicon Valley outpost would pitch opportunities to corporate, hoping that someone would catch the “ball” and run with it. This led to corporate providing a “shopping list” allowing the Silicon Valley outpost to be much more targeted in scouting and screening — in this stage the outpost was again pitching opportunities to corporate, but there was a catcher waiting for the ball. Now, there is something closer to real-time exchange, deeply connecting continuous pitching and catching back and forth.
American Express believes that technology will continue to dramatically change the way that consumers buy goods and services in the future. For example, consumers are going to Amazon for a price check at the point of purchase, or getting coupons based on their location. Harshul Sanghi, Managing Director for American Express Ventures (based in Silicon Valley), has a team that works closely with different groups at American Express to understand their current and future roadmap, as well as existing pain points. The Silicon Valley team then leverages their relationships to identify start-ups with new technologies that might be relevant for a particular business unit. The evaluation process typically includes a trip to the Bay Area with the senior executive sponsor and his/her leadership team to meet companies and evaluate them as potential partners. In many cases there is a fit and the start-up begins working more closely with the business unit to define use cases and run a pilot. Depending on the underlying strategic importance and financial viability, American Express Ventures may invest in these companies to further align and drive value for all parties. Sanghi told me, “This process is a repeatable, scalable, ongoing effort that enables our senior executives to work closely with start-ups to understand how companies are innovating in areas that are important to American Express. This degree of involvement helps us make the right investment decisions, while also keeping AmEx at the forefront of innovation in financial services.”
Product Research and Development
Honda launched Honda Silicon Valley Lab (HSVL) in 2011 to partner with talented entrepreneurs and tech companies to create cutting edge products and services. HSVL efforts are currently focused on providing drivers with seamless access to information, and sensors, displays, speech interfaces, and tactile communications. For example, they recently introduced voice-activated commands (Apple’s “Siri Eyes Free”) into certain Honda and Acura vehicles. With voice commands you can call people, select and play music, hear and compose text messages, use maps and get directions, get calendar information, and more.
“Many industries, from retail to manufacturing, have been fundamentally transformed by Silicon Valley technology,” said Zawacki. “Success relies more than ever on how successful a company is in embracing transformative technologies and managing the rapid change that is inevitable.”
As I wrote in a previous post, this means organizations need to become “anti-fragile,” shifting from command-and-control models within a predictable, stable environment to greater flexibility with a shared purpose and coordination. They need to be able to sense opportunities and threats, and respond flexibly. Companies with offices in Silicon Valley, such as the ones above, are cultivating this sensing and responding as a core capability.
This post first appeared on the Harvard Business Review and has been lightly edited.