Deirdre Macken’s Californian pilgrimage
Australian corporate heavyweights on a pilgrimage to Silicon Valley find a very different vision of the future
IN A room heavy with suits, an entrepreneur ambles up to Michael Chaney and asks, “Hey man, what do you do?” There is a communal intake of breath. This hipster, with his blonde-tipped mohawk, scratchy beard and hooded jacket, is asking Michael Chaney, chair of Wesfarmers and all-round patriarch of Australian business, what he does for a job? “I really enjoyed talking with him,” says Fred Schebesta, the founder of Finder.com, of the 20-minute conversation that followed. “He has a very interesting view on my business and how it worked with his and the effect it would have on the industry we work in.” Silicon Valley is full of serendipitous encounters. And, if you believe the hype around the most scrutinised landscape in business, it’s the way the rest of the world should work.
Last month, Austrade took a group of 40 chief executives, chairmen, academics, start-ups, venture capitalists and superannuation chiefs through the Valley to learn the secrets of digital success.
It’s become something of a pilgrimage for CEOs and directors of Australia’s biggest companies and one that’s prompted many to ask, why are they making the trip, what are they getting out of it and, why don’t they just get a briefing paper? In short, how did Silicon Valley become Disneyland for directors?
After a week trailing the delegates and taking notes (the only person in the Valley using paper and pen), I can condense the lessons from the California classroom to a list of takeaways – because what happens in the Valley does not stay in the Valley.
You are not ambitious enough
At the end of a fireside chat, Google Australia managing director Maile Carnegie (since hired by ANZ as group executive for digital banking) asks an Australian entrepreneur why “a start-up in Silicon Valley has an aspiration to change the world while the aspiration of Australian start-ups is to get acquired?”
It’s immediately apparent to newcomers in the Valley that every young person wants to change the world and become a unicorn (a billion-dollar company). If Los Angeles is full of young writers pitching scripts, San Francisco is full of engineers pitching start-ups. As the founder of RocketSpace, Duncan Logan, tells delegates: “Everyone here is deadly serious about changing the world. It’s hard to imagine that if you’re not surrounded by it, so hang out with people who are as deadly serious as you.”
Australian companies are routinely told they are not aiming high enough, but our entrepreneurs are also too modest. Y Combinator, the world’s most powerful incubator, gets 12,000 applications a year from would-be start-ups but only an average of 20 from Australia.
The shift from “good to great” to “global and good” has happened fast but it makes sense. In order to change the world, you need to be big – ergo the billion-dollar ambitions – and digital businesses are the easiest type of business to scale to global.
It’s a sentiment that is capturing the hearts of Australian business people. Says Elmer Funke Kupper, managing director and CEO of the ASX: “Australians don’t talk about changing the world but we should bloody well do it. There’s no reason why we can’t. As a country that invents, we’re one of the leading countries but we sometimes miss the point that these things can change the world.”
Deanne Weir, investor and philanthropist, agrees: “I love the fact that they have that dream of changing the world. Perhaps we should have more of that, to have everyone aspire to change the world. It’s a worthy aspiration but also incredibly energising.”
The answer to Carnegie’s question from that entrepreneur, Pixc.com founder Holly Cardew, is: “Australians aren’t taught how to be a billion-dollar company.” They’re also succinct in the Valley.
You are not fast enough
“Doing 10 per cent growth a month isn’t where it’s at. Do 10 per cent a day.” So says Logan, whose RocketSpace offices have launched 800 start-ups, including Uber.
Exponential is a word you hear a lot in the Valley. It’s the growth curve of computer power outlined by Moore’s law and it’s what start-ups must aim for if they are going to become the dominant player in their field. This growth creates infant companies that are worth a billion dollars when they still have a few hundred staff. And it excites Australian business leaders.
Vikram Sharma, CEO of QuintessenceLabs was pumped to discover that in the Valley there is an equation of one staff member to $US1 million ($1.4m) valuation. “We are 27 people and I’ve thought for a while that 50 would be the ideal,” he says. “We hope to get revenue of $US50m so $US1m of revenue per person might be right for us. We’re on track.”
The need for speed is infiltrating established businesses. Funke Kupper admits he gave his staff “a completely unreasonable deadline” to produce a blockchain model (the kind of electronic transaction ledger that underpins the digital currency bitcoin): six months from discovery to “hands on keyboards”.
Richard Favero, founder of mobile messaging company Soprano, says: “The message about exponential growth is the one that stays with me. Our growth is north of 30 per cent and I was happy with that last week, but now I’m not sure we’re hitting it.”
Speed doesn’t just dictate the start-up space; it also marks the pace at which start-ups are abandoned.
Says Favero: “They [Americans] let businesses die so easily, we don’t. I would die in a ditch for my business.”
If business is worried about the speed of innovation, GE’s guru of global strategy, Beth Comstock, has more bad news. “It doesn’t matter how fast you’re going, things are moving even faster.”
You don’t know what you need to know
“We are all software companies no matter what industry we’re in,” says Comstock, outlining to delegates how the internet of everything is reshaping the 140-year-old manufacturer. “If we figure it out in one industry you can be pretty sure you can use it in the next industry.”
In the Valley, excitement is shifting from consumer products to business applications. It’s about sensors in machines and infrastructure, blockchain, data collection and augmented reality – and many of these innovations can be applied to many businesses.
Along the way, for instance, Optus chairman Paul O’Sullivan revealed that the telco is looking at using blockchain. Weir made contact with the inventor of an educational product that complements her speech-to-text business and there was a lot of chatter about how dynamic mapping technologies could be used in their industry.
As Weir says: “It’s the chats along way that give you ideas. We’ve found a few people who we may end up working with because they’re in parallel spaces but I wouldn’t have met them
otherwise. It’s the generosity of Americans that’s something we could learn more about – how open they are here and generous, because they see it ultimately as a two-way process.”
You are not agile enough
Outside of Davos, the San Francisco office of RocketSpace with its bare floors, uncovered cabling and weary ping-pong table, might be one of the most visited spaces for the world’s most powerful business people.
“I meet Top 500 company CEOs every week,” says Logan, “and I’ve found that if a CEO is involved in innovation, it can work, but if we meet with the vice-president of innovation, the chance of change is negligible. It has to be driven from the top because companies are full of antibodies, those people whose every bone is resistant to innovation, who cling on to normal because it’s comfortable.”
Corporate chiefs are right to worry about sclerotic boards, given that most directors are over 50, tend to outsource technology to assistants and were appointed because of their long expertise in business – an expertise now under challenge. But as boards get up to speed, chiefs must worry about their staff.
To drive innovation throughout their organisation most have adopted the strategy of divide and – eventually – conquer. That is, they set up separate units of agile workers to spearhead changes and hope that the culture of those units sweeps into traditional parts of the business.
Most confess that cultural change, especially in middle management, is the most difficult part of driving innovation.
Optus’s O’Sullivan cautions that chief executives can’t fake the innovation agenda. “The importance of the CEO being invested in it is really important,” he says. “Employees watch what you do – you can have all the nice emails and videos you like – but they want to know, when this project came up, did he give the money to it? Does he use the technology we’re developing, does he know the names of the people in the team?’
It’s all about talent
If there’s one aphorism that stuck in the minds of delegates it was that the internet has moved us from capitalism to talentism and, with the average cost of starting a business having shrunk from $5 million to $5000, anyone with talent can have a go.
“I was impressed with that idea,” says O’Sullivan. “It explains how we could spend $800 million on a cyber-security business. You end up investing in companies just to get the capabilities.”
In the Valley, the war for talent is not a book title, it’s not about ping-pong tables and it isn’t really about the money. It permeates every business decision. As O’Sullivan says, many billion-dollar takeovers are talent acquisition moves (sometimes for just one person). Talent also dictates location. For instance, GE located its software centre in San Ramon because it was an affordable and pleasant place for young engineers to live. An entrepreneur said he set up across San Francisco Bay because he wanted to attract mid-level engineers and avoid “those new graduates, who want flexible work, big salaries and a San Francisco workplace that they will leave after a few months”.
The focus on talent is in the DNA of the Valley but not so in Australia. Pixc.com’s Cardew says: “Silicon Valley takes a chance on the person and the team. In Australia, they focus on revenue and where you are in terms of revenue.”
Funke Kupper says: “Listening to that conversation about talent, I think, well how much are we doing that in my company? Are we really sure we’ve done everything we should? And the answer for almost all traditional companies is no, so then I think, what’s going to have to change when I get back?
“We’ve done a lot of work figuring out how we get this going in a company that is steeped in 150 years of history and how we make sure it catches to make it real for the end customer. So, we reorganise peoplepeo on different floors, give people more freedom, look at teams d differently and we put some money down.”
You have to
rethink your relationships
There’s a concept in the Valley called co-oper-tition. It describes how start-ups will often co-operate to build a market and then compete once the market is formed.
The Valley is full of new and often complex relationships. It’s about collaborations; it’s about mentoring and sharing. Capital is written in many different contracts; help is often free but full of obligations and customers might become owners or collaborators, or even staff. For example, Airbnb is enlisting the help of hosts and guests to lobby government authorities against restrictions on home share businesses. They call it mobilising the community.
“When they started talking about mobilisation, I thought it was about mobile technology,” says Glenn Wightwick, deputy vice chancellor of research at University of Technology Sydney. “They talk of mobilising communities but they’re really monetising communities, and they’re a business so that’s