I was speaking at a graduation ceremony at santa cruz university and i wanted to say a few words about innovation.
--
Despite the fact that i live at sea, i have with us the opportunity to start a speech recognizing "go banana slugs!"
I am honored to have the opportunity to speak here today.
We are located xv air miles from the epicenter of technological innovation. I used to be an innovator, eight startups in 21 years, but for the last 10 years i have been teaching packages in academia.
I survived the hour when at my first service, in ann arbor, michigan, we had to pull out a map to see that san jose is not necessarily located in puerto rico, but there are also bars with a similar name in major cities. That's where my ticket on an airliner to install computer equipment was hired to take me.
39 years ago i boarded that plane and never went back.
I've seen the valley evolve from sunnyvale to santa clara and what it looks like right now: it stretches from san jose to the south of market in san francisco. I've seen the valley evolve from microwave valley to defense valley, from silicon valley to internet valley, and to the present day where its key focus is simply innovation. And i've been lucky enough to see innovation happen not just in the hardware and software realm alone, but also in the sciences of the modern - in therapeutics, medical devices, diagnostics, and now also in modern healthcare.
Today i've been asked to talk a bit about choosing innovation - most often that means making a list of hot technologies to watch - technologies like machine learning.The utilities that will come from this technology will change every industry from autonomous cars to automated radiology/oncology, and i've also been asked to talk a bit about where this technology is going. Where could it lead?
Silicon valley emerged from the fortuitous intersection of the following factors:
- Cold war research in terms of microwaves and electronics at stanford university, - a stanford engineering dean who encouraged a startup culture but not purely theoretical research, - funding for military and intelligence work during the cold war, leading to microwave and military products for military products in the 1950s,- the decision of one bell labs researcher to start his own semiconductor company near stanford in the 1950s, leading to- a wave of semiconductor startups in the 1960s-70s, - the emergence of venture capital as a professional industry, - the interest comp revolution in the 1980s, - the advent of the internet in the 1990s, and finally- a wave of online commerce applications in the very early decades of modern Buy asphalt sprayers California times.- The influx of risky finance into startups of a size and scope that not only could not have been imagined at the beginning, but would have seemed ludicrous in the depths of the 20th century.
Before the start of this century, the picture for the valley seemed clear. Each new wave of innovation - microwaves, defense, silicon, disk drives, laptops, networking, therapeutics - was relished as an intermittent equilibrium: barely had you fantasized that the wave had reached a dead end, there was a sudden shift and radical change in the emerging family of technologies.
But in the twentieth century, there were barriers to entrepreneurshipin the 20th century, although startups continued to introduce new technologies in every modern advance in technology, the speed of innovation was held back by constraints that our confectioners can only now realize. In the past startups were constrained by the following factors:
1. Customers were initially government and identical organizations that were slow to adopt technology,2. Long technology development cycles (how many hours it takes to go from variant to product),3. Disposable founders,4. High cost of going after weak customers (how many dollars is very important to educate a product),5. Venture capital industry structure (there were a limited number of venture capital firms, any one of which was required to invest millions in any startup),6. The failure rate of new businesses (startups did not know the formal conditions and acted as smaller versions of established corporations),7. Data and knowledge about how to create startups (information was concentrated in certain metropolitan areas like silicon valley, boston, new york, etc.), And therefore did not exist.
Now we are seeing the democratization of entrepreneurshipeverything that is happening in the 21st century is something more profound than a change in technology. What is happening is that similar seven constraints on startups and innovation have all been removed.
The first thing that has changed is that online consumer access and genomics are driving new technologies at scalein the 1950s-60s. In the fifties and sixties, u.S. Defense and intelligence organizations spurred new technologies in silicon valley by giving universities money for discoveries and drugs, and defense companies built weapons systems that used the first microwave machines and semiconductor components created in the valley.
In the 1970s, 1980s, and nine decades, the momentum shifted to the enterprise side as big business supported new technologies in pcs, buy construction planers california communications tools, and enterprise software. Now government and private entities are followers rather than leaders.
Today, in matters of hardware and software, the driver of innovation is consumers, and more specifically consumer internet companies. If products and sales are bite-sized, the arrival of ten to 100 million and immediately billions of visitors has the possibility to happen not in decades, but in years.
In the life sciences sector, it was ipo genentech in 1980 that proved to investors that start-ups in the life sciences sector were capable of earning them colossal sums.
The second thing that has changed is the shortening of the product development cyclein the 20th century startups i was involved in, the time to create the first product release was measured in years while our employees realized the founder's vision of what customers wanted. This meant building existing features that the founding team had guessed at into a monolithic "release" of the product.
But time and time again after the product came out, startups found that the vast majority of features were not applicable or not required by customers. The founders were simply wrong in their own assumptions about customer needs. Found that the notion of "visionary founder" was usually synonymous with hallucination. The effort spent on developing all such unused features was wasted.
Today's startups create products simpler. Instead of creating paper money. Also features. Founders view their vision as a series of untested hypotheses then obsolete from the position of the house and test a compact set of features quickly. This helps them offer customers a series of minimally viable products in a fraction of a day.
For products that are simply "bits" delivered on the internet. The first products of the a company could go public on a major wave of innovation and then live on its favorite current technology for years on end. In a similar business environment, hiring a new ceo with a track record of growing a firm based on a single technical innovation was a rational choice for venture capitalists.
This is no longer the case at all.
The pace of technology change in the 2nd decade of the 21st century is inexorable. It is impossible to imagine a technology in the hardware/po or modern science sector dominating its market segment for several years. Which means that our companies are dealing with perpetual disruption before their investors have made a profit.
To get business in our century, startups must do three things their 20th century counterparts didn't do:
- A company no longer relies on generic innovation. It must constantly innovate, and what preferable one can eliminate such a goal? Founders. - In order to constantly innovate, the dealing center must invest in startup speed and also a much longer cycle time than their counterparts did in the 20th century. This requests the preservation of startup culture over the years, and which one better suppresses such a goal? Founders. - Continuous innovation requires imagination and courage to challenge the initial hypotheses of your current business model (channel, cost, customers, products, supply chain, etc.) Such a thing can entail competing with your peeps and, if necessary, driving them out. (Think of the relentless cycle of ipod, then iphone innovation.) It is incredibly difficult for professional executives with perfect skills in developing existing businesses to realize the vision. Who better to liquidate this task? Founders.
The fourth thing that has changed is that you can organize a firm on a personal device for thousands, but not millions of dollars traditionally, startups needed hundreds of thousands of greenbacks of funding just to bring their 1st product to the consumer. A software company had to buy computers, license from competing firms, and hire staff for labor and prevention. The hardware company had to commit funds to develop prototypes and equip a factory to make the product.
Today, open po has reduced the cost of creating po from millions of bucks to thousands. My students treat computing power like a utility the way i treat electricity. They are able to use more computing power through their comp by amazon web services than existed in the world when i started in silicon valley.
And as for consumer hardware, no startup needs to build its own big factory, because offshore manufacturers take on all the costs. China has simply become a factory.
In recent years, the cost of producing the first product for a start up in this online commerce has dropped a hundred, and more times. Paradoxically, however not paying attention to the dramatic decrease in the price of first production for such scaling now requires ten or 100 million bucks.
The fifth change is the new structure of startup financing the dramatic reduction in the price of first product launches (especially for online startups) has shaken up the venture capital industry.
Previously, venture capital was a narrow club clustered around formal firms based in silicon valley, boston and new york. While these corporations still exist and are particularly large), the circle of investors putting risky finances into startups has expanded, and a fresh class of investors has emerged.
First, venture capital and angel investing stopped looking like a phenomenon focused solely on the united states or europe. Risk capital has emerged in the middle kingdom, india and other states that encourage risk-taking, new technologies and liquidity on a scale that was previously unique to the states.
Next, new groups of venture capitalists, "super angels", smaller than the classic venture capital funds with many hundreds of millions of greenbacks, can actually make the small investments needed to launch a consumer internet startup. These angels slice a lot of early bets and double them if the first results come out. (And values are covered two years earlier than in a classic startup.)
Third, venture capital has become founder-friendly.
The venture capitalists of the 20th century ended up with an mba or finance degree. Many of them, such as john doerr of kleiner perkins and don valentine of sequoia, had service experience at a large tech company. At the same time, at the turn of the 21st century, new venture capitalists entered the game from the dot-com wreckage - this time with more startup skills. The turning point came in 2009, when netscape co-founder marc andreessen created a venture capital firm and began investing in founders with the goal of getting them to be ceos for the long term. Andreessen realized, in that the game had changed. Continuous innovation remained, and it was founders, not hired ceos, who could play and profit. The focus on founders became the competitive advantage of his firm andreessen horowitz. In the circumstances of a seller's market, other venture funds adopted this "invest in the founder" strategy.
Fourth, today's corporate investment people and hedge funds have become passionate about late-stage investing. Their need to participate in high-profile deals has driven the price of late-stage organizations to "unicorn" levels. A unicorn is a startup with a market capitalization of more than a billion dollars.
This means that the emergence of incubators and superangels has dramatically expanded the sources of startup capital. Venture capital funds have now ceded more control to founders. Corporate investment people and hedge funds have dramatically increased the prizes on offer. And the globalization of entrepreneurship has led to at least a hundred-fold increase in the number of possible startups worldwide since 2001. And these days there are more than two hundred startups over a billion dollars.
Change #6: founding a company says the consumer no longer runs the company like a big company since 2001, there has been a radical shift in how startups worry about health. Up until now, investment people and entrepreneurs believed that startups were elementary scaled-down copies of solid corporations. Absolutely everything a reasonable big company has to do is done by a startup - write a project, hire experts in purchasing, marketing, engineering, specify all product parameters in the 1st hour and build products for a wide first batch of customers.
Today, the firm realizes that this is completely wrong. It used to be like this: you made a product, held a great launch event, everyone congratulated the vice president of marketing for excellent press, and at the end of the main board meeting asked the vice president of sales how things were going among him with the sales plan. The answer was inevitable: 'excellent pipeline'." (A great pipeline means no successful sales.)
This would go on for months, because customers were not behaving in a manner consistent with the business plan. Meanwhile, all the other branches of the corporation were executing their plan - in other words, the company was burning through nonprofits. As a result, the board of directors fires the vice president of sales. This cycle continues, then the vice president of marketing is fired, then the ceo.
As we have found out, at the same time as vendors are performing business models, startups are looking for a business model. This is to say that against the backdrop of solid corporations, startups are wondering who their partners are, what functions they need, how they want to buy the product, how much they like to pay. Now our company realizes that startups are temporary organizations developed for the purpose of scalable and repeatable business models. Entrepreneurs first formulate their own conclusions, then test these hypotheses by means of buyers in real-world settings (customer development) and adopt an iterative and incremental development methodology (agile development) to provide the product. When founders discover that their assumptions are wrong, what is inevitably done so is not a crisis, but an event called a pivot, and the likelihood to change the business model.
As a result, startups have tools that speed up customer discovery, shorten time to market, and lower the price of creation. I'm glad i was part of the team that came up with the lean startup methodology.
Change #7 is the last - perhaps the most profound, and concrete for a moment realized by today's graduate students. In the 20th century, learning best practices from a startup executive was limited to the bandwidth of coffee. Which meant you learned about the coolest practices from a board of executives as over coffee with the rest of the more experienced ceo's. Nowadays, any founder is able to learn absolutely everything there is to tell about startup management, online. Incubators and gas pedals like y-combinator have institutionalized experiential learning of best practices (product/market identity, turnarounds, agile design, etc.), Provide experiential and hands-on mentoring, and announce a growing network of founding ceos.
At the end of the day, today's ceos have more detailed day to day information than their predecessors. Here, it turns out, lies part of the problem. To read, hear, and read about the incident as far as building an excellent company is in front of you is not the same option as getting it. As people will see, files are not the same as experience, maturity, or wisdom.
The entrepreneurial singularity barriers on the road of activity are not easily delayed. In any case, they are replaced by innovations that accelerate each stage, noticeably by an order of magnitude in some situations.
Although innovations move with the speed of the internet, our experts are not reduced to just startups among e-commerce. They circulate to manufacturing and, in consequence, to every other business segment. We see amazon affecting retail. Stores are closing. Most students graduating today have no idea what a blockbuster record and video store looks like. Many have never gotten news from a physical newspaper in their lives.
If we are on the cusp of a revolution, every bit as important as the scientific and industrial revolutions, what does this mean? Revolutions are not obvious when they happen.After james watt started the industrial revolution with the steam engine in 1775, no girl said: "on such a day as this everything will change". When karl benz drove through mannheim in 1885, not a soul said: "in a hundred years, there will be 500 million such cars."
And certainly in 1958, when noyce and kilby invented the integrated circuit, the idea of a quintillion (10 to the 18th degree) transistors being made year after year seemed ludicrous.
It may well be that visitors will look back on this decade as the beginning of our corporate revolution. Perhaps we will always know everything about it as the time when scientific research and technological breakthroughs began to be implemented into the realities of society sooner than ever before. This is the period when we reinvented the american economy, when our gross domestic product began to grow, and when states and the world achieved unprecedented levels of prosperity. It is probably the dawn of a new era for a happier american economy built on entrepreneurship and innovation.
.