Four Threats That Could Decay Silicon Valley

4

By Jeremiah Owyang, from Silicon Valley

In many respects, Silicon Valley sits atop the world. Its growth and influence has made it the globe’s top location for innovation, STEM jobs, IT patents, venture capital funding, and Internet and software growth, and Unicorn startups galore.

And yet there’s also been a shift in the Valley’s culture. Growing social and economic rifts have bred fraud, anger and protests. Where housing isn’t in high demand, neighborhoods lay abandoned. One-third of students in East Palo Alto, next to Facebook’s shining new HQ, for instance, don’t even have a home. The new administration poses many questions on the role of tech, labor, and regulation.

One could argue that there’s an emergence of signs that strikingly resemble Detroit in the glory days of the age of transportation. While Silicon Valley will no doubt enjoy many more years as the technology capital of the world, it has its own vulnerabilities.

In Detroit’s case, where I visited earlier this week, the Motor City reveled in its dominance in the 1950s, but growing social unrest soon culminated in a massive riot in the late 1960s. Foreign competition hit next, making the most of economic opportunities to steal market share in the 1970s. Underlying credit problems grew for decades and finally surfaced in the 1990s, and ultimately despite unprecedented bailouts, major bankruptcies hit in 2009, with the city itself declared officially bankrupt in 2013.


Here are four threats, aside from natural disaster, or whole scale physical attack for Silicon Valley today, along with a futuristic probing of their possible conclusions in the coming decades:

Threat One: Complacency and Competition
The byproducts of rampant success are beginning to take their toll on the Valley, especially in the escalating costs of doing business. A concentration of talent and vision that once was a tremendous advantage is now an ever-rising obstacle for new startups or collaborative partners looking to tap into those resources. To think Silicon Valley’s trajectory will continue unabated for much longer represents an arrogance that’s creating a tremendous blind spot for the region.

New tech oases are rising in places across the country — Austin, Texas, is a prime example — and around the world in places like China, India and Korea. In Detroit, Japanese carmakers gained their foothold when a global oil shortage spiked gas prices and opened a door to sell smaller, more efficient cars. Today, there are a lot of regions in the world where tech innovation can be accomplished for cheaper than Silicon Valley. Eventually someone may figure out how to do it faster or better too.

Threat Two: Lack of Economic Diversity Means Fragility
One industry in a single city is a risk. Stemming from that very same tech-obsessed culture comes the liability of being one-dimensional. The threat of a Silicon Valley bubble unplugging from the realities of the rest of America and the world could render its innovations out of touch and useless, whereas a more balanced economy where arts and humanities are also thriving is more likely to produce thinking outside the box.

Historically, iron and steel towns have faltered when global economic shifts happen — they have no backup, and the homes, stores, and businesses that all support that single industry may result in their shuttiner. Additionally, having a variety of industries only breeds a plethora of viewpoints, which can only aid in helping guide a better technology set for humans. Where Silicon Valley is strong with tech, it’s equally deficient in the humanities.

Threat Three: Disappearing Margins as Tech becomes Commoditized.
The open source movement and spread of tech knowledge are diminishing Silicon Valley’s advantage over the rest of the world. There’s an abundant supply of new software developers coming into the market, and technology has a way of democratizing at such a low price point that healthy margins are nearly impossible. And if energy technology succeeds in providing inexpensive renewables in the not-too-distant future, the threshold of entry for competitors will drop even lower. While the iPhone is able to maintain a high price point, China is on their heels with a $25 smartphone. Could other regions in Asia and Europe develop open source versions of technology that smash the price of technologies?

Threat Four: The Rise of AI, Silicon Valley build’s it’s own master
The race to develop artificial intelligence and machine learning could backfire on Silicon Valley if AI breakthroughs displace the need or abilities of its army of tech pioneers. Or the intense pursuit of that goal could unleash uncontrollable machines that wrest power away from the elites. Technology has proven to be a capable disrupter of businesses, industries and entire ways of life. Deliver that kind of disruption on an unprecedented scale and it becomes incredibly hard to predict the consequences.


Any one of these warning threats has the potential to morph into a serious threat to the future of Silicon Valley, and avoiding such eventualities begins with addressing their underlying issues.

Just remember, no industry is hot forever, they all have their own lifecycles the question is, is Silicon Valley just a teething youngster, or in it’s final stages?

Call for Insights: Contribute to our next report on the industry impacts of blockchain

0

screen-shot-2016-12-19-at-7-06-35-am

Crowd Companies’ next research report will explore the industry and business impacts of blockchain––beyond financial services––and we’re looking for qualified interview subjects.

We’ve explored many resources, videos, conferences, articles, and books on the topic of blockchain technology, and found a gap in its in-depth analysis around potential opportunities within all industries. Yes, we’ll include financial services (and the stock market) in our research, but we primarily seek to uncover impacts to insurance; healthcare; supply chain management; manufacturing and distribution; retail; travel; media and telecommunications; government, municipal and legal; and farming and agriculture.

Research findings will also reveal hurdles that corporations must overcome before implementing blockchain, as well as specific use cases for blockchain in every industry, from smart contracts; to electronic medical records; to secure transactions; to digital asset management; to Internet of Things (IoT) implications; and more. Crowd Companies research will broaden the horizon of blockchain beyond typical base understanding of Bitcoin to showcase how every corporation can ultimately benefit from this disruptive technology and work its way toward becoming a distributed autonomous organization (DAO).

And, we’re looking for your insights! Do you fulfill one or more of the below criteria for interview?

  • Have a baseline knowledge of blockchain and actively pursuing its applications. Note: Technical knowledge of blockchain is not a requirement, but how it can be applied to your business or industry is.
  • Build new customer experiences (B2B or B2C) brought forth by blockchain.
  • Contribute to company business model changes on an innovation team, IT, digital, legal, or another department responsible for blockchain research and implementation.
  • Work for a startup or vendor that provides blockchain services or applications to fit a specific industrial or cross-industry use case.
  • Have advanced knowledge of blockchain and viewed as a thought leader or subject matter expert.

If so, please fill out the form at this link.

We’ll review every submission and will contact you via email for interview if you fulfill our qualifications. Thank you in advance for your time and efforts in contributing to our research.

(Photo via Pexels)

Industry Impacts of Airbnb’s Shift to Experiential Business Models

1

The future of Airbnb lies in creating memorable guest experiences, and brands will benefit by complementing these experiences in relevant, valuable ways.

Since attending Airbnb Open in Los Angeles a few weeks ago, I’ve been contemplating what Airbnb’s announcements around shifting toward experiential hosting mean for both guests and corporations. Guests will find authentic travel experiences that complement their hospitality choices, while corporations will find opportunities to partner with Airbnb and sponsor these entertainment and cultural adventures.

During the event, executives from Airbnb revealed a few interesting data points:

  • The average business traveler stays at an Airbnb for six nights
  • The average Airbnb host makes $7,530 per year
  • Travel spending is nearly 10% of global GDP ($7.2B)
  • Airbnb had 40M guest stays in 2015 (see graph below), in 34K cities in 191 countries

screen-shot-2016-12-12-at-10-51-51-am

With guests staying for nearly a week at their hosts’ abodes, many are looking for immersive experiences in the local scene––activities and sights that can’t be booked through a travel agent or seen from a tour bus. There are already more than 600 experiences available to travelers through Airbnb! The company is also experimenting with on-demand car delivery for off-the-beaten-path travel, as well as prepared food delivery.

What does this mean to you? Corporations have the opportunity to connect directly with tastemakers around the world, inserting their brands and products into diverse experiences with lasting impact. Let’s explore a few of the potential industry opportunities:

  • Consumer Goods: Airbnb is the world’s largest showroom, with the goods in hosts’ homes used to influence buyers as the level of trust between guest and host are high.
  • Retailers: These new “experiences” mean that local retailers will be visited in cities, led by the hosts and tour guides.
  • Hospitality and Travel: For hotels, this new offering is about the entire trip, and they’ll soon offer flight deals and cars, in addition to experiences and homes.
  • Food: Food will be delivered directly to Airbnb locations, and continued on-demand food models will become important.
  • Finance: Hosts are generating a modest amount of income per year, but need money to upgrade their locations, an opportunity for small loans.

What does this mean for all companies? Today’s modern customer is seeking experiences, they show off using digital technologies, and access to physical goods is easy with on-demand models, rather than ownership of a house, car, electronics and more. Established companies need to revisit their strategy to provide customers with experiences that connect to the real meaning of why customers want platforms that enable new adventures and more.

 

So Who’s Really Going to Own Autonomous Cars? There’s Four Scenarios.

2

160603_ft_self-driving-car-mercedes-jpg-crop-promo-xlarge2

Above: Mercedes Benz Autonomous Car

Two mega trends are coming together: The Collaborative Economy and the Autonomous World, which means shared mobility from self-driving cars.

Early this year, we published a research report on the Business Models of Self-Driving Cars, and we’ve presented our findings at a number of industry events. A commonly asked question is: “In the future, will we even own cars?” I want to share a few scenarios that are likely to emerge.

Today’s 3-year-old toddlers are unlikely to ever learn how to drive. With autonomous cars already making their debut now, and then en masse in 2021, per Ford and others, these toddlers are unlikely to require driving skills in the year 2031.

Here are four scenarios of car ownership that could play out:

  1. The on-demand model, a.k.a. “Uber/Lyft” model. In this model, autonomous cars would be like a “utility” where most don’t own them, certainly in cities; they are summoned on demand.  John Zimmer, the CEO of Lyft, put forth a visionary piece where most city dwellers do not own cars in cities by the year 2025. Uber’s executives paint a future where mobility is like any other utility, where at a “twist of the tap,” mobility can flow out of a nozzle. In urban areas, home garages could be converted to living space (or Airbnb rentals), and large multi-story garages could be converted to green spaces.
  2. The shared car model, a.k.a. “Zipcar” model. A group of cars are available in a convenient regional area, where many can share and own these cars. For example, some progressive apartments now have shared vehicles in their garage for renters. In this model, a group of neighbors could invest in the commonly owned costs of these cars, and share insurance, car ownership, and maintenance costs. We’ve seen a growth in P2P insurance models, which could further enable this market.
  3. The wholly owned model, akin to current ownership. Just as we currently own most vehicles, we could continue to own vehicles in the future, but they will self-drive. This makes the most sense in rural areas and, to some degree, in suburban areas. Some people with families that have specific car seat or mobility needs (the elderly, those with wheelchairs, etc.) may require their own self-driving vehicles. Others we have spoken to suggest that human-driven cars will only be owned by the very rich — or very poor — similar to how horses are owned today.
  4. Autonomous cars own themselves. Also called a distributed autonomous organization (DAO), self-driving cars could become sentient creatures in the radical future that can not only self-drive and self-charge, but also then take themselves to be repaired at a local garage, and pay for it on their ownership. In this future, the excess profits generated from these self-driving cars would enable them to purchase an additional vehicle, expanding themselves from one car to eventually a fleet. All of this, in theory, could occur without human intervention and without human ownership.

In the end, there won’t be one single model. We’ll likely see a mixture occurring, just as we see this occurring now. Below, the models are broken out into a grid.


Matrix: Scenarios of Future Car Ownership

Mobility Model Who’s Likely to Adopt Who Will Own Business Model
On Demand Urban areas will embrace Uber, Lyft, car manufacturers On-demand service
Shared Car Urban areas, suburban Enterprise, Avis, private owners offering cars on Getaround, Turo Subscription, pro-rata
Wholly Owned Car Wealthy, young families, special care Individual owners Ownership/lease
Autonomous Cars Own Themselves An advanced artificial intelligence that can self-manage a fleet Cars will own themselves Computer-owned “corporation,” an undefined model, or a nonprofit akin to Wikipedia

tesla-autopilot

Above: Tesla’s Autonomous Car

Tesla showed its hand by prohibiting customers from sharing.
Recently, Tesla made an unusual mandate, that its own customers cannot enable their privately purchased self-driving Teslas to be listed on Uber or Lyft. This is a strange mandate considering the cars were purchased outright. It, of course, forebodes a few future business models that we’ll see from Tesla; it’ll likely offer a service model where the owners, or Tesla themsleves enable their autonomous cars to be made available to others as a service.

When would human-driven cars become obsolete?
While Elon Musk suggests that manually driving a car may someday be illegal due to human error and safety reasons, such vehicles won’t go away anytime soon. There would be a significant economic bottom if so many owned assets were quickly depreciated by a government decree. But looking decades forward, when autonomous cars become dominant and common, we will see a social and perhaps government cry for human drivers to be curbed. Perhaps if it’s not illegal, the insurance costs of manually driving would become too high.

To summarize, autonomous vehicles will not only significantly impact how we will be transported, but also the very business models in which our economy operates and how cities will change.

bmw-concept-4-1000x600

Above: BMW’s Autonomous Concept Car

Facebook joins the Collaborative Economy with Marketplace

10

Facebook Joins the Collaborative Economy
Facebook has announced the launch of its Marketplace, a new feature in four countries that enables users to buy and sell their used goods using Facebook connections. While Facebook’s strongest advantage is a network of trusted users, it must develop more sophisticated features to compete against established players. But it has a good start, as the environmental benefits of Facebook Marketplace for helping individuals reuse goods rather than send them to the junk yard will be of particular help for many migrating students, new families, or those seeking to change up their personal items.

screen-shot-2016-10-03-at-6-30-00-am

Market Timing: Existing Startups Under Fire
At a macro level, the startups in the Collaborative Economy Honeycomb are undergoing a shakeup as VC funding is being reduced, startups are being acquired, and regulators are putting the pressure on. The end result is that some startups are having to fold up shop. Facebook’s market entry is smart timing, as it can be a trusted player.

Marketplace Competition
To the casual observer, it would be easy to compare Facebook Marketplace to established players like eBay, Yerdle, Nextdoor, Listia, or Taobao, but these players are far ahead of Marketplace. Marketplace could pose some threats to Craigslist local listings for users seeking to find people they may know, or listings from friends of friends. And the potential is huge; for scale, massive eBay has 164 million active users in Q2 2016, a far cry from Facebook’s 1.7 billion users in the same period.

Four Features Facebook Is Missing:
While Facebook offers a very strong trust graph of people you know in your area, Marketplace lacks a few key features, including:

  1. A payment system that enables digital transactions, similar to eBay using credit cards or PayPal.
  2. A guaranteed bidding system so the buyer doesn’t have to worry about getting the item.
  3. A shipping solution or meeting place (sometimes called a “sharespot”) to enable people to share goods, whether it be at local police stations or Amazon lockers.
  4. Lastly, there doesn’t appear to be a ratings or review feature so buyers and sellers can rate each other, especially if people don’t know them, to build further trust.

The Future for Marketplace
Facebook must improve its feature set, then move into ride and home sharing. An ideal next move would be for Facebook to tie in its Messenger payment system, enabling seamless transactions, and potentially move into more lucrative on-demand commerce systems like ride sharing, or perhaps even home sharing, thereby threatening Uber and Airbnb. By enabling the commerce aspect, not only does this make transactions easier for members, but Facebook will have yet another revenue stream. This isn’t an odd concept, as in China, Uber has sold off assets to Didi, which is owned by Tencent and Alibaba — companies that offer a wide range of Internet products. Yet before Facebook can move into new markets beyond used goods, it must first bolster those four missing features in order to prepare the platform.

Want more? Read my body of work on the Collaborative Economy, filled with data, slides, and more.

 

 

 

 

11 Ways Startups Outrun Established Corporations

3

Screen Shot 2016-08-29 at 6.54.52 AM

The purpose of this post is to list out how startups are bypassing established companies so that incumbents glean the best tactics and apply them to their own corporate innovation.

Tech startups are designed, built, and managed differently than established companies, giving them a competitive edge against incumbent corporations. This post outlines startup advantages, including cultural differences, business models, and business strategies. But, established companies aren’t sitting around idle; they’re adopting these same strategies in order to compete, emulate, or lead in their market. See how corporations are deploying ten types of innovation programs.

In our work at Crowd Companies, we’ve observed that big, established companies possess advantages in their tremendous resources, trusted brand names, and experience in their field, they are also plagued with gears that are slow to turn.


11 Ways Startups Outrun Established Corporations:

 

Startups have unique cultural differences:
Herein lies the greatest difference between a startup and and an established corporation: The core ethos of the organization is built differently.

  • 1) Smaller, faster. Smaller in size, startups can quickly redirect employees in nearly any direction; there are fewer minds to change and fewer levels of management to get through. Additionally, startups hire innovators who are focused on new ways of doing business, which also enables them to quickly shift in unorthodox directions.
  • 2) Embraces failure. Because startups have less at stake, they foster a culture that’s not afraid to fail. You’ll hear mantras that encourage “Fail Fast” or “Fail Forward” risk-taking in exchange for the potential of innovation. Meanwhile, established companies can be hesitant to pivot and disrupt their existing revenue streams.
  • 3) Attracts high-risk/reward workers. Unlike stable career positions, entrepreneurial minded professionals are attracted to the startup lifestyle. This encourages wilder career moves in long shot startups, with the equity promise for high financial gain and industry fame.
  • 4) Attracts skilled talent. Startups often attract top talent due to their sense of purpose and passion, quality of work life, perks, and promise of making it rich through equity packages rather than a salaried job at an established company.
  • 5) They’re younger. As a whole, startup employees and founders, at least in tech, tend to be younger; they can afford to take more career risk, often with fewer family, health and financial commitments. Although controversial, Mark Zuckerberg claims they’re just “smarter” than older cohorts as they may have the latest skills, or can be easier molded.

Startup business models are setup differently:
Startups are set up differently as business entities than established corporations, giving them additional advantages to take down their target markets.

  • 6) VC funded. Ample VC funding enables radical innovation and encourages high-risk business models, often designed to disrupt incumbents through the use of networks, technology, and new methods of going to market.
  • 7) Privately held. Startups have more freedom to disrupt an existing market, as they’re not exposed to the scrutiny over quarterly earnings like public companies are. As a result, these startups answer only to their executives and board, and they can plan beyond the next quarter.
  • 8) Growth over revenue. Startups are not held to the same standards as publicly traded corporations. Startups are often focused on market penetration and adoption rather than just revenue. To avoid upsetting users, Facebook didn’t turn on its “mobile advertising” engines until post-IPO.

Startups have an unorthodox business strategy:
The way startups deploy their day-to-day businesses is different than established companies; they move faster, with greater risk, and are able to quickly ship product.

  • 9) Tackle niche, then grow. Startups can attack small markets, then grow them to compete with established companies. Established corporations often don’t have the appetite to defend smaller markets, giving startups the ability to gain footholds as they expand.
  • 10) Faster than the law. Startups often challenge existing rules, laws, and regulations. They’re able to move faster than regulators, then reshape the discussion to their benefit, like Airbnb, Uber, and Lyft have.
  • 11) Quickly ship product. Startups are known for the practice of “shipping fast” in their product releases: releasing versions daily if not hourly, and are taught that shipping a product when it’s 90% or even 80% finished is acceptable — rather than perfecting it like an established corporation would.

Looking at across these 11 different ways that startups are able to outrun established corporations, you can see that the very core makeup of the culture, business setup, and their strategies are often different than older established companies.

Established companies aren’t standing still, waiting to be disrupted, they are either weighing whether they should build similar features or purchase the startups outright, or emulating the same characteristics of startups. Established companies who don’t move faster, run the risk of being blind sided from a young market competitor.

We’ll build on this in an upcoming report on corporate innovation and explain how established companies are starting to act more like startups and make their corporations more agile.

(Credits: I shared a short list on Twitter, and received some insightful suggestions, including from: Serena Ehlich, Julian, and Caleb Parker. Image from Pexel)