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Brad Stone, best-selling author and Bloomberg Senior Executive Editor, spent time at Salesforce recently to discuss his new book The Upstarts, and to share his insights on how companies large and small can ride the next wave of Silicon Valley disruption.
According to Stone, Silicon Valley’s history is divided into three waves. From 1993 to 2000 was the first Silicon Valley boom - fueled by the advent of the internet and world-wide web, and facilitated by dial-up modems. From 2001 to 2008, things were quieter in the wake of the bursting dotcom bubble, but the emergence of broadband and wifi helped grow Facebook and Google.
The last wave - from 2009 to the present day - has been characterized by the proliferation of smartphones, and by constantly-connected customers with access to supercomputers in their pockets and the internet everywhere. At Salesforce, we have worked to empower our customers to ride that wave by building apps like Salesforce1 - so you can run your business right from your phone.
In the third wave of disruption, two companies stand clear as leaders. Stone chronicles the rise of two ‘Upstarts’ - Uber and AirBnB - to their valuations of $70bn and $30bn respectively - in The Upstarts. As we discussed their fortunes, three key rules for success in Silicon Valley became clear:
“The Upstarts were methodical, they had strong visions, and they were very responsive to data.”
To emulate the unicorns of today’s Silicon Valley, it’s imperative your company can effectively learn from data. In taking this approach, AirBnB and Uber were heavily influenced by Amazon. The online retailer - profiled in Stone’s award-winning The Everything Store - began life as a bookseller. But the company was constantly looking for their next big opportunity, and data was fundamental to that search.
When the data suggested a path forward, Amazon followed it - whether that meant changing their strategy or not. The company began to monitor the other things people were searching for, and used that data to map out the future of the business beyond books.
“[They were] analytical, thorough, and responsive to data. The company didn’t cling to convictions - they followed Jeff Bezos’ mantra, clinging to long term vision - but flexible on strategy”
Another key Stone message? To be a successful tech company, it’s critical to find the right balance between two contrasting characteristics - being ruthless and having values.
“Success in business, and particularly in startup entrepreneurship, has to be a careful balance between ruthlessness and values. If you have too much of one or the other, you topple over.”
The world of ride sharing is littered with companies that spent too long thinking about politeness, and too little thinking about their competitive edge. Companies like Cabulous and Magic Taxi attempted to work within the existing taxi industry, rather than disrupt it as Uber and Lyft did.
In seeking to work with taxi firms, Cabulous and Magic Taxi avoided alienating an entire industry and provoking the widespread frustration that Uber’s playbook called for. But by taking the less disruptive path, they also chose to work within the confines of an existing industry - unable to change either the supply of taxis on the street or the price of fares.
They also faced another group all too willing to try to find a way around the system - taxi drivers. According to Stone,
“When [taxi drivers] found a ride using the Taxi Magic app that looked like they were going to the airport, they’d just pick them up like a regular hire. So it turned out that in this case, playing by the rules was actually a terrible idea.”
The world of business requires a dedicated focus on seeking an advantage, as the taxi drivers knew all too well. Many of the failed startups Stone profiles in The Upstarts fell by the wayside because of their lack of that unflinching focus.
Of course, an exclusive focus on competitive advantage has its own drawbacks. Fail to build fundamental values into your company, and you expose yourself to a different type of risk. Stone counsels building values in at the ground floor. Why? Because things change quickly.
“The things that are possible when you’re young and scrappy and an upstart suddenly, on a dime, become completely unacceptable.”
Take a look at the early days of ride sharing companies, who moved into cities comfortable with the uncertain legality of what they were doing. As Stone sees it, they succeeded with this strategy because the service they provided was so great. When they faced headwinds from local authorities, users actually got out into the streets and protested - on their behalf.
However, once those ‘scrappy upstarts’ got themselves a multi-billion dollar valuation, people began to take a different view.
"Our feelings around a company that is worth this much, and has accomplished so much, are more ambivalent. We don’t see them as the rabble rouser, innovating on our behalf any more.”
Values-driven leadership ensure that companies not only navigate the complexities of business more mindfully, but build deep relationships with customers that will withstand the pressures of the transition from upstart to unicorn.
As companies grow older and more successful, they start to run the risk of being disrupted themselves - and begin to worry about the next group of upstarts following on behind them. To help prevent - or at least mitigate - disruption, Stone suggests taking a lead out of the playbook of one of the tech world’s elder statesmen - Jeff Bezos. His company, Amazon, continues to innovate and evole - even at a huge scale and with a 20+ year history.
How? Because they follow another Bezos mantra - “invent the future you want to see”. As Stone puts it,
“Being active and trying to invent new things helps Amazon see the future a little better. To me, “invent the future you want to see” is a useful metric in how to protect yourself from the Ubers and AirBnBs of the world.
If you’re out there on the frontier, you’re less likely to be taken by surprise as the taxi cabs were, as the hotel companies were - these were not fundamentally inventive industries and they suffered because of it.”
Three key rules for upstarts, incumbents and innovators. Let data be your guide. Find the balance between ruthlessness and citizenship. And constantly experiment. They’re the key to riding the wave of silicon valley disruption, not drowning in it.
