Why Silicon Valley is the still the most desirable place for high-tech companies? There are many other reasons that beyond the clichéd “innovation”.
Like in real estate business everything is “location location location”, in high-tech, many things are about “people people people”. Technologies are not just machine, patent, and product, but largely are related to people. For companies, how easy to find qualified people is one of the top priorities to consider location. If company needs to relocate people from somewhere else, it is not just expensive but also sub-optimal. From workers’ perspective, moving to place with plenty of job opportunities is equivalent to shopping at Union Square where you can visit many brand stores in walking distance. It is arguable why Microsoft wants to set up its head quarter at Seattle but not at Silicon Valley. Interestingly Microsoft is able to move engineers from different places to Seattle but it never has a sizeable presence at the Silicon Valley. The reason for that I believe is because MS is really big enough, which could mean state /city and people need it as oppose to that it needs location and people. Plus the skill set to work for Microsoft has become so unique that engineers would not want to move around. But for many small to medium companies, setting up at the right place determines the effectiveness of recruiting.
Another reason of the success of Silicon Valley is culture. With more than 40 years history of the valley, a very unique “high-tech” culture has been formed: flat, transparent, efficient and “help you succeed”. In computer network, a flat layer 2 network is always faster than a hierarchical layer 3 routing network. Likewise, in Silicon Valley, hierarchy has always been labeled as dumb, slow, and not cool. Title is not very important here, instead being smart and able to make new product and coming up new ideas are always cool and admired. Transparency in almost every aspect of life and work ensures people to focus on productivity and cut off any unnecessary overhead. In such environment, it is easier to innovate and work efficiently. On top of that, people are more willingly to help each other to succeed because the main focus is on making new product other than maintaining a business. In any expanding environment, people are not worried much about competition but spend more energy at looking for new opportunities.
A good ecosystem: a good business needs a good eco-system. Eco-system is not easy to define but in my view it is about how easy to do business within it. It is quite virtual but a little like software running at hardware. It is also like an organic process which each part moves by itself. In the valley, complementary components work together efficiently, such as HR, logistics, manufacturing, support, marketing etc. All these functional resources form a good eco-system for making new product, which it is not easy to find somewhere else. In the last two decades, Internet has been the driving force of innovation, from internet browsers, routers/switches, servers and database to support internet applications (1990 to early 2000 ) to social networking , mobile application and cloud computing (mid 2000 to now). Most of the innovations are originated from the Valley and then outsourced to other places. It is almost impossible to duplicate such success in other places, such as India, China, Germany, UK etc. It is really about a system of innovation.
Bottom line is, the valley is still the place company and people want to come and stay no matter how bad the economy is. It has something you will appreciate after knowing it for a while. Lastly, probably it is about the nature of the world where every place is good for something, but not everything.
Monday, February 7, 2011
Saturday, August 14, 2010
What needs to do for Chinese companies to enter U.S. market?
There are several things that chinese companies would ignore or be unaware
when they entered the U.S. market:
1) They over emphasize low cost but ignore value.
Consumers at U.S. have some little difference comparing to their Chinese counterparts, they want things to work with reasonable cost, in other words, they want value. A while back, I bought a wireless router (A Taiwaness product) with considerable lower price $29.99 than other brands, but after a couple hours struggle, I simply couldn't make it connected to the internet. What a shame for an engineer has has spent 10 years at TCP/IP. Then I returned it and bought a Dlink with $59.99. It took me 10 minutes to make everything done. Even with double price, I would definitely keep Dlink. I want something work.
2) Developers are valued but not testers
Chinese look down at testers. Testers at product companies are treated as dump with lower IQ.
What is the end result? Many products came out to market without fully tested, e.g. having quality problem. That is not the worst part however, because they are developered by "smart" engineers, only "smart" consumers could literally use those products. In other words, because the product is not test driven, they might have awkward UI, features partially working, or be unreliable. I strongly believe, smart engineers should be doing testing and be part of driving force for product dvelopment. A product with well designed UI and superior quality must have gone through strict testing from bottom up. Beyond that, testing enginners, who have the first hand user experience, should have strong influence on design of UI and usability. Tecent's CEO is called "Chief Experience Officer" because he himself personally tested and played with products and proposed hundreds of design ideas. Remember, Chinese is a practical people who could tolerate poor quality and usability, but not eveyone in the world.
3) Lacking customer support. Customer support is expensive and Chinese want cheap product. So in many cases, customer support is just symbolic or a joke. But U.S. customers want to be taken good care of, customer support makes a big difference. So you might say, who would not do it if I had enough money. But I want say, it is not just about cost, it is about culture and systematic approach for the mechanism. You must instill a DNA into your employees to make them understand customer statisfaction is always the first priority, and put down everything at hand in order to satisfy customer need. If any example I would raise at Silicon Valley, Cisco is one of them. When customer issue is sent to R&D team, everyone will look at it and is encouraged to answer questions no matter how much you know. This culture not only increases the customer satisfation, but bring feeling of owership and fullfillment to employees.
4) Lacking sales channels. For most Chinese companies, it is too expensive to get the channels. However it is a big open topic however, I would say they just didn't want to spend the money to hire the professional sales companies or professional. In this country, nothing is free. You have spend money before earning. What you have to do is just calculate the ROI, that is it. Haier, the well-known electric company in China, perhpas was the first to use the distributor to enter U.S. market.
5) They need to build local presence in U.S. in terms of manufacturing and R&D. Many has realized the need and has done that, but because of the bad image of sweat shop, they can't attract talents. However, Japanese companies have successful done that. How did they do that?
Japanese companies adopt the same policy and culture of U.S. companies. Many of Jap companies were managed by Americans. However, Chinese probably still have a long way to go before adopting the same methodology. The reason, they simply don't trust. Then why Chinese don't trust local people? because in China since 1949, the fiduciary duty has been totally destroyed. Taiwanese companies might be better in this perspective, but the deep rooted chinese culture still make it difficult for Taiwanese companies to entrust the local management in the same way as Jap. I have heard Jap companies also have its own issues but they undoubtely are more successful in building local presence in U.S.
6) Lacking communications between sales office and head-quaters. Often, they sent sales from China and hire some local executives to lead the sales team. However, such hybrid team would not work the best since the executives have to adopt the chinese culture. I have seen such sales organization from a big company. And he has to rely on his subordinates to communicate to the head-quater at China. I believe, the local sales team should be composed of most local sales(not chinese sent from china). And the head-quater should set up marketing team to support local sales by providing as much collatoral as possible. The communication mechanism and marketing infrustructure for supporting oversea sales have to be established to scale.
when they entered the U.S. market:
1) They over emphasize low cost but ignore value.
Consumers at U.S. have some little difference comparing to their Chinese counterparts, they want things to work with reasonable cost, in other words, they want value. A while back, I bought a wireless router (A Taiwaness product) with considerable lower price $29.99 than other brands, but after a couple hours struggle, I simply couldn't make it connected to the internet. What a shame for an engineer has has spent 10 years at TCP/IP. Then I returned it and bought a Dlink with $59.99. It took me 10 minutes to make everything done. Even with double price, I would definitely keep Dlink. I want something work.
2) Developers are valued but not testers
Chinese look down at testers. Testers at product companies are treated as dump with lower IQ.
What is the end result? Many products came out to market without fully tested, e.g. having quality problem. That is not the worst part however, because they are developered by "smart" engineers, only "smart" consumers could literally use those products. In other words, because the product is not test driven, they might have awkward UI, features partially working, or be unreliable. I strongly believe, smart engineers should be doing testing and be part of driving force for product dvelopment. A product with well designed UI and superior quality must have gone through strict testing from bottom up. Beyond that, testing enginners, who have the first hand user experience, should have strong influence on design of UI and usability. Tecent's CEO is called "Chief Experience Officer" because he himself personally tested and played with products and proposed hundreds of design ideas. Remember, Chinese is a practical people who could tolerate poor quality and usability, but not eveyone in the world.
3) Lacking customer support. Customer support is expensive and Chinese want cheap product. So in many cases, customer support is just symbolic or a joke. But U.S. customers want to be taken good care of, customer support makes a big difference. So you might say, who would not do it if I had enough money. But I want say, it is not just about cost, it is about culture and systematic approach for the mechanism. You must instill a DNA into your employees to make them understand customer statisfaction is always the first priority, and put down everything at hand in order to satisfy customer need. If any example I would raise at Silicon Valley, Cisco is one of them. When customer issue is sent to R&D team, everyone will look at it and is encouraged to answer questions no matter how much you know. This culture not only increases the customer satisfation, but bring feeling of owership and fullfillment to employees.
4) Lacking sales channels. For most Chinese companies, it is too expensive to get the channels. However it is a big open topic however, I would say they just didn't want to spend the money to hire the professional sales companies or professional. In this country, nothing is free. You have spend money before earning. What you have to do is just calculate the ROI, that is it. Haier, the well-known electric company in China, perhpas was the first to use the distributor to enter U.S. market.
5) They need to build local presence in U.S. in terms of manufacturing and R&D. Many has realized the need and has done that, but because of the bad image of sweat shop, they can't attract talents. However, Japanese companies have successful done that. How did they do that?
Japanese companies adopt the same policy and culture of U.S. companies. Many of Jap companies were managed by Americans. However, Chinese probably still have a long way to go before adopting the same methodology. The reason, they simply don't trust. Then why Chinese don't trust local people? because in China since 1949, the fiduciary duty has been totally destroyed. Taiwanese companies might be better in this perspective, but the deep rooted chinese culture still make it difficult for Taiwanese companies to entrust the local management in the same way as Jap. I have heard Jap companies also have its own issues but they undoubtely are more successful in building local presence in U.S.
6) Lacking communications between sales office and head-quaters. Often, they sent sales from China and hire some local executives to lead the sales team. However, such hybrid team would not work the best since the executives have to adopt the chinese culture. I have seen such sales organization from a big company. And he has to rely on his subordinates to communicate to the head-quater at China. I believe, the local sales team should be composed of most local sales(not chinese sent from china). And the head-quater should set up marketing team to support local sales by providing as much collatoral as possible. The communication mechanism and marketing infrustructure for supporting oversea sales have to be established to scale.
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