Open Innovation & Paying it Forward
I have just returned from a trip to San Francisco and Silicon Valley and after many visits to the Bay Area I think I have finally cracked their code for success. The philosophy and practice of Open Innovation combined with a “pay it forward” culture is most definitely the reason why this small part of the US creates the worlds most successful companies.
I was attending SaaStr 2016, a gathering of 5,000 SaaS entrepreneurs, executives and investors.
The days were spent listening, networking and comparing notes with many of the founders and investors in some of the world’s leading, most innovative and fastest growing technology companies. Whether it was a private dinner with some of silicon valley’s finest, a conference presentation or a simple exchange over coffee everyone I met was the embodiment of open innovation and a paying it forward culture.
The idea of open innovation has been around since the 1960’s but it came to prominence though the work of Dr Henry Chesborough in his 2003 book Open Innovation – : The new imperative for creating and profiting from technology.
“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.”
Hustling for business at the SaaStr event were hundreds of companies that are all taking advantage of open innovation. The word “integration(s)” is most defintely part of all their value propositions. Perhaps the most successful SaaS business of all, Salesforce.com are the leaders in pushing open innovation in the software industry. Already in 2005 they launched the Salesforce App Exchange which now has over 2,700 applications in the marketplace with over 3 million downloads to date.
Another leader in open innovation is WordPress.com. There can be little doubt that the open-source content management system created by Matt Mullenwegg and Mike Little in 2003 has had probably the biggest impact in levelling the playing field in digital marketing.
With over 76 million websites now created on wordpress thats 59% of all websites with a known CMS or over 25% of all websites globally. Key to this success has been the development of its plugin marketplace of both free and paid for software. Currently there are over 43,000 plugins to choose from and these have been downloaded over 1 billion times.
Whilst many long established and successful companies which have been run for decades on traditional management thinking centred around sustained competitive advantage and fierce protection of intellectual property find the open innovation revolution challenging the advantages are clear from my perspective:
- Reduced cost of conducting research and development
- Potential for improvement in development productivity
- Incorporation of customers early in the development process
- Increase in accuracy for market research and customer targeting
- Potential for synergism between internal and external innovations
- Potential for viral marketing
Speaking to innovators from some of the world largest software companies as well as founders and investors in some of todays fastest growing software startups it was clear that all see the careful mapping of their ecosystem and clever use of open innovation and API integration as a key to their current and future success.
Paying it Forward
The practice of helping each other out or “paying it forward” as they phrase it in silicon valley was clearly on display during my visit too. As well as using open innovation and your place in any given technical ecosystem to your advantage just as important is your own personal network and their willingness to help you out.
From the silicon chip engineer meetups at Wagon Wheel in Mountain view in the 1960s to the Homebrew computer club of the 1970s that was attended by the likes of Bill Gates and Steve Jobs and created the personal computer industry the network of likeminded souls has always been important to the success of silicon valley.
In the SaaS world the backing of Oracle’s Larry Ellison of his protege Marc Benioff’s Salesforce.com in their $4m seed round in 1999 or Benioff’s own 78 investments in fellow tech startups is a clear illustration of the “paying it forward” culture of silicon valley.
But it’s not just access to capital that this culture assists with. Just as important is a network to throw ideas at, a community to use and validate your product and vision and sometimes a shoulder to cry on when things to not work out and you need picking up off the floor.
I had many conversations with investors, board members and executives of companies large and small whilst in San Francisco. One commonality in all conversations was the genuine interest and acknowledgement that the success of many of our businesses could well be interlinked.
One conversation will stick in my mind. As I was on my morning jog I literally ran into the CEO of Optimizely, Dan Siroker. I have long been a fan of Dan’s work since his days leading the analytics team on the 2008 Obama campaign and in my day job as a CMO we obviously use Optimizely, the world leading A/B testing tool.
He was only too happy to share 20 minutes on his walk to work about the challenges of building a SaaS company and discuss feedback on A/B testing and our own experience and challenges with using his product.
Dan maybe one of Silcon Valley’s most up and coming founders having raised over $164m and now having over hundreds of employees at Optimizely but what I experienced with him was what I experienced with many on my trip, a genuine feeling of helping others in the same situation and an interest in pushing all technology innovators forward.
It is this open culture both in terms of technical innovation and personal networking which I believe every successful organisation and technology hub worldwide needs to learn from. If it’s the key to silicons valleys success then we should all take note and replicate.