Culture of innovation: Takeaways from Silicon Valley
I am currently visiting the San Francisco Bay Area, the home of Silicon Valley and global technological innovation. With the UK government focused on achieving economic growth, it is interesting to consider what underpins the Silicon Valley innovation ecosystem that cultivates and hosts high-performing technology companies. Spending time here, the culture is uniquely enterprising but this layers on top of industry decision making which is driven by pro growth policies at state and federal level. Here’s an example of all three elements coming together.
1) Risk taking
There is an appetite for business risk and reduced stigma around failure. Venture capital funds innovation with low odds of significant return, and actively encourages rapid burn of investment to allow the market to select companies with an edge and quickly iterate on what is working and what isn’t. Multiple deals are made in a single morning in Blue Bottle Coffee or Peet’s- everyone has something to pitch, something to offer and people are willing to take chances on career changes, collaborations or investments.
2) Research and Development
Huge amounts of funding pour in to R+D in Silicon Valley. Much of the capital comes from and is spent it outside of the traditional academic environment. For example, Alphabet (Google’s parent company) spends billions annually on R&D, and this is increasing year on year. There are strong relationships between industry and local universities, such as the Apple Heart Study -a collaboration between Apple and Stanford Medicine on the use of Apple Watch to detect arrythmias.
3) Tax incentives
Tax credits at federal and state level allow companies to deduct a proportion of their R&D expenses from their tax bill, which in turn incentivises companies to invest in innovation. Tax breaks are used to target innovation to underdeveloped areas in opportunity zones. Another example of a pro growth tax policy is new employment credit which awards businesses for hiring and retaining employees.
Lara’s take
Lack of economic growth in the UK economy is in danger of leading to a downwards spiral where we can no longer afford essential public services such as healthcare and education, further exacerbating economic inactivity if human capital depreciates.
People talk about culture being part of the problem, but culture is grounded in the industrial and policy climate. Kindling investment and enterprise, using UK universities as a springboard to innovation and cultivating and retaining talent all require incentives. These incentives have to be effective at individual and organisational level to drive a culture of productivity.