Letter from Silicon Valley
Tracking down the "secret sauce"
The area between San Francisco and San José is home to almost as many people as the entirety of Switzerland. Yet Silicon Valley is in a different league: it's a true hot-spot for technological innovation. But why's that? And what can we learn from this in Switzerland?
If somebody in San Francisco asks you about your secret sauce, they're not interested in your family recipe for salad dressing. Instead, they're talking about the mixture of ingredients that enables a company to be successful in the market. New entrepreneurs on the hunt for money hear the question "what's your secret sauce?" on a near-daily basis. It's asked by business angels, venture capitalists (VCs), potential business partners...
Like every successful start-up, Silicon Valley, as a location, has very specific characteristics. There are good reasons why Google started in a garage in Mountain View and not in Zurich's Oerlikon district. Ever since I've been in California for Swisscom, I've been trying to understand what makes the area such fertile soil for entrepreneurial success stories.
Of course, there are many aspects to consider. There's a comparatively large pool of outstanding computer specialists, software engineers and data scientists, populated directly by graduates from the elite universities of Stanford and Berkeley. Then there's the financial infrastructure, which pairs great ideas with smart money. And finally, there are all sorts of network effects that both let clusters form and encourage this process.
We've got lots of these things in Switzerland. Switzerland has technological know-how and a broad base of specialists, not least because of our excellent education system. In addition, in recent years, we have set up networks and organisations as part of various initiatives, such as Digital Switzerland. Different industries work together and politicians get involved where it makes sense for them to do so. But Switzerland’s qualities are primarily utilised to apply technology in a first-class manner – they are used much less frequently to create new companies that can disrupt the status quo on a global scale. Why?
The key reason behind Silicon Valley's pioneering role, I believe, is the unique entrepreneurial culture that has taken root here in recent decades. Plans are big and ambitious, helped by the huge volume of the US market. It's all about improving the world by solving problems. That could be part of the reason: in Switzerland, we are fortunate to have very few problems that need to be solved in any kind of rush.
I got my first lesson in the culture of Silicon Valley soon after I'd arrived, at an accelerator's demo day. A presentation was given by a start-up that was developing solutions for second screening. "That's great," I thought, "Swisscom is Switzerland’s market leader in TV connections!" I approached the CEO and explained who we were and what we did. After thirty seconds he said: "We're not interested." Switzerland is too small and too far away, he said. I was perplexed by the rejection, having convinced myself that I was a potential customer with a listed billion-dollar group behind me.
Only much later did I understand that this ultra-focused approach is part of the culture in Silicon Valley. In Silicon Valley, you learn how to say "no" quickly and frequently. By doing so, you do both parties a favour, enabling the person you've turned down to immediately look for other, more promising options.
A focused approach involves pooling all your strengths. Instead of spreading yourself thinly, you direct all your resources to where you think it will be most beneficial. Ten years ago, Google put the smartphone at the centre of things, as part of its "mobile first" project – which met with ground-breaking success. Then, two years ago, the company decided to set its sights on artificial intelligence (AI) as the most important technology of the future. Other companies in other countries might have set up a separate AI department. But that's not what Google did: with "AI first", they issued an all-out demand that every new product developed by the group must incorporate AI technology. New topics are followed through with much more consistency in Silicon Valley than in Switzerland, even at large corporations.
This focus also affects questions of time: the "here and now" is what matters. Even senior executives' schedules are kept remarkably free. This gives them space to act, allowing them to improvise or react to new things at any time. If I have an idea and want to make an appointment with a member of a tech company's executive board, the meeting usually takes place no later than the following week. In Switzerland, however, people's diaries are booked up for several weeks in advance, even at medium-sized companies. In Silicon Valley, not answering an email on the same day is considered incredibly rude.
All this gives tech companies in Silicon Valley a unique kind of manoeuvrability and speed. The traditional strategy of constructing intellectual property through patents is no longer seen as a priority here. Instead, in the digital economy, the period of time between coming up with an idea and launching it on the market is what's key. If you're a tech company, you've got to assume that ten other companies are working on the same solution as you are. In addition to Facebook, there were countless other attempts at creating social networks, and the same can be said of taxi apps like Uber. Often, the winner is whoever can be first on the market, and thereby occupy it. In California, it is not uncommon for start-ups to welcome their first customers after just six months. In Europe, on the other hand, this period often lasts more than two years.
Some Swiss start-ups actually offer superior technology, but I have seen even these companies fail because they did not establish themselves quickly enough on the global market. In Switzerland, people spend a long time honing the perfect technology, which gives their Californian competitors a head start. They can make a product with technology that might only be 80 percent mature, and then relentlessly market it on a global scale.
People are full of passion for what they do
The slow pace of European start-ups is also related to the culture of (not) taking risks. I've talked to VCs who only invest in a company if the founder has experienced two previous failures. In Switzerland, conversely, we still live in a culture where people do not want to make mistakes, where a lack of success is considered a failure. In Silicon Valley, it is more likely that the founders have learned from their experiences and gained something that will benefit them the next time around.
In Switzerland, people often have the impression that the workplaces in the high-tech world of California are well-being oases, with kindergartens on the company premises and people playing table football. Of course, every company tries to attract (and retain) the best possible talent. But these aspects are never at the heart of a professional relationship. Most offices in Silicon Valley are remarkably unglamorous. On the contrary, there is an achievement-based culture that is highly demanding. People are full of passion for what they do and show the highest levels of commitment to it. Around half of the employees here come from overseas, mostly from China and India. For them, the American dream is becoming a reality in Silicon Valley.
Should the Swiss economy follow the model of Silicon Valley more closely?
Switzerland has its own "secret sauce". Our culture attaches great importance to perfection, consistency and prudence. We have world-class research, and an excellent education system with a vocational training programme that is unrivalled by that of any other country. These qualities are highly successful in many sectors. We've got to make much more use of them so we can better position ourselves in the digital economy.
Where are the most significant differences to be found?
In Silicon Valley, the pressure exerted by problems is felt much more strongly. There is a much greater awareness of global issues, not least because of the large numbers of people from overseas. Even in everyday life, people face many more difficulties than in Switzerland, with the keyword being "mobility". The culture of making mistakes is also central. In Switzerland, lots of people hardly dare do anything because they are afraid of getting it wrong.
Why are many Swiss companies lagging behind in terms of digitisation?
Swiss companies need to learn to see themselves as digital technology companies even more than they do at present.
From the pharmaceutical industry to the finance sector: digitisation is on everyone's lips.
It is often believed that innovation can be delegated to a specific department or innovation manager. If need be, you can even buy a garage to create the right Silicon Valley-style atmosphere. We have to be careful that innovation is not overly equated with coolness.
What are the other reasons for the success of Google and the like?
They are completely focused on the value they bring to the customer. At Amazon, every employee who suggests a new product must first write a press release. This forces them to focus on the customer, with no exceptions.
Simon Zwahlen Head of Business Development & Innovation at Swisscom in Palo Alto, California.
The interview was conducted by Florian Schwab.
– Accelerator: a consulting company that helps start-ups accelerate their growth, mainly by providing expertise, capital or contacts.
– Artificial intelligence: stands for machines that can learn from their environment and react to it.
– Business angel: a private individual who provides money to young companies because they enjoy supporting entrepreneurs.
– Demo day: a kind of roadshow where start-ups give short presentations to introduce themselves to investors.
– Second screening: a link between the screen on a smartphone and the screen on a TV that enables additional information to be accessed.
– Venture capitalist: an investor who invests in companies and business models that have not yet become established.
Swisscom tracks what’s going on in the digital world around the globe, with their network stretching from Shanghai to Silicon Valley. Simon Zwahlen is one of their leading specialists. He provides Weltwoche with first-hand monthly reports on the hottest trends and most fascinating developments.