I gave the Alumni Day talk at U.C. Santa Cruz and had a few things to say about innovation.
Even though I live just up the coast, I’ve never had the opportunity to start a talk by saying “Go Banana Slugs.”
I’m honored for the opportunity to speak here today.
We’re standing 15 air miles away from the epicenter of technology innovation. The home of some of the most valuable and fastest growing companies in the world.
I’ve spent my life in innovation, eight startups in 21 years, and the last 15 years in academia teaching it.
I lived through the time when working in my first job in Ann Arbor Michigan we had to get out a map to find out that San Jose was not only in Puerto Rico but there was a city with that same name in California. And that’s where my plane ticket ought to take me to install some computer equipment.
39 years ago I got on that plane and never went back.
I’ve seen the Valley grow from Sunnyvale to Santa Clara to today where it stretches from San Jose to South of Market in San Francisco. I’ve watched the Valley go from Microwave Valley – to Defense Valley – to Silicon Valley to Internet Valley. And to today, when its major product is simply innovation. And I’ve been lucky enough to watch innovation happen not only in hardware and software but in Life Sciences – in Therapeutics, Medical Devices, Diagnostics and now Digital Health.
I’ve been asked to talk today about the future of Innovation – typically that involves giving you a list of hot technologies to pay attention to – technologies like machine learning. The applications that will pour of this just one technology will transform every industry – from autonomous vehicles to automated radiology/oncology diagnostics.
Equally transformative on the life science side, CRISPR and CAS enable rapid editing of the genome, and that will change life sciences as radically as machine intelligence.
But today’s talk about the future of innovation is not about these technologies, or the applications or the new industries they will spawn.
In fact, it’s not about any specific new technologies.
The future of innovation is really about seven changes that have made innovation itself possible in a way that never existed before.
We’ve created a world where innovation is not just each hot new technology, but a perpetual motion machine.
So how did this happen? Where is it going?
- Cold War research in microwaves and electronics at Stanford University,
- a Stanford Dean of Engineering who encouraged startup culture over pure academic research,
- Cold War military and intelligence funding driving microwave and military products for the defense industry in the 1950’s,
- a single Bell Labs researcher deciding to start his semiconductor company next to Stanford in the 1950’s which led to
- the wave of semiconductor startups in the 1960’s/70’s,
- the emergence of Venture Capital as a professional industry,
- the personal computer revolution in 1980’s,
- the rise of the Internet in the 1990’s and finally
- the wave of internet commerce applications in the first decade of the 21st century.
- The flood of risk capital into startups at a size and scale that was not only unimaginable at its start, but in the middle of the 20th century would have seemed laughable.
Up until the beginning of this century, the pattern for the Valley seemed to be clear. Each new wave of innovation – microwaves, defense, silicon, disk drives, PCs, Internet, therapeutics, – was like punctuated equilibrium – just when you thought the wave had run its course into stasis, there emerged a sudden shift and radical change into a new family of technology.
But in the 20th Century there were barriers to Entrepreneurship In the last century, while startups continued to innovate in each new wave of technology, the rate of innovation was constrained by limitations we only now can understand. Startups in the past were constrained by:
- customers were initially the government and large companies and they adopted technology slowly,
- long technology development cycles (how long it takes to get from idea to product),
- disposable founders,
- the high cost of getting to first customers (how many dollars to build the product),
- the structure of the Venture Capital industry (there were a limited number of VC firms each needing to invest millions per startups),
- the failure rate of new ventures (startups had no formal rules and acted like smaller versions of large companies),
- the information and expertise about how to build startups (information was clustered in specific regions like Silicon Valley, Boston, New York, etc.), and there were no books, blogs or YouTube videos about entrepreneurship.
What we’re now seeing is The Democratization of Entrepreneurship What’s happening today is something more profound than a change in technology. What’s happening is that these seven limits to startups and innovation have been removed.
The first thing that’s changed is that Consumer Internet and Genomics are Driving Innovation at scale In the 1950’s and ‘60’s U.S. Defense and Intelligence organizations drove the pace of innovation in Silicon Valley by providing research and development dollars to universities, and defense companies built weapons systems that used the Valley’s first microwave devices and semiconductor components.
In the 1970’s, 80’s and 90’s, momentum shifted to the enterprise as large businesses supported innovation in PCs, communications hardware and enterprise software. Government and the enterprise are now followers rather than leaders.
Today, for hardware and software it’s consumers – specifically consumer Internet companies – that are the drivers of innovation. When the product and channel are bits, adoption by 10’s and 100’s of millions and even billions of users can happen in years versus decades.
For life sciences it was the Genentech IPO in 1980 that proved to investors that life science startups could make them a ton of money.
The second thing that’s changed is that we’re now Compressing the Product Development Cycle In the 20th century startups I was part of, the time to build a first product release was measured in years as we turned out the founder’s vision of what customers wanted. This meant building every possible feature the founding team envisioned into a monolithic “release” of the product.
Yet time after time, after the product shipped, startups would find that customers didn’t use or want most of the features. The founders were simply wrong about their assumptions about customer needs. It turns out the term “visionary founder” was usually a synonym for someone who was hallucinating. The effort that went into making all those unused features was wasted.
Today startups build products differently. Instead of building the maximum number of features, founders treat their vision as a series of untested hypotheses, then get out of the building and test a minimum feature set in the shortest period of time. This lets them deliver a series of minimal viable products to customers in a fraction of the time.
For products that are simply “bits” delivered over the web, a first product can be shipped in weeks rather than years.
The third thing is that Founders Need to Run the Company Longer Today, we take for granted new mobile apps and consumer devices appearing seemingly overnight, reaching tens of millions of users – and just as quickly falling out of favor. But in the 20th century, dominated by hardware,…