The "Enterprise Innovation API"

I've written before about the seemingly unbridgeable gap between the elite class of software "makers" and the enterprise customers who most need their help.

I was reminded of the problem by Fred Wilson's post this morning on "vertical accelerators" -- specifically the FinTech program in New York.

In Fred's words...

"the secret sauce of these programs is the leadership of the CIOs and CTOs of the largest banks and financial services companies...

"When I talked to the teams that went through last year's program, this was the thing that all of them gushed about. Getting regular access to the highest level technology execs in these institutions was a game changer for most of the teams"

I'm already on record as a huge fan of accelerator programs, and the pattern Fred describes is playing out all over the early-stage community (other examples include Weiden + Kennedy's PIE program, Rackspace-sponsored TechStars Cloud, and Microsoft-sponsored TechStars Kinect).

Big companies are desperate for access to digital innovation, and are "leaning in" to the accelerator movement for access and influence.

But "access" and "influence" are weak sauce for huge incumbent firms faced with looming digital threats. How can big companies access technology innovation on *their* agenda, with the kind of urgency and impact they need to avoid being disrupted out of business?

The traditional solution to the problem of enterprise innovation-at-scale is M&A: waiting until a disruptor is operating at a "meaningful" level of revenue or impact, and then paying a huge premium to take those innovations in-house (where they usually die a quiet death for lack of cultural and strategic fit).

The new trend of enterprise-focused accelerators is a tacit acknowledgment that M&A is often too little, too late: disruption is happening too fast, on too many fronts, to wait until its potential is obvious to the entire industry.

I'm delighted to see enterprise players engaged with the early-stage community, but I don't actually believe it's really going to solve the problem of fostering digital innovation within the enterprise.

The enterprise-accelerator trend suggests that corporate buyers are ready for a new approach to this hard-but-important problem, a translation layer that connects corporates seeking innovation with the elites of the digital creative class, with the scale + velocity required to help tech-laggard bigcos survive.

Toward an "Enterprise Innovation API"...

There is no one company or product I'm aware of that's solving this problem today, but I expect a successful pattern here to combine the following elements:

• Trusted Executive Access
  
  Delivering impact at enterprise scale requires access and support at the highest levels of the organization, because that's where strategy is formulated and money + power are controlled. Traditional enterprise consulting firms excel at this -- from McKinsey + BCG in strategy; to Accenture and IBM in tech; to WPP, Omnicom,  IPG and Publicis in brand + creative.
  
  Companies will always reject a truly disruptive innovation effort if this layer of the organization isn't bought in -- gaining + maintaining access is critical.

• "Outside-In" Approach 
  
  Traditional enterprise IT projects are black holes (or gold mines, if you're an old-school system integrator), requiring costly and time-consuming coordination of technical and leadership resources across many different departments and budgets.
  
  Delivering truly disruptive technical innovation at enterprise scale requires extreme tactical agility -- tapping strategic data and organizational resources as needed, but pulling them into lightweight frameworks that (largely) sit outside the tangled web of legacy enterprise systems.

• Assemble More, Develop Less 
  
  Another key tactic of old-line enterprise IT consultants is to encourage deep system-level platform development and customization, deploying armies of low-level coders to wrap custom software (and sometimes even bespoke hardware) around enterprise-specific business rules.
  
  Looking forward, high-impact enterprise innovation will be driven by firms that can convince their enterprise customers to embrace the power + agility of modern tools + platforms (e.g., LAMP, AWS, iOS / Android, Twitter, Facebook, SMS / Push, SaaS, IaaS), instead of trying to channel their technology spend into a proprietary system.
  
  
• A Platform, Not a Pyramid
  
  Traditional services firms always wind up looking more-or-less the same -- a few seasoned + strategic folks at the top (the "partners"), a bigger tier of smart + hungry lieutenants below that ("team leads" or "engagement managers"), and a high-churn mass of inexperienced kids at the bottom (which is where the margin comes from).
  
  In a world of high-velocity, software-powered disruption, the pyramid model fails: it's too slow, the needed skills are too diverse, and the quality of "digital creatives" willing to work in the lower tiers of a traditional pyramid structure is too low (for all the same reasons that apply to enterprise recruiting of technical talent).
  
  A winning approach to enterprise-scale innovation will federate the talents of elite performers at each layer in the stack -- senior strategy consultants, brand and creative professionals, IT infrastructure experts and software creatives conversant with the current (i.e., mobile / social / cloud-based) state of the art. 

No single firm can credibly claim to deliver a best-in-class solution across these functions, and I actually don't expect any single entity to emerge as a leader here. Instead, I see an opportunity for a "virtual industry" of boutique advisory firms, led by "partner-level" refugees from the old pyramids who understand how innovation happens now.

These "innovation boutiques" will call in elite teams of specialists, assembled from the emerging class of high-performance talent marketplaces (think Forrst and Dribble for visual design, GroupTalent and oDesk for software execution, Contently for content creation, etc.), to deliver short-duration, high-impact solutions to their corporate clients.

So the "Enterprise Innovation API" isn't a company at all, it's a loosely-federated web of specialist firms, teams and individual contributors that make themselves available for high-impact strategic engagements on behalf of the biggest and most powerful brands on the planet.

The components of this new enterprise innovation market are already emerging and -- as demonstrated by the corporate accelerator trend -- the customers are eager to buy.

Secondary Market Kung Fu

I'm going to catch a ton of shit for this, but here's the truth: Seattle is a secondary market for software entrepreneurship.

But before all you PNW partisans jump all over me, let me qualify that statement:

Compared to Silicon Valley, *every* city in the world -- including New York, Boston, Austin, Beijing and Bangalore -- is a secondary market for software entrepreneurship.

There simply is no other place on the planet with a greater concentration of talent, money, tech incumbents (a.k.a., acquirers) and self-reinforcing media attention for early-stage innovation than the Bay Area.

Entrepreneurs who live anywhere other than Silicon Valley -- which is most of the world's entrepreneurs -- have two choices: pick up and move, or learn a little secondary market Kung Fu.

First, let's talk about what you *don't* get if you choose to build your startup in a secondary market:

• Credibility -- As Mike Arrington will tell you, any entrepreneur worthy of the name will get his (or her) ass to the Valley and never look back. In this view, if you aren't serious enough about your startup to bring it to the show, you don't deserve to be called an entrepreneur.

• Access -- Most entrepreneurial exits are via acquisition, and most tech acquirers are in the Valley. Want to get bought by a tech bigco? You stand a much better chance of getting on the radar -- both formally and informally -- if you're just down the street, not a plane flight away. The same goes for VCs, mentors, or any other scarce human resource -- physical proximity + repeat interactions increase your odds of getting the help you need.

• Coverage -- Journalists thrive on access too, so it's no surprise that the loudest media voices on tech and startups make their home in the Bay Area (unless they're temporarily avoiding income taxes). Since journalists are people too, they apply the same heuristics to startups that investors and acquirers do: if you aren't in the Valley, you must not be serious; and if you're not serious, you're not worth covering.

• Talent -- Not only are there more digital creatives in the Bay Area than anywhere else on earth, but (even more importantly) the culture of entrepreneurship there runs so deep that only the weirdos and lamesters are actually willing to work at a bigco. Any Valley developer with an ounce of creativity and grit is building their own business, not working for someone else.

• Serendipity -- Good ideas come from frequent collisions between people and ideas spanning divergent domains. If you want to increase your odds of producing a truly disruptive innovation, you need to put yourself in the way of as many serendipitous idea-generating interactions as possible. Once again, based on numbers alone, Silicon Valley looks like a winner.

Now, since a Kung Fu master prizes his ability to use his opponent's strengths against him, let's talk about how Caine (photo above) would use those disadvantages to his advantage...

• Credibility -- Secondary-market companies actually *can* find success without the built-in support systems Bay Area folks take for granted -- it's harder to do, and all the more impressive for that. Chicago-based Groupon didn't attract investor and media attention because it was in the Valley. It attracted attention by generating "$1 billion in sales faster than any company, ever".
  
  In my experience, smart investors and journalists actually *like* to learn about companies operating outside the bubble -- there's less competition for the story (or deal), and the excitement of finding a "hidden gem" (or "undervalued asset") is part of the appeal.
  
  

• Access -- This one is hard to hack -- the advantages of regular, face-to-face interactions are real and powerful -- but there are ways to tap the bubble without living in it, and most of them come down to two words: relationships + trust.
  
  If you want access to a Bay Area company, investor or journalist and you're not a local, find a way to engage the people you *do* know who can help. If you're an entrepreneur, seek angel investors or advisors who are well-connected within your target firms. If you're an out-of-town investor (as I am), go out of your way to work with local syndication partners who can help your portfolio companies reach the right folks.
  
  (Neither of these strategies is a silver bullet, but both beat standing outside the store with your nose pressed against the glass...)
  
  

• Coverage -- If you think Silicon Valley is a competitive place to be an entrepreneur, try spending a little time with a tech blogger. Thanks to our industry's ongoing disruption of the news business, it's gotten insanely difficult to sustain an audience for high-quality reporting. The league tables are measured article by article, in the form of views, shares and Techmeme hits, and  journalists care as much as ever about scoops and exclusives.
  
  Seen through this lens, getting good coverage in the tech press is a lot like the Access point above: "outside the beltway" entrepreneurs can earn high impact coverage by investing in relationships with the journalists they respect the most.
  
  Where to begin? Try: 1) offering stories + hooks worth writing about; 2) being respectful of the journalist's time and professional pressures; 3) helping out (e.g., with background interviews / story referrals) that have nothing to do with your own agenda; and 4) regularly "showing up" as a constructive commenter + social amplifier for the writers you follow.  

• Talent -- this story's been told so I won't belabor it here, but the "war for talent" in the Bay Area has a significant downside: recruiting is insanely hard, employee loyalty is low and the prevailing culture focuses more on quick flips and big paydays than teamwork and sustainability. You know things are bad when even Zuck gets in on the culture-bashing:

"If I were starting now I would do things very differently. I didn’t know anything. In Silicon Valley, you get this feeling that you have to be out here. But it’s not the only place to be. If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me."

Secondary markets may have fewer entrepreneurial devs, but they also tend to have less-intense cultural and competitive pressures to exacerbate the talent problem. There's a good reason why Bay Area tech darlings like Zynga and Facebook look to cities like Seattle, New York and Boston for expansion offices (and it ain't the weather...)

• Serendipity -- An ironic downside of the intense concentration of startup activity in the Bay Area is that  -- despite the seeming diversity among startups, there is a kind of self-referential monoculture that has developed around the Bay Area tech ecosystem; as a recent article described it, "The Problem With Silicon Valley is Itself"
  
  If -- as Steven Johnson convincingly argues -- good ideas come from the interplay among divergent fields of inquiry, cities with a less-dominant tech culture (or with equally strong intellectual alternatives) are actually better-positioned to generate truly breakthrough innovations than Silicon Valley (even if they're not as well-equipped to productize, finance or wring value from those ideas)

So -- given all of the above -- why would any serious entrepreneur choose to live anywhere other than Silicon Valley?

The more time I spend with entrepreneurs (and between Founders Co-op and TechStars Seattle that's pretty much all I do), the more convinced I am that founders are artists first and capitalists, opportunists and every other kind of -ist second, third, or (sometimes) not at all.

In my experience, artist-entrepreneurs value things like creative expression, personal autonomy and values-based relationships more than anything else. They resist systems that demand intellectual conformity and compliance, and deliberately (sometimes self-destructively) push against constraints that they perceive to be arbitrary or inconsistent with their creative vision -- including the idea that they "have to be" somewhere else to pursue their dreams.

The world is full of entrepreneurial artists -- empowered technology creatives that are absolutely inspired by Silicon Valley, but by no means in its thrall.  Thanks to our mobile, social, ubiquitous technology, these people are finding each other and forging their own communities right in their own cities. They may admire the Bay Area for its many strengths, but they are anything but paralyzed by their outsider status -- it's actually a source of contrarian pride and determination.

Silicon Valley will always be the first and the best, but -- thanks to technology itself -- there is no geographic monopoly on technology innovation, and many paths to get there...