Silicon Valley demands answers from the C-suite executives who visit the region from their home offices elsewhere in the US and across the world. The tech giants and startups that dot the landscape around San Jose and San Francisco move at hungry paces that challenge Fortune 500 veterans to compete, defend and partner. Corporations react by establishing beachheads, setting up antennae and building outposts with multiple goals in mind – but knowing what to do with a permanent presence in or around San Francisco requires a series of crucial steps and decisions.
For more than a decade I have been CEO of Orange Silicon Valley (OSV), the San Francisco Bay area presence for Orange, one of the world’s largest telecoms operators. We came to Silicon Valley with multiple goals in mind – and those goals evolved over time. We tackled intercontinental challenges and formed new, lasting and mutually beneficial relationships with a rising generation of US technology companies, all the while adapting to expand and improve how we work with those companies and leverage our connections to serve Orange.
Corporate partners and startups at various stages have different goals, after all. So we developed a dynamic portfolio of strategies and programs in response. Today, OSV has more than 40 engineers and business analysts, and our team has worked with more than 500 companies annually through our programs, which have included Orange Fab, Fab Force and Orange Institute, all of which have allowed us to create business and knowledge-sharing relationships with key leaders and innovators in tech.
During my time at OSV, we have hosted hundreds of executives representing the world’s largest corporations. When they visit our offices and ask about the secrets behind our success, I offer a framework for success that reflects the accomplishments and community of relationships that made OSV what it is today. I call it the Most Framework, because it provides corporations with a guide to getting the most of out of a Silicon Valley presence.
The Most Framework was designed to help corporations operating in Silicon Valley to answer strategic questions, operate effectively, plan,and ultimately bring back new ideas, tech and business models to their larger organisations. Those organisations’ commitments are likely to correspond to one of four different modalities identified in the framework:
- Mixed
- Opportunistic
- Strategic
- Tactical
The framework provides paths that in turn point to corresponding outcomes. What follows is a guide for corporations that have already decided to establish themselves in the Bay area and Silicon Valley world.
Identify the motivations
The Most Framework outlines four prominent motivations we have observed, based on our conversations with scores of CEOs and their teams over the years. The first – mixed approach – is quite common, as it is a composite of the other three – opportunistic, strategic and tactical.
Often, an organisation’s C-suite will tour Silicon Valley on a learning expedition, and after just a few days the teams will feel that digital tech innovation is moving too fast here to be monitored remotely. Moreover, they begin to grasp the importance of connecting in person with the right influencers and thought leaders. The underlying rationale is to get closer to Silicon Valley, to get a better understanding of what is really going on, and not to rely solely on customised scouting reports and external consulting services. In a nutshell, it is about learning, sourcing and investing.
But the definition of what form this learning should take is unclear, the calls to action are manifold, and all of them seem urgent – influence the strategy, spot a tactical or opportunistic move, acquire, partner, invest, hire or some combination of these. After the excitement and the buzz clears, assertive decisions are required.
There are different kinds of corporations interested in connecting with Silicon Valley. Tech and non-tech, product, manufacturing and service businesses, market research and consulting firms, and even government agencies from around the world. Their respective motivations are different and sometimes overlap, as represented in the mixed model. Many companies and government agencies, for example, also want to invest in Silicon Valley companies. Some companies, mostly industrial, can create, or acquire, production capabilities, delivering new products with local talents, or via cooperation with startups and universities.
What is often an issue is the distance between the motivations and the expected results. Often what characterises the relationships between a subsidiary in Silicon Valley and the company’s HQ is tension between the forces of push and pull, prescribe or execute, persuade or be told, lead or follow, and urgency or patience.
The Most Framework structures how decisions can be made depending on the desired outcome and impact. Before presenting the framework, we can address the questions decision-makers ask – and should reflect on – based on our many conversations.
Select the leadership and team
Designating the individual who will be responsible for creating a corporation’s Silicon Valley affiliate involves a critical choice. It is essential to appoint a senior executive who is well connected inside the company, well respected, and who has experience in dealing with both customers and partners. It does not work well when the core team is made only of juniors or interns – and assembling this type of staff can externally signal a lack of commitment and resources. Since this leader will represent the corporation, he or she must be trusted and come from within the company, not the outside.
The other members of the team should include a healthy complement of locals who have either studied or worked in Silicon Valley. They will bring with them not only their experience, but also their network of friends and professional acquaintances. The management team should stay no less than three to five years to acquire the right knowledge and connections.
The reporting line should be with a member of the corporate executive committee who has influence and decision power relative to strategy and investment. A board of stakeholders at the HQ will ensure that initiatives are steered properly and regularly. A meeting each quarter is a good tempo. Weekly reports that reflect what is happening on the ground will help to keep the HQ informed, engaged and involved. These reports are also a key vehicle for new initiatives recommended by the affiliate, such as sourcing inside the mother company and investment activities in Silicon Valley.
Adjust size according to desired outcomes
A baseline of five to 10 people is required to meet the expectation of learning in situ and reporting back to HQ with intelligence. Assume that a few good connections will already be established. Also, plan to leverage or augment existing relationships with vendors and major platforms. Even at a modest scale, expect that many corporate tech tours will need to be organised, reinforcing the team’s need for local knowledge and networks.
The next level of scale selected will be relevant to service providers and manufacturers with a heavy technology quotient in their supply chain. These companies want to gain early access to disruptive products and services for testing and analysis. The best practice here is to have a number of engineers directly proportionate to the number of topics being considered. In Silicon Valley, a “two pizza” team – or about five engineers per project – is ideal. If the corporate parent has deep interest in an average of six to seven topics at any one time, then an appropriate size for the entire team would be 35 to 60 people.
The path from discovering Silicon Valley to operating a successful presence there will not always be a straight line. Cautionary voices may argue for a gradual deployment initially – “Let’s start small and we’ll grow as needed”. But small will remain small unless local leadership forcefully makes the point that more outcomes demand more resources. Staying small sends a message to HQ and to Silicon Valley that an organisation’s office is not aligned with the parent company. VCs and startups will smell this and avoid the outpost.
A multi-pronged approach for generating deliverables throughout the parent company requires the robust scale mentioned above. Those deliverables range from investment pipeline ideas to full-blown term sheets, as well as vendor evaluations and alternative or supplemental sources to existing vendors. Additionally, companies may want to participate in advancing cutting-edge industrial standards or gaining market intel and leading learning expeditions. Those outcomes can be matched to C-suites, corporate development and investment, business unit heads, strategic project heads and operations.
Importantly, OSV’s conversations with VCs tell us that having this enterprise-wide connectivity to stakeholders can make a company an attractive co-investor, assuming corporate venture capital is part of the multi-pronged approach. That is because the local office can act as a conduit to connect co-investment startups, helping them to learn and scale.
Build trust in Silicon Valley – and at HQ – through investment
More and more we have seen an influx of investment capital, not just from tech but from non-tech companies, driving a need to perform both financial and technical due diligence when contemplating startup investments or opportunistic acquisitions. This is not necessarily – but can be – a scale issue so much as it is a skills challenge, since it calls for a special set of finance and strategy talents.
A company can parachute in or, better yet, hire locally, but either strategy must deliver the requisite investment acumen to do deals in Silicon Valley. Even then, there will be larger questions of autonomy. HQ’s desire to retain the final say-so on investments of any size is to be expected. To acquiesce to this can mean exasperation at best, and at worst extinction. This is not black and white, and at OSV we have argued for strict accountability. Traditional VCs have the unfair advantage of not being measured on their failures, only their successes, while their CVC counterparts are accountable to chief financial officers who will measure both.
Understand the power and pitfalls of POCs
Sooner or later – and it is usually sooner – any debate concerning how to tap into Silicon Valley innovation will highlight the proof-of-concept (POC) as a possible outcome, as well as a channel for HQ impact. While it seems reasonable to focus on the POC as a shiny object, it is easy to lose sight of how others perceive POCs.
While the leadership of a local affiliate may pin big hopes on their team’s POC work as a means of persuasion, they need to consider the framing back at HQ. It is all too easy for that frame – especially among stakeholders threatened by the disruption – to settle at “it’s just a POC”. The point of caution here is to not overestimate the impact of a POC to the C-suite. It may be more advantageous to consider these opportunities as a form of exposure.
On the other hand, if HQ stakeholders come to the local affiliate with requirements and a request to find and validate something, then the POC may be on firmer ground. But even in these cases it should be asked whether a strong demo from a third-party Silicon Valley source might deliver more value and effect more change. Ultimately, the surest test for green-lighting POCs should be identifying whether there is a clear path to deployment.
Lead tech tours and learning expeditions
Learning expeditions are now part of the DNA at Silicon Valley affiliates. They are table stakes. And they are both good and challenging things to do. However, they are good only insofar as they create friendly relationships at the highest levels of the company. Also, note that even as they open the eyes of HQ delegations to Silicon Valley trends, learning expeditions can strategically help propagate the usefulness and relevance of the affiliate, creating valuable goodwill.
It can be easy from the HQ to believe that its teams at Silicon Valley affiliates are having a great time, free from the worries of everyday business operations. Cultivating relevance to many internal business and operational units is the best antidote against this perception, so it is important to push topical learning expeditions to targeted special interest groups within the company. This approach allows the local team to customise and optimise meetings around specific themes, and the process fosters intimate business relationships between the visitors and the visited.
The interests of both visitors and the visited need to be nurtured. Learning expeditions can stress and sometimes jeopardise relationships at the local level. It is a hard truth that after all the excitement of the meeting in San Francisco, Palo Alto or Mountain View, follow-ups often fail to materialise when the visitors return home. Bridges built locally with care over time with great people and companies alike can be impoverished or burned with one visit that smacks of pure techno-tourism.
Preparation and planning must address delegates’ quality and professionalism. A key best practice is to be clear with the local hosts, setting expectations properly and honestly. Clearly, not all visitors will have the power or responsibility to decide on a business opportunity, and one of the less pleasant aspects of the job is informing such colleagues that their lack of decision-making ability is why a given company refused to take a meeting. Nevertheless, for Silicon Valley companies, where there is a commercial relationship, it can be practical to connect with VIPs from the visiting company at a marginal cost to build goodwill.
All forms of techno-tourism, however, will be unwelcome and bring collateral damage that can be hard to repair.
Deal with antibodies at the HQ
Earlier, I mentioned the risk that comes with perception at an HQ that an affiliate presence in Silicon Valley is free from everyday business concerns, perhaps nothing more than a Club Med. What is missing in that scope of understanding is a direct experience of Silicon Valley’s rapid, sometimes brutal, pace of innovation, and this knowledge gap will need proactive correction.
The best practice here is for the affiliate constantly to be launching initiatives relevant to many different stakeholders in the company – marketing, human resources, finance, strategy, technology, R&D, IT and, yes, operations. Think of it as becoming a moving target – giving a hard time to naysayers and sceptics who cannot question what you do, as you are doing many different good things for many stakeholders.
Applying the Most Framework
If you can accomplish the list of missions I mentioned above, you will find answers to the most frequent questions that arise when setting up a corporate affiliate in Silicon Valley. You will also be ready to turn your attention to the objectives you have in mind and situate yourself in the Most Framework, which is designed to avoid dead ends and enable your company to chart its path to a successful outcome. The principal behind this framework is simple. Identify your motivations, and this will be your guide for moving forward.
The Most Framework: a guide to shaping a Silicon Valley affiliate
Mixed: the multi-pronged approach – Mixed motivations combine elements of the three categories that follow – opportunistic, tactical and strategic – in this framework. Accordingly, choosing this path out of the gate can be risky. It will be necessary to avoid competing objectives, conflicts that arise from multiple stakeholders, and concurrent learning curves. As a result, the affiliate’s format will probably necessitate a substantial a ramp-up period.
In articulating the three discrete motivations individually, we include the most immediate secondary motivations that can be efficiently served at the same time. We also provide examples of industries adopting these organisational design patterns.
Opportunistic: focus on sourcing – We have seen this motivation drive a number of smaller observatory-type affiliates that lack fixed objectives beyond a general expectation of sourcing innovative solutions for their corporations. If these units are scaled too small, they usually wither. The sourcing objective is achieved by working locally with a multi-tier partner ecosystem that usually includes university connections, a mature startup, a major industrial player or existing supplier, or all of these. This motive includes some level of technical diligence, as well as business development and maintaining a proper medium-sized team.
A good alternative to consider is joining an existing local affiliate of a peer interested in similar topics but not a direct competitor. This helps the new affiliate to get up to speed faster and minimise the challenges of an underdimensioned budget for a while. Some companies decide to work with professional startup incubators and accelerators, or send someone as an expert in residence with firms – like a VC – when this arrangement is possible. We think it can only be a transitory format that can be used to define what the viable motivations should be in the end. But once validated, this option is important to the implementation of the original grand vision.
The nearest adjacent objective is Investing, when a startup or earlier-stage university-connected trend shows promise for the company’s supply chain or roadmap.
An increasing number of car companies, for instance, are pursuing this opportunistic model in Silicon Valley, as machine learning and digital experiences infiltrate their industry faster than others.
Strategic: always be learning – The strategic motivation is about complementing the HQ’s R&D and product innovation groups by exposing them to Silicon Valley’s disruption of their domain. This is a learning objective, and for it to be relevant, the local affiliate’s leadership must be strongly aligned with the HQ strategy and technology roadmap.
This alignment needs to be fulfilled in Silicon Valley by technical experts who can connect with peers back home and with local innovators. Thus, a large operation is required to be effective with the strategic model. The adjacent objective is obviously sourcing products that the company’s traditional suppliers cannot offer. This sourcing activity in turn may drive opportunistic M&A or supportive investments – again, scale is required.
According to metrics maintained by the telecoms trade group Global System for Mobile Communications (GSMA), the telecoms operator industry controlled the majority of the first $1 trillion in industry revenues in the 1990s, but it has ceded control of the next trillion in revenue to Silicon Valley. Despite this seismic shift, we have found many telco affiliates in Silicon Valley to be undersized relative to this impact, and therefore not well positioned to serve as a strategic partner for HQ.
Tactical: prioritise investment – The tactical motivation involves non-organic growth and speculative moves in adjacent business territories. While the convention among professional VCs is to refer to their corporate counterparts as “strategic investors”, our experience shows corporate venture capital and M&A to be a tactical approach to serving the objective of investment. This is where the main purpose of the affiliate is to spot disruptive technologies the mother company will want to experiment with as soon as possible, or find great companies that the HQ can start deploying a new business with – M&A.
We have previously published a complementary framework covering corporate investments, which classifies intents and outcomes as the three N’s – now, new, next. We cannot overemphasise the strategic importance of autonomy for the local office in its investment activity, given the expectation of pushback. It is worth reiterating that accountability is the best argument for autonomy.
Within the tech sector, such tactical offices can complement existing solutions used for billing, marketing, human resources or in house IT systems, making the adjacent objective one of sourcing. We also find a preponderance of non-tech offices conforming to this model in the pharma, food and public sectors.
As more companies gravitate to Silicon Valley, our understanding of the various permutations by type of business continues to deepen. The perspective taken here with the Most Framework is that of a services organisation with a high quotient of technology in its infrastructure, operations, and products. That said, we intuit that the levelling effect of software and digitisation makes the lessons we have learned relevant to our new neighbors arriving in the Bay area and Silicon Valley.