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8 takeaways from 2 days in the Valley
Key trends for your organization to watch over the next 3-5 years
As I covered in the last edition of Forestview, Silicon Valley remains a special place that continues to drive innovation globally despite tight COVID-19 restrictions limiting in-person gatherings and the rise of remote work over the past 2 years. At the Plug and Play Silicon Valley Summit, Omid Kordestani summarized the current state well in comments to Plug and Plug Tech Center CEO Saeed Amidi last week. Kordestani contends that no place will entirely replicate the unique culture of innovation that has been bred in Silicon Valley. However, other locations have and will continue to succeed in replicating another version of it with their own distinct innovation culture, because good ideas and entrepreneurial spirit are not confined to California.
I was able to attend the first two days of the 3-day event (unfortunately having to return a day early). This was the first in-person gathering at Plug and Play in over 2 years, and it was one of the largest gatherings since the COVID-19 restrictions were loosened in the state of California. The energy level was high as attendees were enthusiastic about the opportunity to pitch and network face-to-face. I took a lot of notes from the presentations on stage and one-on-one conversations off stage and left with a number of trends to research further, which I plan to share in more depth in future editions of Forestview.
Eight headline trends: what to watch for
For this edition, I want to share with you 8 key trends that were recurring themes during my time in Silicon Valley that will shape a lot of innovation and conversations in the years ahead.
Weathering the current economic storm
The death of third-party cookies
Empowering the influencer “middle class”
Merging online and offline experiences
Climate change solutions for individuals and businesses
Leveraging the 5G rollout and preparing for 6G
Corporations are still learning to innovate
1. Weathering the current economic storm
Perhaps not surprising, there was a lot of conversation about managing the current economic storm of high inflation, soaring gas prices, supply chain disruptions, the crash of crypto, the correction of stock markets, and challenges in fundraising over the next 12-24 months. Many startups talked about their efforts to “hunker down” and how to weather lower valuations and the tighter fundraising environment. The prevailing attitude were that times are tough at the moment and will get tougher for startups before they get better, but it was far from “doom and gloom”. Most saw this period as a cyclical correction similar to past periods such as the dot-com bust of 2000 and the Great Financial Crisis of 2008. A common sentiment was that “down periods are where top startups are born” and there was a steely optimism among most in the crowd. It remains an open question how the next months and years will play out as the U.S. has not experienced this level of inflation in 40 years, but virtually all attendees sensed more of a course correction or speed bump rather than a meltdown.
2. “Democratize” everything
When hearing the term “democratize”, listeners may immediately think of political systems. In Silicon Valley speak, democratize is a broader term that essentially means breaking down entrenched hierarchies and creating a new system where participation and power is more widespread. What ride sharing did to the traditional taxi industry is coming in many other industries. The power of blockchain and ability of the crypto industry to disrupt traditional finance has created a thirst to cut out any number of centralized intermediaries. Some attempts will succeed while others will fail, but the attempt across a wide range of industries will be made over the next decade.
The recent crypto crash did not appear to dissuade fans and many startups are focused on building out custodial wallets and enabling non-fungible tokens (NFTs) and the digital asset economy. Building out infrastructure and applications to enable decentralized finance (DeFi) was a key theme along with “bridging” technologies that allow for better communication between blockchains and more transparency between the fiat money economy and the crypto world.
3. The death of third-party cookies
A sea change is underway to end reliance on third-party cookies led by Apple and Google following an increased focus on privacy and the passage of both the General Data Protection Regulation (GDPR) in the European Union and California’s Consumer Privacy Act. This transition has been covered a fair bit in the media and marketing professionals are well aware of the change, but many firms that use an advertising-based model heavily reliant on third-party data are scrambling for a new approach.
Many startups focused on the need for firms to transition to use both zero-party data (where customers intentionally give up their data) and first-party data (behavioral data gathered through customer interactions such as browsing your website). This transition actually can help marketers get closer to their intended audiences, ensuring that they are communicating the right message at the right time to the right people. A broader theme was that the ad-supported model of commerce needs an overhaul, especially when it comes to reaching the new audiences of Gen Z and Gen Alpha.
4. Empowering the influencer “middle class”
Buried within all of the discussion of the Great Resignation and the hiring boom in entry level jobs is a major difference in what Gen Z is looking for in terms of a career. Creative roles that emphasize individuality such as being a social media star, YouTube gamer or streamer is high on the list as is freelancing and being an entrepreneur, while roles that require higher education degrees are on the wane such as doctors and lawyers. The rise of student debt combined with a perception that an education is not required to be successful among Gen Z is a noteworthy trends in itself.
Adding fuel to the fire is the solid return on influencer marketing campaigns that businesses are seeing and the fact that influencers are the single most important online purchase driver for Gen Z. There are two major challenges in influencer marketing today: 1) the vast majority of benefits accrue to the influencers with the largest following, while those with mid-tier followings can rarely capitalize on their audience, and 2) assurance for marketers that their brand can be trusted to influencers. Several startups are focused on solving both problems in one form or another, including the automation of tracking to ensure that the product placement and script provided to influencers is executed as planned (this is tediously tracked manually today) and helping marketers scale their campaigns across a wider range of influencers.
So, in short, those Gen Zers looking to make money from their audience of social media followers may have a much easier time doing so in the future. As a result, most entry-level jobs will look less and less attractive to young people, making it even harder for firms to fill their talent pipeline.
5. Merging online and offline experiences
With the rise of e-commerce and growth in online shopping during the pandemic, you might be forgiven if you thought shopping at brick-and-mortar retail stores and shopping malls was a thing of the past. A general estimate is that e-commerce accounts for 20% of all sales with 80% still occurring in physical stores, and in the U.S. data shows that percentage is actually below 15%. Several experts commented at the Summit that many consumers and retailers are looking to merge the online and offline shopping experience. This trend goes beyond a basic omni-channel experience where a phone representative sees that a customer was previously online and is calling with a question to a fully immerse “phygital” experience (not my name for this).
With a smart phone accompanying virtually every customer these days, the number of Google “near me” searches doubled over the last year showing that customers want to know which stores have the items they are looking for in stock while they are out and about. One commenter noted that while e-commerce has become popular with the advent of the Internet, the basic in-person retail experience has not fundamentally changed over the last 30 years. This is evolving today and firms that are quick to enable an online component to their offline experience stand to benefit.
6. Climate change solutions for individuals and businesses
Led by younger generations, more people believe that climate change is a major problem and they feel personal responsibility to play a role in combatting it. A wealth of startups focused on many different aspects of climate change mitigation and adaptation, all the way from creating more sustainable packaging materials to building out a full infrastructure for electric vehicles (EVs) to helping businesses become more efficient in using energy, especially byproducts such as “waste heat” that can be transformed to save money and help the environment. Carbon capture and storage technologies were also popular, along with more options for recording and managing carbon credits.
Startups are also focused on building on the success of renewable energy sources such as solar and wind and improving the electric grid to further enable selling back energy to help manage peaks in demand. One startup was focused on “smart charging” for batteries for EVs where they are charged during off-peak hours but used to supply power during peak hours. This is a promising area with a bevy of entrepreneurs working to fill the demands of the marketplace globally.
7. Leveraging the 5G rollout and preparing for 6G
While many countries have been on 5G technology for their cellular networks for the past few years, here in the United States and other countries 5G is in the process of being rolled out nationwide. 5G will certainly help with better experiences streaming video and I have been told that 5G will unlock the full potential of the Internet of Things (IoT) as connectivity to WiFi will no longer be a requirement for many devices. While the full benefits of 5G have yet to be realized everywhere, I had an interesting conversation about the development of 6G which is likely needed to enable some of the future applications such as the metaverse.
In a nutshell, as the “pipes” we use to connect our mobile phones gets “wider” to accommodate larger amounts of data, providers will look for even more data-intensive use cases to provide premium experiences to consumers. To date, the demand has been there: we have gone from simple text messages to e-mail to mobile web to streaming full-length shows and movies. Are we approaching our limit as data consumers, or will there be an appetite for even more immersive experiences such as AR/VR and the metaverse? We will likely know based on the behaviors of consumers in Asia first as these countries are likely to roll out 6G first and the accompanying products and services that will take advantage of the faster speeds and bigger throughput.
8. Corporations are still learning to innovate
Finally, one of the aspects that makes the Plug and Play Tech Center so successful is the support of 400+ corporate partners. The list includes a who’s who of major corporations across a wide range of industries, and their participation is a tangible sign of their commitment of resources to boost their innovation efforts. Aside from connecting with promising startups, one of the side benefits is networking with other corporate partners and informally benchmarking against similar firms to measure the maturity of their innovation efforts. As mentioned in an early edition of Forestview, innovation is a discipline that has been recognized by many firms over the past 1-2 decades, yet it remains less mature that most other departments within firms.
Many partners attending were candid about their capabilities and were thrilled about the progress they had made, yet almost all I spoke with also bemoaned “the process” and how slow they were to move relative to the startups they sought to partner with. Some firms established a separate process to fast track partnering with startups, recognizing that these firms have different needs than traditional vendors accustomed to selling into a given industry. A few partners were recognized with awards and those that were spoke about the journey that they had been on. Those firms that had a mature innovation function shared the importance of staying the course: making a long-term commitment to focus on innovation even as leaders, priorities, and projects change over time.
Which of these 8 emerging trends is most impactful to you? How would you rate the maturity level of innovation efforts at your firm? Do you have any broad lessons learned to share? What impactful trends do you feel are missing from this list? Share your thoughts below and start a conversation.