Young, high-tech billionaire CEOs, phenomenal exponential growth and society-changing technologies. These are what come to mind when we think of Silicon Valley. It’s a region synonymous with high-tech innovation and entrepreneurship. And rightly so. Thirty of the Fortune 100 companies are headquartered there and it accounts for more than a third of all venture capital in the US.
What is it about the San Francisco peninsula that enabled it to morph itself from a humble hippy culture into a global high-tech ecosystem? And are there lessons can we learn from its meteoritic rise as we manage disruptive change in our organisations, whatever our sector? This article looks at how it got where it is today and explores what it can teach us about leading organisational change.
The US Navy acquired the San Francisco shipyard during World War II and began shipbuilding to support the war effort. As the area grew in military significance it, in turn, attracted electronics components industries. Tapping into the ready supply of talent and world-class research on its doorstep at Stanford University enabled these companies to provide cutting edge technologies in response to the military’s evolving needs, in a positive reinforcing cycle.
But the Military proved to be a demanding customer. Rigid procurement rules and low margins forced the technology suppliers to pivot towards commercial markets and diversify their products, and in doing so develop world-class manufacturing capabilities. Their reputation for high quality led to growth that provided them with enough capital to continue to innovate at a time of unprecedented technological expansion. Technological innovation was matched with new financial incentives and organisational forms; attracting the very best talent from around the country.
As companies poached people from each other, area-specific bodies of knowledge and best-practice were formed, creating a regional strategic advantage that was hard to copy outside the area. In his book, The Making of Silicon Valley, Christophe Lécuyer argues that the phenomenal success of companies like Apple were not accidents of fate but were made possible by the professional networks in the area. “Critical to Jobs’ and Wozniak’s success” he wrote “was their access to networks of engineers, entrepreneurs, and financiers in Silicon Valley… In other words, the rich technical and business environment in Silicon Valley made it possible for Apple to emerge as a major corporation”.
Silicon Valley represents a path of growth where each critical juncture was in some way dependent on what had happened in the past. This path-dependencerepresents the structuring conditions that persist and build over time. It’s what Complexity Scientists mean when they say history matters. The initial conditions in any situation creates the forces that enable or constrain us as we attempt to take action in the here-and-now.
Contrasting path dependence with traditional models of change
Path dependence can help us think differently about how we approach organisational change. Let’s take, for example, mergers and acquisitions. As sure as night follows day, a reorganisation follows a merger. But only eleven percent of post M&A reorganisations meet their intended objectives. What’s worse is that more than a quarter of these change initiatives result in negative business outcomes. Surely we’re getting something wrong in how we lead change if this is the best we can do?
Pick up any book on change and you’ll find a ‘roadmap’ or model of change that you can supposedly rely on because it’s worked in other organisations. If we were to take seriously the idea of path dependency and history matters we would have to accept that the initial conditions created pre-acquisition have a profound impact on the actions available to us as we attempt to move forward. Our own context would become a much better guide than an off-the-shelf model that’s touted by a ‘change guru’.
Managing a reorganisation wouldn’t begin at the point of implementation, as so often happens, but many steps back along the path. How people are treated at the point of acquisition, for example, would be seen as an important initial condition that would impact all future major change that relied on employee goodwill.
At every step along a path, the options available to us are dependent upon and constrained by the choices that have gone before and the environment that we’re nested within. Sometimes these constraints are imposed on our company by outside forces, such as regulation or the law. But they can also be cognitive or values based. By generalising our change efforts, we risk missing the specifics of why things happened, what’s happening now and what might happen next.
When we examine change efforts that haven’t achieved what they set out to, we can often see that they have misjudged what was legitimately available to them based on their history and context. House of Fraser, for example, was acquired by Sports Direct’s Mike Ashley in May 2018 with the promise of turning it into the Harrods of the High Street. But it is now losing high-end fashion brands like Chanel and is currently losing £1m per week.
Path dependence does not mean a scenario of inevitability; there aregenuine options available. But our responses and actions are confined within certain parameters that are defined by the context. Focusing on these issues in a thoughtful and discerning way would lead to more successful change outcomes. This requires a different type of leadership work; giving attention to sense-making and deeply understanding the specifics of our organisation rather than relying on best-practice and off-the-shelf solutions.
No one planned Silicon Valley. It developed through a dynamic process of interactive adaptation. Like all living systems, it evolved to exploit the opportunities available to it in incremental steps. But change happens both ways. Today, housing supply can’t meet demand, salaries are uneconomically high, and traffic congestion saps hours of potential productivity every day. The word is, watch out for Texas.