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Innovation and Global Business Leadership
- A Silicon Valley Perspective -
Sumitomo Chemical Co., Ltd.
Tokyo
August 2nd, 2010
Masa Ishii （石井正純） AZCA, Inc. - Managing Director
Visiting Professor – Graduate School of engineering, Shizuoka University
Noventi – Venture Partner
Palo Alto Research Center (PARC) – Senior Executive Advisor
©2010 AZCA, Inc.
The Bay Area before Silicon Valley
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©2010 AZCA, Inc.
Mecca of High-tech Industries
• 15,000 high-tech companies (2007)
• Value added per capita: $224,200 （US
average $85,800）
• Patents - 7459 patents in 2000 up to
8809 patents in 2003 (40% of California
State, 10% of the entire US)
Abundant financial source to back venture
activity
• 40% of VC money flows into Silicon
Valley
• Over 300 VC firms
Strong informal network
• High mobility of people
• Seminars and conferences and
universities and research institutions
• Grassroots networking events
• “Silicon Valley Club” of entrepreneurs
and VCs
San Jose became 10th largest city in the US
(passing Detroit)
Silicon Valley Today
People with diverse cultural background
• 36% of the population is foreign born
• 55% of engineering professional is
foreign born
• 48% of people speak languages other
than English at home
High Education Level
• Universities and research institutions
such as Stanford University, UC
Berkeley, PARC, SRI International
• More than40％ of people have bachelor
or higher degrees (US average 27%)
Abundant High-tech Talent (2006)
• Software: 101K
• Innovation Services: 77K
• Semiconductor: 57K
• Hardware: 54K
• Components: 24K
• Biomedical: 21K
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©2010 AZCA, Inc.
US Graduate School Rankings
大学院
所在地
州
Score
Biological
Scie
nce
s Chemistry
Computer
Scie
nce Physics Total Score
Stanford University Stanford CA 4.9 4.9 5.0 5.0 19.8
Massachusetts Institute of Technology Cambridge MA 4.8 4.9 5.0 5.0 19.7
University of California--Berkeley Berkeley CA 4.8 4.9 5.0 4.9 19.6
California Institute of Technology Pasadena CA 4.7 4.9 4.2 4.9 18.7
Harvard University Boston MA 4.7 4.8 3.9 4.9 18.3
Cornell University Ithaca NY 4.4 4.4 4.5 4.7 18.0
Princeton University Princeton NJ 4.4 4.0 4.5 4.9 17.8
Columbia University New York NY 4.3 4.3 3.9 4.3 16.8
University of Michigan--Ann Arbor Ann Arbor MI 4.3 4.0 4.0 4.2 16.5
University of California--San Diego La Jolla CA 4.2 3.9 3.9 4.1 16.1
University of Illinois--Urbana-Champaign Urbana IL 4.5 4.6 4.6 13.7
University of Chicago Chicago IL 4.2 4.2 4.6 13.0
University of Wisconsin--Madison Madison WI 4.5 4.2 4.1 12.8
Yale University New Haven CT 4.5 4.1 4.1 12.7
University of Texas--Austin Austin TX 4.2 4.3 4.1 12.6
University of California--Los Angeles Los Angeles CA 4.2 4.0 4.1 12.3
Scripps Research Institute La Jolla CA 4.5 4.6 9.1
University of Washington Seattle WA 4.2 4.5 8.7
Johns Hopkins University Baltimore MD 4.6 4.0 8.6
University of Pennsylvania Philadelphia PA 4.3 4.2 8.5
University of Maryland--College Park College Park MD 4.0 4.2 8.2
Carnegie Mellon University Pittsburgh PA 4.9 4.9
University of California--San Francisco San Francisco CA 4.5 4.5
University of California--Santa Barbara Santa Barbara CA 4.5 4.5
Washington University in St. Louis St. Louis MO 4.5 4.5
Rockefeller University New York NY 4.5 4.5
Northwestern University Evanston IL 4.4 4.4
Duke University Durham NC 4.4 4.4
Georgia Institute of Technology Atlanta GA 4.3 4.3
University of North Carolina--Chapel Hill Chapel Hill NC 4.0 4.0
Pennsylvania State University--University Park University Park PA 4.0 4.0
Purdue University--West Lafayette West Lafayette IN 3.8 3.8
Brown University Providence RI 3.7 3.7
Source： US News & World Report 4
©2010 AZCA, Inc.
VC Investments by Geography
Source: National Venture Capital Association
100% ($Billion) = 2.7 2.7 7.9 104.0 23.1 28.4
VC Investment by State VC Backed Startups
（top 10 states, 2008）
State VC backed
startups
California 1292
Massachusetts 346
New York 195
Pennsylvania 152
Texas 125
Washington 126
Maryland 87
New Jersey 76
Colorado 78
Virginia 65
Others
WA
NY
TX
MA
CA
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©2010 AZCA, Inc.
High-tech Ecosystem of Silicon Valley
Idea New
Products
Entrepreneur
VC
Universities
Research
Institutions
Lawyer
Accountant
Consultant
Investment Banker
Research Firm
Executive Search
Etc.
Network of Innovation
Regional Cluster
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©2010 AZCA, Inc.
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2
2
3
3
4
5
5
5
6
7
7
7
16
17
32
0 5 10 15 20 25 30 35
Other
Hungary
Belgium
Switzerland
Korea
Italy
Iran
China
Australia
Germany
UK
France
Canada
Taiwan
Israel
India
#Companies
*- IPO
Source: 10K , Hoover’s
Country of Origin of Successful* VC Backed
Entrepreneurs
Anyone from Japan?
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©2010 AZCA, Inc.
California, 62%
Massachusetts, 14%
New Jersey, 6%
Washington , 3%
Texas, 3%
Other, 12%
Source： Thomson Financial database
Where 1st Generation Immigrant
Entrepreneurs Founded Companies?
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©2010 AZCA, Inc.
Successful Companies by 1st Generation
Immigrant Entrepreneurs
0
50
100
150
200
250
300
350
400
Before 1980 1980－1989 1990－2005
Started by US born enterepreneur
Started by 1st Generation Immigrant
IPOs of VC Backed Companies
Source: Thomson Financial database
123
246
356
7%
20% 25%
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©2010 AZCA, Inc.
Company Founder Country of
Origin
#Employees
（WW、2005）
Type of Business
Intel Corporation Andy Grove Hungary 99,900 Semiconductor
Solectron Corporation Winston Chen Taiwan 53,000 Contract design, manufacturing
Sanmina-SCI Corporation Jure Sola
Milan Mandarin
Bosnia
Croatia
48,621 Contract design, manufacturing
Sun Microsystems, Inc. Andreas Bechtolsheim
Vinod Khosla
Germany
India
31,000 Work station, computer
eBay Inc. Pierre Omidyar France 12,600 Electronic auction
Yahoo Inc. Jerry Yang Taiwan 9,800 Web portal
Lifetime Fitness, Inc. Bahram Akradi Iran 9,500 Fitness center
Tetra Tech, Inc. Henri Hodara France 7,200 Engineering service
UTStarcom, Inc. Ying Wu China 6,300 Telephone equipment
Google Inc. Sergey Brin Russia 5,680 Web search, portal
Kanbay International, Inc. Raymond J. Spencer
Dileep Nath
John Patterson
Australia
India
Canada
5,242 Computer system design service
Cadence Design Systems, Inc. Alberto Sangiocvanni-Vincentelli Italy 5,000 ECAD software
Juniper Networks, Inc. Pradeep Sindhu India 4,145 Communications equipment
Watson Pharmaceuticals, Inc. Allen Chao Taiwan 3,844 Pharmaceutical
Parametric Technology Corporation Samuel Geisberg Russia 3,751 Software
Pediatrix Medical Group, Inc. Roger Medel Cuba 3,013 Healthcare facilities
NVIDIA Corporation Jen-Hsun Huang Taiwan 2,737 Semiconductor
Salton, Inc. Lewis Salton Poland 2,466 Consumer Electronics
Lam Research Corporation David Lam China 2,200 Semiconductor equipment
WebEx Communications, Inc. Subrah S. Iyar India 2,091 Software
VC Backed Public companies Started by First Generation Immigrants
Successful Companies Generating Employment
World Wide
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©2010 AZCA, Inc.
AZCA
William Hewlett &
David Packard
Elon Musk
Andy Grove
Pierre Omidyar (French-born Iranian-American )
Jerry Yang Larry Page
Sergey Brin
Larry Ellison
Steven Jobs
Major Players in Silicon Valley
Bill Gates
William Shockley
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©2010 AZCA, Inc.
“Brain Circulation”
Footprint of Students from Asia Is Japan in this Circulation?
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©2010 AZCA, Inc.
Today Past
Evolving Economic Model
New technologies and state of the
art products emerge in developed
countries equipped with high R&D
capability and affluent customers.
After the product is standardized
and the manufacturing process has
matured, activities shift to
countries where low cost
manufacturing is possible.
Highly capable engineers travel
frequently between SV and their
home country.
Immigrant entrepreneurs have
abundant experience in SV as
well as strong ties in the country
of origin.
Limited chance for new technology
to be developed in the developing
countries.
Sometimes government in the
developing country leads R&D
programs.
R&D opportunities for developing
countries thanks to the
advancement of distributed
development and manufacturing
approach.
Wider opportunities for
developing countries to come up
with their own technologies.
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©2010 AZCA, Inc.
Waves of High technology
1960 1970 1980 1990 2000 2010
Telecommunications, Internet
Semiconductor
PC, Computer Systems, Peripherals
Software
Life Science
Nanotechnology
Greentech
World’s
De-facto
Standards
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©2010 AZCA, Inc.
California, 46%
Massachusetts, 19%
Texas, 10%
Washington, 8%
New Mexico, 6%
Others, 11%
VC Investment in Greentech Greentech Investment by State
(2008)
100% = $4.1 Billion
VC Investment in Greentech
Source: Thomson Financial/NVCA
1.4% 2.2% 2.3%
2.9%
4.5%
5.9%
9.1%
14.5%
12.4%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2001 2002 2003 2004 2005 2006 2007 2008 2009
$Billion % of total VC
Investment
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©2010 AZCA, Inc. 16
Requirement for Greentech Cluster Growth
Source: NRDC (National Resources Defense Council)
Survey Results on 25 Investors
Requirement #Answers
Entrepreneurial Culture, Abundant Entrepreneurs 13
Aggressive Government Policies 12
Excellent Universities, Research Institutions 11
Access to Financial Sources (e.g., VC) 8
Market Potential 8
Deal Flow 4
Customer Awareness 3
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©2010 AZCA, Inc.
“Green New Deal” by President Obama
Key Points
Create 5 million new jobs by investing $150 Billion in
Greentech during the next 10 years
Reduce the use of crude oil by equivalent amount of
import from Middle east and Venezuela within the next
10 years
Introduce 1 million plug-in hybrid cars made in USA by
2015
Usage od renewable energy – 10% by 2012, 25% by 2025
Reduce green house gas emission by 80% by 2050 as
compared in 1990
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©2010 AZCA, Inc. 18
Greentech Policies of California State
Public Energy Research (PIER) Program
The Green Wave Initiative
California’s Renewable Portfolio Standard (RPS)
Renewable Energy Incentive Programs
Renewable Resource Trust Fund
Solar PV Initiatives
California Solar Initiative (CSI)
Energy Efficiency Rebates
Diesel Emission Reduction Plan
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©2010 AZCA, Inc.
Greentech and Key Technologies
Biotechnology
nanotechnology
Computer Science
Material Science
Telecommunication
Microelectronics
●
●
●
Key Technology Power generation (Solar, Fuel Cell, Solar
Thermal, Wind, etc.)
Energy Storage (Secondary Battery, Super
Capacitor, etc.)
Infrastructure (Smart Grid, distributed Power,
Wireless, etc.)
Energy efficiency (Solid state light, HVAC,
Lighting control, green Building, etc.)
Transportation (HEV, PHEV, EV、Related infra,
etc.)
Fuel (Bio fuel, Hydrogen, Catalyst, etc.)
Desalination
Air, water, soil, waste (Monitor, detection,
process, improvement, etc.)
Greentech application
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©2010 AZCA, Inc.
Silicon Valley’s Leading Position in
Greentech
Silicon valley’s Infrastructure
Obama’s Green New Deal
Green Policies of California State
Silicon
Valley leads
Greentech
Entrepreneur
VC
Universities
Research
Institutions
Lawyer
Accountant
Consultant
Investment
Banker
Research Firm
Executive
Search
etc.
Network of Innovation
Regional Cluster
Accumulation of relevant technologies
• Micro Electronics
• Information Technology
• Telecommunication
• Material Science
• Computer Science
• Biotechnology
• Nanotechnology
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©2010 AZCA, Inc. ©2010 AZCA, Inc.
Commercialization in Greentech
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©2010 AZCA, Inc.
Silicon Valley’s Fundamental Characteristics
Keyword 1: Openness
Openness to people with different
background
Openness to new ideas (technology,
business model) “Out of the Box
Thinking”
Keyword 2: Tolerance for Failure
Low risk high return
May attempts, many failures behind some
success
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Traits of Business Leaders in Silicon Valley
“Out of the Box” Thinker
Passion for Success
Continued Will for Success
Power to endure hardship
Open, Flexible
“Soft Power”
Global Perspective
©2010 AZCA, Inc.
7-S Model for Successful Silicon Valley
Companies
Strategy Aim for No.1 player in the market leveraging
innovation or disruptive technology
Structure Flat, network
Flexible
System Maximum utilization of IT
Virtual Integration*
Style Informal
Open
Entrepreneurial
Staff Knowledge worker
Empowered staff
Free agent
Skill Alliance, collaboration, partnership with outside
companies
Shared Value Self Realization
New value creation
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*- linked not only by physical assets but by information
Steps for Globalization
Basic management
principle
Domestic
Some
international
experience
Management
localization
Globally uniform
Products/
Services
Domestic
standards
Minor
modification of
domestic
standards
Tailoring to local
markets
Global R&D,
design
Adaptation to
local markets
Financial
performance
COGS/Profit Short term profit Longer term ROI Strategically
adjusted ROI
Functional Export Assembly, sales,
and service in
the local market
Development,
manufacturing,
sales in the local
market
Integration and
feedback on a
global basis
Operational Issues Tariff, export tax Penetration to
the local market
Relationship with
local partners
Management
Resource
Integration of
information and
control
Positioning/import
ance of overseas
Incremental
revenue
First line of
defense
Strategic
complementarity
Opportunity for
growing as a
global player
Global Multinational International Domestic
Source: McKinsey & Company
Many Silicon Valley companies start here!
Fostering Global Business Leaders
Does the company have a globally viable corporate vision?
Is the company really committed to developing globally
capable HR?
Does the company have training programs for fostering
globally capable HR?
Securing candidates
Global career path
Utilizing the skills (expatriates, inpatriates)
Does the company have a learning organization from its
global presence?
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This is a very, very time consuming process!!
©2010 AZCA, Inc.
Discussion
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