(Editor’s note: A version of this post appeared previously on Orange Silicon Valley’s Medium account.)
Corporations come to Silicon Valley from around the globe to discover new innovations, partnerships, and investments. For more than 15 years, I have had the honor of leading such efforts as the CEO of Orange Silicon Valley (OSV), the Bay Area presence for Orange, which is one of the world’s largest telecommunications operators. In the newest issue of Global Corporate Venturing magazine, where a portion of this article first appeared, I was proud to detail much of what I have learned in a new framework that I call MOST.
I call it the MOST Frameworkbecause it provides corporations with a guide to getting the most of out of a Silicon Valley presence. It reflects OSV’s experience, as well as insights from the many Fortune 500 companies, European Companies, and those from Asia that OSV has partnered with and spoken to during our time here. The framework is designed to help corporations operating in Silicon Valley to strategically answer questions, operate effectively, plan, and ultimately bring back new ideas, tech, and business models to their larger organizations. Those organizations’ commitments will likely correspond to one of four different modalities identified in the framework:
The framework provides paths that point to corresponding outcomes; you can view those motivations and associated choices in the tables I have included here. These recommendations assume that the company has already identified its motivations and decided that it needs to launch an affiliate presence here in the heart of the tech world. (For more about identifying motivations, please see my full article in Global Corporate Venturing’s July/August issue.)
If your company has already committed to launch its Silicon Valley presence, then congratulations — there is a challenging and rewarding journey ahead of you. These are the paths to now consider.
The MOST Framework: A guide to shaping a Silicon Valley affiliate according to corporate motivations
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 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 organizational 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, and/or a major industrial player or existing supplier. 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 to join 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 minimize the challenges of an under-dimensioned 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 better 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 local innovators. Thus, a large-sized 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 global telecom trade group 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 under-sized relative to this impact — and therefore not well-positioned to serve as a strategic partner for HQ.
Tactical: Prioritize 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 (1) spot disruptive technologies the mother company will want to experiment with as soon as possible, or (2) 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 overemphasize 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, HR, 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 organization with a high quotient of technology in its infrastructure, operations, and products. That said, we intuit that the leveling effect of software and digitization makes the lessons we have learned relevant to our new neighbors arriving to the Bay Area and Silicon Valley.
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