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Boundary Breaking: How to Challenge the Silicon Valley Model and Succeed in Global Innovation

Schumpeter was the first to propose the theory of technological innovation and economic growth. Xiong believes that innovation is “establishing a new production function” and “introducing a ‘new combination’ of factors of production that has never been done before into the production system”.

The innovation referred to here emphasizes production reorganization and resource allocation. With the evolution of the technological innovation ecosystem, entrepreneurs and investors around the world are increasingly dependent on globalization and need more open, efficient and free cross-border cooperation to build a more resilient and sustainable innovation chain. “Boundary Breaking: How to Rewrite the Rules of Silicon Valley” by the renowned entrepreneurial investor Alexander Lazaro re-examines the meaning, connotation and prospect of cross-border integration from the perspective of innovation ecology. Nowadays, voices of “anti-globalization” come and go, and technological innovation policies are subject to more and more restrictions, posing new challenges to technological innovation and highlighting the importance of cross-border integration.

The Silicon Valley Model Is Not a “Master Key”

In 1953, when Akio Morita embarked on his first overseas trip, he perceived the United States as a nation that “seemed to have everything”. The waiter brought him ice cream and remarked, “The little paper umbrella on this ice cream is produced in your country.” The waiter appeared to be implying that Japan was too far behind. But 30 years later, everything had changed. New York, which seemed “glamorous” when Morita first visited in the 1950s, was now filthy, crime-infested and bankrupt.

Meanwhile, Sony had become a global brand. Akio Morita redefined Japan’s image abroad. The country was no longer regarded as a producer of paper umbrellas for ice cream sundaes. Today, Japan manufactures some of the most advanced products in the world. Morita had a strong circle of friends on Wall Street and Washington. He painstakingly learned the art of New York dinner parties the same way other Japanese approach the traditional tea ceremony. Whenever Morita was in New York, he hosted the city’s wealthy and influential at his apartment at 82 Fifth Avenue, across from the Metropolitan Museum of Art.

Morita was initially fascinated by the power and wealth represented by his American friends. But the aura around the likes of Kissinger and Peterson began to fade as America moved from one crisis to the next. Their country’s system didn’t work, but Japan’s system worked. By the 1980s, Akio Morita realized the deep-rooted problems of the American economy and society. The U.S. had long seen itself as Japan’s teacher, but Morita believed the U.S. should learn lessons as it struggled with a growing trade deficit and a crisis in the high-tech sector. Akio Morita said that the United States was “busy training lawyers”, while Japan was “busy training engineers”. Compared with American corporate executives who paid too much attention to “this year’s profit”, Japanese corporate management paid more attention to “long-term” profits. Labor relations in the United States were hierarchical and “old school,” and companies didn’t adequately train or motivate shop floor workers. Morita believed that Americans should stop complaining about Japan’s success. He decided it was time to tell his American friends: Japan’s system works better.

In 1989, Akio Morita expounded his views in a collection of essays entitled “Japan Can Say No.” Even the normally affable Morita had trouble hiding his belief that Japan’s technological prowess had given it a place among world powers.

In the US, “Japan Can Say No” sparked outrage. The book was translated and distributed unofficially by the CIA. An outraged congressman put the entirety of it in the Congressional Record for publicity. The bookstore said customers in Washington “went crazy” in their search for the bootleg book. Akio Morita coyly asked the official English translation to publish only Shintaro Ishihara’s article, not to reflect his contribution.

“Japan Can Say No” was controversial, not because of its views, but because of the facts. The US was significantly behind in memory chips. If this trend continued, geopolitical changes would inevitably follow. In the same year that “Japan Can Say No” was published, former U.S. Secretary of Defense Harold Brown published an article that came to almost the same conclusion. “High technology is foreign policy,” Brown wrote in the article. If America’s high-tech status was deteriorating, then America’s foreign policy status was also at risk.

It was awkward for Brown to admit it. Brown, a former Pentagon leader, hired William Perry in 1977 and empowered him to put semiconductors and computing power at the heart of the military’s most important new weapons system. Brown and Perry had succeeded in convincing the U.S. military to accept microprocessors, but they didn’t anticipate that Silicon Valley would lose its lead. Their strategy paid off in new weapons systems, but many of them depended on Japan.

“Japan is leading in memory chips, which are at the heart of consumer electronics,” Brown acknowledged. “Japan is catching up quickly with the U.S. in logic chips and application-specific integrated circuits.” Japan is also making some of the types needed for chips. Tools such as lithography equipment have achieved a leading position. The best Brown could have foreseen was that the United States would protect Japan in the future, but with weapons powered by Japanese technology. The U.S. strategy of turning Japan into a transistor salesman seemed dead wrong.

“Era of Resilience” Needs to Pay Attention to Innovation Ecology

Although the rise of modern technological innovation is not new, the traditional technological innovation ecology has not seen modern innovation and entrepreneurship models such as venture capital. Until the rise of the Internet in the 1980s, the trend of technological innovation represented by Silicon Valley began to lead global innovation and entrepreneurship. The main reason why the model at that time was able to operate quickly and conveniently was the rapid development of globalization, active multinational companies and multinational investment, and free trade and open markets provided a fertile soil for technological innovation. However, in the past few years, a new trend has emerged in globalization. The “anti-globalization” launched by developed countries and the “re-globalization” advocated by developing countries compete together. Controlling costs, preventing risks, and enhancing the resilience of corporate development have become the key.

Not long ago, German economist Markus Brunnermeier proposed the status quo, difficulties and solutions of a resilient society in his new book “Resilient Society”. This book expresses a similar view that today’s start-ups are increasingly emphasizing achievable growth goals and abandoning the growth-at-all-costs mentality. The authors call it a “camel-shaped” enterprise. At present, what we are facing is an innovative and entrepreneurial environment from the impact of the new crown pneumonia epidemic to climate change, and then to the increasingly prominent “anti-globalization”. It is more difficult for start-ups to survive and grow than before, and they need to pay a higher price. This book believes that in the face of the brand-new innovation and entrepreneurship environment and various complex challenges, as an innovative entrepreneur in the frontier, he needs to have four advantages-creating a huge market, benefiting from competition, obtaining the support of the market ecosystem, Expand the talent pool.

According to the experience of successful multinational corporations, although technological innovation mostly originates from “time and timing”, it cannot be separated from the “geographical advantage” and “harmony of people” of the innovation ecology. For example, Silicon Valley in the United States, Tsukuba in Japan, and Shenzhen in China, these world-leading sources of technological innovation often have unique innovation advantages and outstanding innovation and entrepreneurship resources. In the era of Internet technology, for start-ups that focus on a certain link in the value chain, innovative products or solutions can solve customer problems. These services do not require a large amount of capital and hardware investment, but require a strong ecosystem System Support. This book emphasizes that start-ups still need to develop “full-stack skills” and grow into a “camel-type” enterprise, or create infrastructure or hardware independently by weighing cost-benefits, or use other company resources to cooperate and build together. Experience shows that innovative entrepreneurs in frontier areas prefer to build a full-stack moat (that is, the three major moats of competitiveness, capital and technology) to enhance the sustainability and resilience of enterprise development.

Participate in “cross-border integration” from a global perspective

Cross-border integration is a global concept. In addition to the field of innovation and entrepreneurship, the importance of cross-border integration is emphasized in Internet technology, education, culture, and traditional industries. On one hand, cross-border integration can quickly adapt to changes in market and customer needs. By bringing together cutting-edge innovators in different fields, it can promote the collision of new ideas and concepts and stimulate innovative thinking; on the other hand, cross-border integration can quickly match the optimal With the most efficient combination of resources to create new products and launch new services, this model can easily form an ecosystem of innovation and entrepreneurship.

In the era of globalization, cross-border integration is not limited to local or cross-field, but involves a more complex industrial chain and supply chain system. Even for “asset-light” start-ups, as the market expands and influence increases, the complexity of cross-border integration becomes very prominent. This book summarizes the key to the success of start-ups in the frontiers – born with a global layout, that is, to expand to the global market at an early stage.

How to practice cross-border integration? This book gives a relatively clear point of view, that is, to penetrate the concept of the world and open up the global network of relationships. Even though there are new trends and even adversities in the era of globalization, as a technological innovation company, it should still regard embracing globalization as the foothold of future innovation and entrepreneurship. The author believes that in the frontier, typical innovative entrepreneurs have richer life experiences, and often have cross-regional, cross-sector and cross-industry experience.

From practical experience, the key to the long-term growth of multinational corporations lies in making full use of high-quality resources from all over the world, carefully combining and extensively coordinating the huge role played by the industrial chain and supply chain, and optimizing resource allocation at minimum cost. And the most accurate supply and demand system to gain a leading edge. Successful multinational companies such as Apple, Tesla, and Huawei all adopt this model. This book proposes that cross-border integration also needs to be combined with the local environment, and only by adapting to the local environment can sustainable growth be guaranteed.

Another key to cross-border integration lies in team and talent cultivation. This book argues that innovative entrepreneurs in the frontier place pay more attention to the resilience of enterprise development, and the key method is to serve multiple markets. Therefore, this book proposes to establish a distributed team and establish an organizational management system in a globally distributed manner. The advantage lies in the use of a diverse talent pool, cost control, and a higher degree of integration. The first model is the “Earth & Moon model”, that is, the dominant headquarters serves as the organizational center, and new centers are launched when entering new markets; the second model is the separation of customer operations and technology development (or called “reverse Outsourcing”). Another way is to build a first-class team, look for talents from all over the world, cultivate a growing and multi-tasking team through training and training, and promote the formation of interdependent and cooperative long-term relationships between employers and employees. In addition, the book suggests that startups train to become all-rounders.

How to expand and maintain cutting-edge innovation advantages

This book uses vivid cases to prove the importance of cross-border integration, and tells the success stories of innovative entrepreneurs in frontier areas outside the Silicon Valley model. Looking around the world, the development ecology of start-ups and unicorns is facing new challenges. Research shows that in 2022, there will be only 258 newly-born unicorn companies in the world, and the number of new unicorns will drop by 50% compared with 2021. Rising new external uncertainties such as competitive interest rate hikes by global central banks, geopolitics, and major power games have brought new risks to innovation and development ecosystems such as start-ups.

This book believes that the market ecosystem faced by the frontier is more complex and changeable, and the innovative entrepreneurs in the frontier adapt to the new innovation and entrepreneurship model, focus on solving the pain points in the ecosystem, and focus on developing resilience. Ecosystem builders. The author pointed out that the hope of the future lies in the frontier, the monopoly advantage of Silicon Valley will be broken, and innovation is being transferred to the world. There are many places where the East and West need to learn from each other and cooperate with each other.

This book places particular emphasis on managing risk. Although many technological companies with global influence are mostly developed from start-ups around the world, the samples of these successful companies are only a small part of the surprising number of start-ups, and most of the entrepreneurs may have encountered failure in the early stages of entrepreneurship , There are also some companies that have growth bottlenecks after developing to a certain scale, and are eventually forced to withdraw from the market. This book argues that building a startup, whether in Silicon Valley, on the frontier, or elsewhere, is risky. The author offers two suggestions: one is to choose acceptable risks. The innovative entrepreneurs in the frontier area should first determine the acceptable and unacceptable risk types at the beginning of their business, create a culture of risk management, and empower employees to foresee risks. The second is to reshape finance, develop new venture capital models, through joint investment (venture capital funds), use new investment technology (artificial intelligence), enhance the resilience of investment portfolios, and deal with more difficult market ecosystems.

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