What can we learn from firms in Silicon Valley?

As part of a group of IPA agencies, I recently completed a whirlwind tour of 18 of the most successful and fastest-growing businesses in Silicon Valley and Hollywood including Facebook, Google, LinkedIn and Disney. There are at least six characteristics that unified them all.

Vision

The first was vision. Specifically, the importance of a company vision which transcends the everyday and points towards a higher purpose. For Facebook it’s the creation of ‘the largest living map of living connections’. For Twitter, it’s ‘instantly connecting people everywhere to what is most meaningful to them’.

For AirBnB, the service which allows users to rent each other’s apartments, it’s the sense that ‘a world of sharing is a better one’. Sharing is a big idea. And one which seems to be catching on in California, as we see a rash of resourcesharing services: people renting out each other’s apartments, cars, even prams and lawnmowers. And, of course, lending each other money.

Is this phenomenon a short-term response to recessionary pressures, giving people a much needed extra source of revenue? Or is it a genuinely game-changing play, where individuals now compete with companies in the rental market? This phenomenon of collaborative consumption – as it’s fashionably called – hints at another trend which was evident in California: a move from ownership to rental. It’s evidenced in everything from car rentals to movie downloads to cloud computing.

‘One of us’

As well as this clarity of vision, each of these companies exhibited a distinct culture and a clear understanding of what it is to be ‘one of us’. Each one of the cultures we came across was of course different, but distinct, and characterised by ambition, restlessness, contrarianism and being ‘always in beta’.

In many instances, these cultures manifested themselves in workplaces which are three-dimensional representations of the brand. Typical were Google’s campus in Mountain View with its outdoor spaces, colour, sense of fun and exploration.

Zynga’s office with its interactive light-tunnel through which all visitors walk, its room dedicated to life drawing and its bars and restaurants (free food is a recurring theme), IDEO’s café, all glass and wood, with a toy workshop hovering above on a mezzanine which made you want to play.

The walls are crumbling There are some 800 million people on Facebook, 130 million business people on LinkedIn, five billion searches a day on Google, a billion tweets every four days, 230 million people are gaming via Zynga. If Farmville were a country it’d be the fifth largest in the world; a zettabyte of information is being created every year (that’s a million million gigabytes to you and me); there are five billion mobile users worldwide; 85% of the world’s population is covered by a wireless signal (which is greater than the reach of the electric grid).

You get a sense of a world in which we will be increasingly connected, at all times, to whatever we want: games, content, commerce, conversation. The barriers to collaboration, consumption and creativity are crumbling. And as they fall, the opportunities for trade increase. Warner Bros are now renting out films directly via Facebook; LinkedIn is becoming an important source and distributor of business news, with its global audience of business professionals. Farmville users raised millions of dollars while gaming via microdonations.

Here’s an even bigger idea. Chinese protectionist laws prohibit foreign companies from importing more than 20 films a year into the country. That’s 20 films in total, shared between dozens of studios and producers. Undeterred, Disney have observed that with only one child per family, the whole family unit (parents, grandparents etc) are entirely dependent on the professional success of that single child to support the family. And Disney have been smart enough to realise the importance of English as a key to educational and professional progress.

So what have they done? Disney are getting their brand in front of Chinese families by opening language schools – using their narrative and film-making skills to make the educational experience a rich one. If you thought that Tesco selling petrol and banking was category busting, you ain’t seen nothing yet.

"Each of the company cultures we came across was of course different, but distinct, and characterised by ambition, restlessness, contrarianism and being ‘always in beta'"

The data revolution

What happens when you preside, as Google does, over five billion searches a day? And of course it’s not just Google we are talking about, but granular access to huge volumes of customer interactions typifies many of these next-generation media companies. What we are witnessing is a data revolution.

As consumers interact with social platforms, games, information and each other, they are revealing information about their preferences and behaviours like never before. Effortlessly and in volumes unimaginable only a decade ago. And this is not just opening up opportunities for the digital pure-plays like Facebook – which learn more about their users by the second – but also for traditional media brands.

Warner Bros, 20th Century Fox and Disney now know their customers in ways never possible before. Now, they’re using sites like eBay to monitor what movies are being pirated, and then using ‘Manufacturing on Demand’ technology to manufacture those films and selling them directly on Facebook.

Disney on the other hand have used a fairly primitive source of data – YouTube - to do something even more imaginative than renting out movies on Facebook. Check out DJ Pogo, a 16-year-old kid who likes making mash-ups of Disney films. Only a few short years ago Disney, who make Chinese protectionism look mild, would have closed him down. Now, they’re giving him access to hi-res content to make even better mash-ups. Why? Because his latest Alice in Wonderland mash-up has 7.6m views and is introducing Alice to a new audience.

Always in BETA The same sound bites echoed through the corridors wherever we went. ‘If you don’t fail you’re not trying hard enough’, ‘test, test, test’, ‘hack days’, ‘launch and learn’, ‘always in beta’. As hip as some of this sounds, as natural as it might be to creative people, its also quite counter-cultural. Failure is a taboo in the UK. In California it’s a badge of honour.

This was brought home to me when I revealed at a drinks reception that I was one of the founders of the first digital music download company in the UK, the person I was speaking to said ‘I heard of that’. And then asked ‘did it collapse when itunes came along?’. ‘Yes, I said’. ‘That’s so cool… brands like yours were part of that whole music revolution.’ Not the kind of response you’d get in the UK.

This commitment to being ‘always in beta’ is supported by a whole load of rituals and practices. The practice at Google of giving people 20% of their time to come up with innovative ideas (15,000 last year) is perhaps the most remarkable.

And there were some wonderfully innovative ways of approaching the topic. Top of the list was Albert Savoia, Google’s technology director, with his approach to prototyping. Or rather, Pretendo-typing, which he calls ‘Preto-typing’.

Albert’s thesis is this: most new ideas fail, it’s a fact of life. So don’t ask people’s opinions in focus groups of how they might respond to a new product. And certainly never spend millions developing prototypes that have a high chance of falling on their faces. Instead, develop proxies cheaply and quickly. And collect real data, not opinions. Want to write a book? Create a fake door.

In other words buy a Google Adwords campaign and see if people click on it. Collect their email addresses. And if you have enough, you have a ready-made database of prospects. Have a retail idea? Set up a stall in a car park and see if people pre-order. Have an idea for a PDA? Make a model out of wood and ask people to carry it around with them for a few days. Then once you know the concept can work, spend money on building it. Bonkers, but genius. Albert’s mantra is: now beats later, simple beats complex, commitment beats committees, data beats opinions.

Boiling the frog

There were numerous instances on the trip, when we all recognised huge threats to traditional advertising models and agencies. It’s what Marc Giusti of Leo Burnett referred to recently in Campaign magazine as ‘boiling the frog’.

What exactly is this threat? Simply expressed it’s the threat of being left behind. Some of the emerging companies in California have scale that is eyewatering, they have access to unimaginably rich levels of customer data, they have the ability to integrate systems, some of them own boutique businesses in the areas of apps and social media. Others have offshore production facilities. They have speed, agility and inventiveness. They have transparent and ROI-oriented payment models. And they don’t necessarily need traditional creative agencies to deliver much of this.

For example, Zynga can integrate your client’s brand into their games, weaving it straight into the narrative in ways which enjoy high user acceptance and likeability, replacing traditional advertising formats.

That, of course, is the glass-is-half-empty view of what we saw. The glass-is-half-full view says clients will always need the creativity that agencies bring, the depth of expertise in communications, the solutions and media neutrality we can provide and the talent we can access.

But taking it for granted means that our frogs will be boiled. Advertising needs to reinvent itself just like every other industry.

Marc Nohr is chief executive officer, Kitcatt Nohr Digitas.

This is the speech delivered by Marc Nohr at the IPA 44 Club event hosted at Microsoft in January 2012.

Featured Image: Silicon Valley business park is home to many types of innovative companies – but they all share at least six characteristics for success