SILICON VALLEY SPECIALdigit-dl-projekt.de/wp-content/uploads/2017/04/Research... · 2017-04-07 · production in the digital (world) economy. The central question is therefore no

Digital services in modern value-added systemsNew potential for sustainable production

The digital economy – under the microscope

SILICON VALLEY SPECIAL

Digital services in modern value-added systemsNew potential for sustainable production

In October 2015, the team for “Informatisation of Society and the Future of Work” from the Institute for Social Science Research in Munich (ISF) conducted fieldwork among well-known German companies and American pioneers of the digital econ-omy in Silicon Valley. The researchers reported their initial impressions and results in a blog. This brochure presents the blog contributions published by the team in a slightly revised form. The fieldwork took place in the context of the research project “Digital services in modern value-added systems” (known simply as digit-DL). The joint project, headed by the ISF and in collaboration with IG Metall, is funded by the German Federal Ministry of Education and Research (BMBF) as part of the funding initiative “Innovation with Services” and is supervised by the project sponsor of the German Centre For Aeronautics & Space Research (DLR). A select group of experts from companies and trade unions contributed to the project. Funding code: 01XZ13017, 01XZ13018

Additional information: www.digit-dl-projekt.de, www.idguzda.de

PREFACE 4

FOREWORD 5

UNDERSTANDING THE UPHEAVAL

Always on in the information space – Silicon Valley as a strategic spot for disruptive innovation 6

Data, Data, Data – Self-experimenting digital societies 8

DISRUPTIVE BUSINESS MODELS AND WORK

Cloud, platforms and the IoT – New business models in the information space 10

Marketplaces for work – The disruptive transformation of highly skilled labour 12

“Traffic is a serious issue” – The car in a digital society 14

The creative workshop – The office of the future 17

THE BAY AREA START-UP SCENE

Plankton, cleaner fish and whales – Start-ups in the Silicon Valley innovation system 18

“It’s all about growing” – Visiting the “HanaHaus” 20

Start-up unplugged – Impressions from the start-up scene 22

SOCIAL INTEGRATION AND SOCIETY

Networks, patchworks and working in the open – Concepts of social ties 27

What’s half of everything? – Women in Silicon Valley 30

“There is a lot of pressure on the inside here …” – Work and life in the middle class 32

RESULTS AND REFLEXION

Catapulting into the digital world – How long can technicism work? 34

Can a tanker be disruptive? – Spanning innovation and stability 36

IMPRINT 39

CONTENTS

3 digit-DL Silicon Valley – Contents

Silicon Valley has long been synonymous with the digital revolution in business and society. In the 1970s, research-ers examining new approaches to teamwork primarily travelled to Sweden or Japan in order to analyse the indus-

try politics there. Today, representatives from companies, associations and research are taking the road to California, looking to the Bay Area for answers to their questions about the digital transformation of economics, work and life.

In October 2015, the scientists of the BMBF-funded joint project digit-DL also went there – and for good reason. For if the potential of digital value-add is to be understood and evaluated as a whole, with its constitutive unity of products and services together with its connection to producers and crowd-working, Silicon Valley is surely the right place to go.

What makes the economy there of such interest? It can be characterised as a “foresight economy”. Coming from the German “Vorauswirtschaft”, the concept of a “foresight economy” was shaped by German economist Ernst Helmstäd-ter; it conveys the fact that its carriers are economic and social pioneers who are entering into new technical, proce-dural and economic developments with verve at an early stage, paving the way for others in the future. The effects of such a “foresight economy” spread to other actors and sectors, with a multiplying and imitation effect ensuing.

To deal with such a (digital) “foresight economy” in person and on site can lead to new and far-reaching findings for research and business alike. With this brochure, the results of these field studies are made available to the interested public. The researchers of digit-DL have been just as surprised by the consequences of the economic use of the digi-tally created worldwide information space, as they have been by the now self-evident blurring of boundaries between companies, work and life – and thinking in the categories of the Internet of Things – all of which has allowed the Silicon Valley economy to always remain one step ahead of the “Industry 4.0” project.

However, despite the fascination that this inspires, it is important to keep in mind that the economic players in Silicon Valley are part of the US systems of innovation, economics and society. As is generally known, the rules of the game are different from those of the European economic and social space, so that any attempt at teaching or copying such examples should always be carefully considered.

We hope this publication is of interest to many readers. Ultimately, the findings of the joint project digit-DL may further promote discussions regarding the opportunities and risks offered by the value-add of digitisation.

PREFACE

Klaus Zühlke-Robinet, German Centre For Aeronautics & Space Research e.V. (Bonn), Project sponsor, Innovative Work Design and Services

4 digit-DL Silicon Valley – Preface

Anyone who has been to Silicon Valley in recent years will have some idea of how fundamental the upheaval in societies and economies that are linked to the internet and digitisation is bound to be. In October 2015, in the

context of the joint project “Digital services in modern value-added systems. New potential for sustainable produc-tion“ (digit-DL) we had the opportunity to gather our own impressions of the dynamic with which the local digital industry is driving transformation – as well as the consequences this has for companies and people.

Silicon Valley is downright “manically disruptive”. This is reflected not only in the radicalism with which the actors of internet giants and start-ups use production and business models to turn upside down the organisation of work – and thus complete value-add chains and industries (with the aid of risk-taking capital investors). It is also reflected in the social fabric of the Bay Area, in the interaction of social groups and in the everyday life of the people, which is increas-ingly directed by data.

Our field studies, which we were able to carry out with the help of well-known German internet companies and pioneers of the American digital economy, have confirmed our initial theory: The key to success in Silicon Valley is the consequent use of the global information space, which has grown with the internet, as a new stage of action and production in the digital (world) economy. The central question is therefore no longer why Silicon Valley is on the rise, but how sustainable its strategies are, what they mean for the German economy and how German companies can shape the digital transformation within their own specific framework conditions.

We have already reported on the first impressions, interim results and further ideas developed during our research trip via our idguzda blog entries. We further conducted a first detailed review in the context of the second digit-DL conference, which took place on 28 January 2016 at IG Metall. Our blog contributions have received a great response from both the professional world and the general public. With this brochure, we are now consolidating these findings in printed form. For the sake of improved legibility, we have reworked and reorganised the material.

This publication explains the background behind the digital upheaval, examines the mechanisms and consequences of disruptive innovation, takes a look at the start-up scene and society of Silicon Valley and, finally, draws preliminary conclusions regarding significance for the German economy.

We would like to take this opportunity to thank the German Federal Ministry of Education and Research (BMBF) and the DLR project sponsors, without whose financing and extensive support this field research would not have been possible. We would also like to thank our partner IG Metall, the company partners of digit-DL and, last but not least, the expert group “Company of the Future”, which has constantly and constructively accompanied the project. Finally, we would like to thank our network partners, who have helped open the doors to discussions in Silicon Valley: Robert Bosch GmbH, the Daimler and Benz Foundation, Hewlett Packard Inc., SAP SE, Software AG and VW Financial Services AG.

FOREWORD

Dr. Tobias Kämpf Dr. Kira Marrs Alexander ZieglerProf. Dr. Andreas Boes Thomas LührBarbara LangesKatrin Gül

5 digit-DL Silicon Valley – Foreword

The fact that the Silicon Valley has a fundamental importance for the global IT industry was something we were already able to conclude following our first visit in 2008. Anyone with a global claim in the IT industry was already present there. SAP, for example, had its second largest lab in Palo Alto – because it was essential for the company to capture the innovative impulses of the Valley at an early stage. In addition to the IT companies, we also found the innovation labs of Daimler and VW. In comparison to this first visit, the importance of Silicon Valley for the global innovation system has once again clearly increased.

Innovation labWhat we found especially striking was the fact that even those industries that many observers do not regard as classic candidates for early disruptive change in the market are now highly represented here. We met, for instance, execu-tives from RWE who were convinced that strategic contributions to innovation that could impact their own business models are being developed here. They thus managed an innovation lab intended to probe into local innovation devel-opment, reporting their results directly to their CEO. Also noteworthy is the fact that Vishal Sikka, the CEO of Infosys – which, with nearly 190,000 employees, is the second-largest Indian IT services provider – has its headquarters in the Valley. This has a significant symbolic impact. On the occasion of our first visit to India in 2006, Infosys was the most attractive company in Bangalore. And it was precisely this city that was to become a new strategic location for the world IT industry.

Globalisation, however, has meanwhile also become part of the global value-add chain in Silicon Valley. It affects the work situation here in many different ways. Even small start-ups with fewer than ten employees tend to have part of their “workforce” in India or elsewhere in Asia. This results in a time zone structure for production spanning up to 12 or even 14 hours in time difference. A manager from a large IT company with teams in the USA, Europe, India and China told us about having calls with employees in China and India in the evenings, followed by calls the next morning starting at 7:00 am with contacts in Europe. Working in Silicon Valley requires time zone management. And this doesn’t only apply to the upper and middle management, but also to the “simple” software developers.

Information space in pure cultureWhat we encounter here is an everyday challenge for managers and software developers, which has been made possible only because of the internet and its role at the heart of the digital transformation. This time we again have interviews and discussions with players in the Valley to further examine our further developed scientific core thesis regarding the information space. We want to know whether – and how – this thesis is confirmed at the core of the American digital landscape. Our conviction: The global information space is not just a technical infrastructure for nerds. Rather, it’s a new social space inhabited by the entire global society. It is developing into a hub for the forma-tion of social relations, businesses, values, and even political decisions. It is the basis for a leap in the productive forces of society.

In the Valley, the scope of this development was understood. Here, we experience the information space in a pure culture. This is because the emerging American IT industry radically makes use of its possibilities. They do not think about the “new” from the perspective of the old, but are fully committed to disruption. Business strategies, production

Always on in the information spaceSilicon Valley as a strategic spot for global innovation- and value-add chains

UTC-8: 23:50:07 Wednesday UTC+1: 08:50:07 Thursday


6 digit-DL Silicon Valley – Understanding the upheaval

models, value chains, work organisation – with the information space as a relay station these companies turn everything that makes a traditional economy on its head.

Workdays without beginning or endIt is thus no wonder that established companies in the industrial and service industries feel their core business to be under threat – leading them to now frantically look for counterstrategies. However, the disruptive force of Apple, Google and countless other start-ups that set the bar in the Bay Area also has serious consequences for the people who work there. Through the information space, all of their successes and failures become transparent. Not only this, but because work is possible at practically any time and in any place, it’s now taken for granted that employees in the Valley are fully exploiting the possibilities of this ever-increasing flexibility and mobility.

So the workdays seem to have neither a proper beginning nor any real end. The concepts of “closing time” or “overtime” do not make any sense in this context. Rather, the working world requires employees to march onwards throughout the day. Employees develop strategies for dealing with working times, structuring daily availability requirements in the global and digitised working world in such a way that, in the end, at least a little space remains – in order to accompany their daughter to an important hockey game, for example.

And if it’s possible to make calls from home both in the evening and in the morning, in order to escape the rush hour traffic – then many employees are satisfied. A clear separation between working time and leisure time is not impor-tant and perhaps not planned at all. “Always on” – in terms of time and motivation – is the practice here. ■

Information space CommunicationCooperation

Client

The emerging American IT industry uses the

opportunities presented by the information space in a radical fashionUTC+1: 08:50:07 Thursday UTC+5.30: 13:20:07 Thursday


While we were on the road with the team in “SF” (or “San Francisco” – don’t say “Frisco”) I went to a bar with two colleagues after dining. We had a nice evening. The next morning, I received an email from the team at the bar. They thanked me for my first visit to the bar, welcomed me to provide any “feedback” I might have and said good-bye in the hopes that I would be back soon. Since I had not left my e-mail there, I was a bit confused. How did the bar staff know I was there?? And how did they know that it was my first time there?

After giving it some thought, I came up with the following explanation: During my time in the Valley I used “Waze”, an app that generates up-to-date traffic information with user-fed data and other information. Much like an ADAC traffic jam alert, the app is designed as an interactive platform built on a crowd-based approach. This system records move-ments and visualises them for all other users. If I were to flag certain friends, the app would even inform these persons if I were to be in their vicinity. I suspect that Waze not only makes the data generated in this way available to other users, but also makes it accessible to interested customers, presumably for a small fee, in an appropriately processed form – which includes the e-mail addresses of the potential persons of interest. So the bar staff would have known that I spent about half an hour there – and were then probably also able to get my e-mail address via this means. Right?

Information biotope for the digital economyBehind this novel business idea is a culture of dealing with data and information that is completely tailored to the new conditions of digital society. Anyone who asks how their own data is dealt with learns that – apart from credit card data – people do not consider anything worthy of protection. Even a person’s genome information, as one interviewee assured us, would of course be made available to the general public online. This interviewee was familiar with the German approach to data protection and privacy, and considered this mentality to be utterly foreign in Silicon Valley.

Here, people are happy to share their data. Because this is the only way to fully tap into the potential of the internet. “Only those who give something of themselves will experience something,” is a mantra we hear again and again. This is why the people of Silicon Valley are taking full advantage of the new possibilities provided by the process of informatisation. The entire Valley is a regular biotope for the process of informatisation that self-tests the data and information needed to create a digital economy. Without these many open-hearted users, the critical mass of initial data needed to lend wings to a new economy that is based on the exploitation of gigantic data sets would be lacking. These data provide the key to enabling thousands of new business ideas in all areas of life.

Data and businessTo transform this mass of data into useful business ideas, more than supercomputers and big data concepts are used. This also makes the Valley quite conventional in terms of communication between people in one place. Everyone is part of the conversation, from the teams in start-ups to the developers in big companies. And all of them are eager to make use of everything that is at their disposal. This is how they are generating their ideas. In order to explore these ideas, they deliberately talk and share thoughts, with almost no regard for business secrets – at parties in the evening or when seeing friends, for instance.

In the Valley, thanks to the fact that everyone is connected to everyone else via his or her activity in the internet industry, an excellent evaluation system emerges. And because the key players in Silicon Valley are all related to

Data, Data, DataSelf-experimenting digital society



one another through their networks, this social innovation system progresses extremely quickly. This means that the people here not only have a plethora of data about everything and everyone – but that they are also, as part of a relatively small social system, able to interpret this data in a communicative manner, thus allowing them to validate information.

We might think that the people at the neighbouring table in the bar are simply enjoying a beer. In fact, they are currently discussing their latest ideas on how to make a data-driven business. The networks of the Valley are generally held together by such personal chats among friends, which take place at parties or local bars. And in this context, too, only the person who gives information shall receive information. ■

Only the person who gives information shall

receive information.


Silicon Valley is programmed for disruptive innovation. Everywhere in the Valley, one senses peoples’ efforts to bring something completely new to the market in order to fundamentally change the rules of a certain segment and to put themselves at the top of the area’s value-add chains. And all of those who have hitherto been at the top of the value-add chains are prepared to anticipate these disruptive changes and to adjust their business model accordingly at an early stage.

Overall, this results in extremely dynamic development: New trends emerge and shape the everyday life of a company’s people and business practices in only a few years, at a speed that surprises even the people who are involved in these innovations as developers or strategists. The iPhone is always mentioned as epitomising this rapidity of development: Introduced only in 2007, it has since then revolutionised the market for mobile phones. Today, smartphones are an omnipresent part of everyday life.

But what trends will actually emerge from this dynamic mass of buzzwords? What themes will be decisive for the future? And what is the “theory” driving this world where everyone seems to run about in confusion – while still following certain directions?

Three themes come up repeatedly in our interviews – regardless of the interviewee’s background: The cloud, platforms and marketplaces, and the “Internet of Things” are at the top of the agenda for new business models. We expected to hear about the cloud and platforms. The cen-tral importance of the Internet of Things (or IoT, as it’s abbreviated) took us by surprise. Some people even seem to think that the cloud is yesterday’s news – and that the IoT is the new major trend.

The new cloud companiesThe topic of the cloud is currently creating many new companies. Furthermore, already established IT companies are evolving into “cloud companies”. Here in the Valley, this theme is articulated in two ways: Proactive market forces like Salesforce, Workday or

Appirio understand the cloud as the basis for completely new business models; reactive market veterans, such as SAP or Oracle, instead view the cloud as an additional distribution channel for their products and services – they emphasise its hosting capability. The former are building their businesses up on the cloud concept, from scratch. The others have to take their customers from the “on-site” era and migrate them to the cloud.

Both groups see the enormous potential for standard-isation and automation that occurs when “software as a service” is operated in the hosting model. They differ, however, in the radicalism with which they utilise this new paradigm of the cloud. We believe that the proactive forces have enormous potential because the cloud as a paradigm suits an approach that takes advantage of the information space as an open social area of interaction, connecting everything with everything.

However, we are also convinced that the paradigm of the cloud will evolve. It is not just a matter of “hosting” but also a new view of how IT infrastructures, which are both simple and agile, can support the company of the future.

“Gamification” as an organisational principleA second central trend is the subject of platforms and marketplaces; this trend is usually complementary to the paradigm of the cloud. Whether it’s a start-up of eight people or a big company like Amazon or Google – all of them are building marketplaces for everything: Savvy, a small start-up south of San Francisco, is leveraging this approach to build a peer-to-peer learning platform; Airbnb provides private home rentals around the world;

Cloud, platforms and the IoTNew business models in the information space


10 digit-DL Silicon Valley – Disruptive business models and work

Uber arranges mobility services; Amazon is creating a world-class marketplace for sellers around the globe.

This approach is especially interesting when companies such as Salesforce, which by now has more than 16,000 employees, provide millions of developers around the world with a unified development environment, which can either stand alone or function in the context of crowd applications and other customer applications. Mean-while, a look at companies like Appirio and Topcoder teaches us which crowd approaches can be used to create a well-organised and productive workforce. Here, on the basis of competition and “gamification”, new approaches for the organisation of work are being developed. This is far more than a simple cost-saving model derived from a new form of outsourcing.

A new view of the digital economyIn Germany, the topic of the “Internet of Things” is hidden behind the buzzword of “Industry 4.0”. And since engineers from the production departments determine this discussion, we are talking more about cyber-physical systems than about the Internet of Things, although these necessarily go hand-in-hand. Here in the Valley, the world is used from the perspective of the IoT. Indus-try 4.0, in the sense that it is known in Germany, plays a subordinate role. Innovations in the Valley are therefore rather based on the interaction of cross-company val-ue-add chains than the automation of production itself.

The immense potential that results from this develop-ment is only now becoming visible. As companies look at their business models from the perspective of data and information, the Internet of Things becomes a central theme. This highlights the central importance of this approach. Here, a whole new view of the digital economy is developing, which above all addresses large companies

and service providers. With the IoT approach, they find a way to migrate their processes from the 19th and 20th century industrial society to the digital economy of the 21st century. The result is a huge potential for change. Companies like SAP, which are very close to the giants of the global economy, have enormous competitive advantages.

Information space and disruptive innovationIf one asks what holds these new trends together, one arrives at our primary scientific thesis regarding the information space. All of these developments make sense when one looks at the information space as a new level of social interaction, in which all digitisable information is combined with the communication of millions of people. The resulting thesis: Because the various actors in Silicon Valley are all, consciously or not, thinking about innovation from the perspective of this paradigm, they have a certain direction that unites their differences, making them, in their essence, perfectly suited for radical change – and a true disruptive force. ■

Some people even seem to think that the cloud is yesterday’s news

- and that the IoT is the new major trend.


Silicon Valley stands for disruptive change. The best way to illustrate this is via the story of a start-up founder who, when presenting his business idea, was told by investors that he had to demand more money for his idea because it is decisive to “think big”. This idea of conquering the world is central to the Valley mentality. Platform strategies are of particular importance here. Current examples of this are Uber and Airbnb, which put pressure on traditional suppliers and entire industries with their business strategies, while at the same time questioning traditional regulations. When such a platform penetrates the market, it becomes the hub around which the val-ue-add chains are structured. It thus has the potential to change the structure of traditional markets.

We had the opportunity become acquainted with a start-up in Silicon Valley that has the potential to disrupt the organisation of work thanks to its crowdsourcing platform for highly qualified skilled labour. At the core of the business model is the provision of a platform that companies can use to issue orders to members around the world. The orders are divided into small-scale work packages and processed by members according to the competition principle – without any binding contract. Only the best solution is awarded with money – while competitors go away empty-handed. While other plat-forms, such as ebay or Uber, are used to mediate goods or services, this platform serves as a “marketplace” for work and strategically uses globally distributed workforce resources.

Radical industrialisation of highly qualified skilled labourThe key element in this new form of distributing work is the question of how highly qualified skilled labour can be organised – how the masses, as an unstructured and unattached work force, can be harnessed as a resource. The key to this organisation of work is the radical indus-trialisation of highly qualified skilled labour. For a long time it was unthinkable that complex skilled labour could be divided and assigned to globally distributed members by means of a marketplace, and the building blocks

of this work then processed individually before being reassembled.

“Competition”: This is the magic word when it comes to successfully organising an undetermined number of globally distributed platform members and transforming them into a new productive power. Here, companies can borrow from concepts of modern internet-based comput-er games. Members receive points for the contributions they make; these are included in their performance evaluation. This allows you to always see where you stand in comparison to everyone else. Especially interesting is the fact that while everyone is actually competing against everyone else, a sense of community is maintained. A combination of competition and co-operation – “co-peti-tion” – is called for.

This new organisation of work has disruptive potential. While Uber and Airbnb rethink mobility and accom-modation, undermining traditional providers, as well as the organisation and regulation of the taxi and hotel industries, with their business models, this crowdsourc-ing platform does exactly the same with regard to the organisation of work. This company is an example of how radical industrialisation of highly qualified skilled labour could be accomplished – and how small-scale work pack-ages can be taken care of by globally distributed workers.

Especially notable is the fact that “Crowdsourcees” are not hired as employees of any company. On the contrary, they are pitted in a competition against permanent employees – and with far fewer rights. In this way, the employee status of the company’s actual employees can eventually be permanently dispensed with.

Legal systems under pressure from the marketAn interviewee from the film industry elucidated the guiding vision behind this approach. Just as with the composition of the team for a film project, the globally distributed members are to be fluidly organised, as need-ed. Companies can draw on a pool of globally distributed workers with specific skills without being bound to them in the long term.

Marketplaces for work The disruptive transformation of highly skilled labour



However, similar to the cases of Uber and Airbnb, this creates a constellation in which historic legal systems come under pressure from the market – and thus run the risk of being virtually invalidated. In this case, it is a question of radically loosening the bonds between companies and their employees. This can affect the ability of companies to innovate. Above all though, it can undermine the protection needs of employees.

At the present time, we cannot foresee whether this model of the organisation of work, as we have witnessed it in the Valley, can be effectively stabilised. Significant evidence suggests this would be beneficial. Meaning: We have great challenges ahead of us. Above all, it is a matter of not allowing the disruptive changes to simply happen, but of incorporating them into society’s existing systems of values and standards. Shaping this social framework will be one of the most important tasks ahead. ■

Companies draw from a pool of globally distributed workers, without committing

to them in the long-term.


Silicon Valley is so fascinating precisely because of the fact that it concentrates the entire IT world in a small space. Here you can not only find the “Who’s Who” of the major IT corporations – and indeed all of them are rep-resented with large branches here – but also thousands of start-ups who are pushing ahead with innovative ideas and business models. Additionally, there are many other more mature IT companies, which would probably be considered “mid-sized” in Germany. Hundreds of thousands of IT experts work together in a narrow space, networks are created – and everything is about IT.

This truly impressive melting pot of the global IT industry is very vivid when you drive through the Valley. The logos and corporate buildings of IT companies can be seen on every corner. One can also see that the Valley already has its own unique history. In addition to ultra-modern campus buildings with their high-gloss facades, one also sees buildings that are not quite as futuristic but somewhat older. In order to experience the incredible concentration of IT companies, you don’t even really need a car: Already during my morning jog through the hills of Palo Alto, I quickly pass the offices of SAP, HP, Cloudera and VMware – without covering marathon distances.

Driving is a hot topic in the Valley, which, with its high concentration and close proximity of businesses, is plagued by horrendous traffic. In almost all of our inter-views, the topic arose: “Traffic is a serious issue” – every morning and evening, a huge caravan travels through the Valley in stop-and-go traffic. Hundreds of thousands of IT workers have to get to their jobs. Even with good roads, the sheer volume of cars often leads to kilometres of traf-fic jams. Thus, short distances can become quite lengthy – it’s not unusual for the 40 miles from Palo Alto to San Francisco to take 2.5 hours driving time (self-tested!).

Better to work then spend time sitting in trafficThus, it’s no surprise that “traffic” has become a driver for a distinctive home office culture in many companies. To avoid losing time in senseless traffic jams, you work from your own home or try to plan face-to-face meetings in a way that avoids rush hour.

But Silicon Valley would not be the Silicon Valley if it were not seeking disruptive solutions to this problem. Here, the (perhaps most obvious) solution of expanding the public transport system is not considered enough of a “next big thing” concept; instead, the people here think about self-driving cars. It’s no coincidence that Apple, Google and Tesla are three important pioneers of autono-mous driving in Silicon Valley. And yes: You really do see self-driving Google Cars here. Besides the technology, the idea behind this is quite interesting: People shouldn’t waste their time in traffic driving, but rather use this time to work, network with colleagues and perhaps advance the next great innovation – all while their cars drive themselves.

No digital world without carsOn the short path to Esther’s German Bakery one day, we came across two Google cars. In Germany, people would stop in their tracks at this sight; here, nobody bats an eye. Ultimately, the self-driving car is part of the big self-experiment of “How might the digital society of the future look?” – in which many (not all!) participate in one way or another.

Interestingly, companies in Silicon Valley seem to be unable to envision this digital world without cars. Cars have a significant role here. Those who can afford it have as many cars as people in the household. The fatal consequences: The entire infrastructure for cars and public transport is not sufficiently well developed. It is not surprising that Uber and Lyft have become serious mobility service providers in this context. At least

“Traffic is a serious issue”The car in a digital society



We’re no longer asking whether Apple is planning to enter the car market, but rather discussing with

what force – and when – they will enter it

attempts are now being made to improve the infrastruc-ture for bicycles.

Everyone with an interest in cars was surprised by how quickly Tesla was able to develop and produce a car. This proves that a start-up can break the rank and file of car manufacturers. Tesla has proven to benefit significantly from having radically embraced the advantages of the electric motor. Here the competitive advantage of the large OEMs is by far not as great as with conventional combustion engines. What we are not discussing as intensively in Germany is the fact that Tesla has not only set new standards in terms of powertrain and service, but also launched a new type of car on the market.

The car as object in the information spaceTesla uses all cars in the United States as objects in the information space on a permanent basis. This offers two crucial advantages over conventional cars. Firstly, Tesla has massive amounts of data on the driving behaviour

and the mobility expectations of its customers. The customers here in the Valley certainly offer a large field test allowing for permanent observation. Secondly, the company can change its products continually through the cloud. Just as we are used to the fact that our smartphone prompts a new operating system or app update without our asking, Tesla’s software can be “flashed” again and again. One conversation informed us that his Tesla had new functionalities in the field of automated driving after the latest software update. Tesla’s autopilot is just the beginning, however.

Google and Apple still essentially determine the Valley’s innovation system. There are the big players that every-body talks about here. Interestingly, these companies – coming from the world of information – have also set their sights on the good old car, showing unmistakable aspirations to catapult this classic device of mobility into the digital world.


The strengths of these two companies, with their gigantic cash flows, can hardly be measured by German stand-ards. The word on the street in the Valley is that Apple is willing to pay engineers from Tesla, the new star on the electric car market, a “hand-off” fee of up to a million dollars if they enter into a contract with Apple and stay there for at least a year. Anyone who takes them up on their offer will surely end up with a lot of money. And a clear goal: To propel the iCar to the next phase. We’re no longer asking whether Apple is planning to enter the car market, but rather discussing with what force – and when – they will enter it.

Who will build the car of the future?We are convinced that Apple will not only bring a new product onto the market, but also present a new production concept. They seem to want to conquer the automotive market in the same way they conquered the mobile market in 2007 when the iPhone emerged: Not only was the product market in the field of mobile teleph-ony disrupted, but the way in which the product was manufactured also changed. What they have succeeded in producing with the iPhone, they hope to transfer to the automobile market: the contract-ready model. So Apple will hire as many developers as necessary to develop the car they want. They will not strive for serial production. So when German manufacturers believe that their competences in serial production of cars is “safe” – in the sense that there will be no local competitors – they may

be correct. However, this will do them no good. They are in danger of being bypassed.

So the prize question is: Who will be building the car of the future for Apple, Google and Uber? In view of the overcapacity in the market, it’s likely that one or two European producers will be applying for the job – perhaps not under their own name, but via a subsidiary company. In addition, the new Chinese car manufactur-ers will certainly be of interest. And even Foxconn, the Taiwanese contract maker of the iPhone and many other smartphones and branded laptops, which is headquar-tered in China, should be considered a serious contractor in this conversation. This makes it obvious: There is a risk that the core competence of the German auto indus-try – quality production in large quantities – could no longer make a difference in the next phase of automobile development and production. ■

“Traffic is a serious issue”


Experiments with open office concepts are currently underway everywhere. Most of the time, however, these experi-ments aren’t intended as spaces for creative teams, but as attempts to save space and get people out of their “homey” comfort zone. Employees often feel that something is bein taken away from them, their room or at least their own desk.

Here in Silicon Valley, we have finally experienced an open office concept that we would like to see put into practice for creative teams – and for ourselves. Devel-oped by a software company that we visited, the concept was created together with the employees, over a period of several years. The variant that we were able to examine was known as “Generation 4.0”.

“Not like in a library”As we enter the building, we feel like we are coming to a former metal workshop. Instead of turning and grinding machines, however, there are now loosely grouped tables, screens and whiteboards. The lights seem to be deliberately insulated. The space’s colour spectrum is modelled after natural light. A designer hasn’t created this – it is the result of lived practice. Nothing seems sleek or artificial. The room looks like a true workshop for creative minds. This is not least due to the enormous expanse of the area – there is clearly no effort to skimp on space here. We are amazed by a pleasant noise, which sounds like the ventilation of a machine. “That’s done intentionally,” a colleague explains. The ventilation noise is artificially generated and is supposed to prevent you from feeling that you have to be quiet here.

“We don’t want you to feel like you’re in a library where you aren’t allowed to talk,” the colleague explains. The walls in this area are either non-existent, glass or con-sisting of huge whiteboards. Visualisation plays a major role: It’s important to developers that they can see what they’re working on. The entire history of a project can often be understood from the drawings and notes on the

walls. This ensures that nothing is lost in oblivion. The walls are only cleaned after the project is concluded.

Space design as an open processOne other thing proves noteworthy: “Everything here is about movement” the colleague remarks. And, indeed, there are no objects in the whole surface of the room that cannot be moved. Behind this is the idea that wherever people work, they should shape the space as they need it. “We do not want the space to determine how we think – rather, we want the space to adapt to our work”. This is strongly reminiscent of the old Bauhaus principle “form follows function”.

Overall, our impression is that the character of this “open office” is a double one: Not only are the spaces open, intended to promote communication and collaboration in work, but also their design is likewise subject to a permanently open and flexible process. What a “space” is, where it is and how it is shaped – the people them-selves determine this, according to their needs and the changing requirements of their work. Such a concept of open spatial design could also be interesting for many development departments of companies in Germany. ■

The creative workshopThe office of the future


This space hasn’t been created by a designer – it is the result of lived practice.

“Traffic is a serious issue”


Silicon Valley is a gigantic social experiment designed to launch a catapult-like start into the digital economy. There is no innovating step-by-step, little-by-little. This is where people shoot for the moon in hopes of radical innovation, transforming new possibilities of digitisation into a disruptive change for entire markets.

This catapult-like transformation of a society and its economy is based on many factors: A visionary start-up scene and a carefree handling of data (compared to Ger-man standards) and, above all, the combination of large amounts of risk capital, very well-equipped universities, an extreme density of innovative enterprises and an extremely lively social network within the Valley. This is a known fact. What we keep discussing: How do different companies work together in this system? Because the success stories of Silicon Valley seem to lie in these synergies.

Its innovation system is still, essentially, determined by the Googles and Apples. There are the big players that everybody talks about here. But it would be too simple to explain this innovation system by its big players alone. Looking at the different companies in a systemic perspec-tive, it becomes clear that there are varying layers in the Valley’s innovation system.

Start-ups as a base The base layer of innovation is seen in the small start-ups, which create thousands of new solutions in coop-eration with the universities and private institutions. They are something like the “plankton” of the innovation system on which the whole food chain is based. This plankton is often “fed” with the capital of investors and larger companies. These olancton cmopanies are impor-tant inventors who develop thousands of new ideas to a stage where it is then worthwhile for larger companies to take a closer look.

In times of disruptive change in markets it’s possible for a start-up that is still dependent on the money of investors to have nevertheless already established a dominant market position – thus significantly spurring the impulse to reinvention. Google, for instance, was established in 1998. Today, it dominates the strategic bastions of

commercial use of the worldwide information space and has a cash flow capable of buying up large industrial companies.

The start-ups also have a training and career-building function for the big fish. Many early professionals gather their first experiences here, later moving on to the Goog-le’s of the Valley. And vice versa, many former employees go to start-ups and do their own thing there after a com-paratively short time with the industry leaders.

Never-ending entrepreneurial spiritAs the plankton of the innovation system, the start-ups also have a third major role in the innovation culture of the Valley. They bring the entrepreneurial spirit into this innovation system again and again, making sure that it never gets lost. In particular, a strong value orientation and visionary thinking prove to be highly functional here. This is essentially brought to the scene by the start-ups. In the early stages of an idea’s realisation, the convincing power of a product or service that does not yet exist results from the strength of the vision that aims to realise it.

The start-ups would not get any money at all and would not be noticed at all if they did not present their ideas with strength and visionary zeal. In fact, they often turn to cultural patterns from alternative movements of the 1960s and 1970s. They share an idealistic view with these movements, in that they all want to improve the world. Here, however, the fact that this could ultimately lead to a person being on par with Mark Zuckerberg and Larry Page in terms of income is not seen as a contradiction.

A fourth important function of the start-ups is their norm-setting effect. The start-ups function with little money and a lot of idealism. Even if they are lucky enough to have the money of investors, this only assuages worries about their existence for a comparatively short time. After all, they must prove after (at most) two years

Plankton, cleaner fish and whalesStart-ups in the Silicon Valley innovation system


18 digit-DL Silicon Valley – The Bay Area start-up scene

that their idea is still worth supporting with foreign cap-ital for a further phase. Because start-up phase follows start-up phase, and companies are still fully oriented to grow and develop their idea without profiting, they are dependent on their investors for many years. They are stuck in an eternal probationary phase.

With the start-ups, the Valley’s culture of high perfor-mance standards in terms of work and innovation are justified. All of our interviewees, even in the established IT companies, always pointed out that they work a lot. What’s more, they have always referred to the fact that the unique way in which start-ups work – a lot of ideal-ism, long working hours – has a normative effect on all companies in the area.

Symbiosis with the big fishAnother characteristic of the start-ups is not just to serve as a basic source of food for the big fish. Some of them mutate into “cleaner fish”. These live in close symbiosis with the big fish, fulfilling certain functions for them and benefiting in turn from their support and protection. All large companies have an eco-system of “cleaner fish” around them, which they use to drive innovation. They often provide these companies with needed access to production resources and in turn profit from their inno-vation contributions. Exciting examples in this regard

are SAP’s HANA-Plattform or the Force.com platform of its competitor, Salesforce. These platforms are not only aimed at established “cleaners” within their own respective eco systems, but are also open to the crowd – an anonymous set of developers.

So, when we see the big whales that dominate Silicon Valley, it is important to note that their power of inno-vation is rooted in the start-ups; serving as the plankton or cleaner fish, the start-ups serve as the basis for the prosperity of the entire eco-system. ■

Start-ups bring the entrepreneurial spirit into the innovation system

again and again, making sure that it never gets lost.


The Valley is famous for its start-ups. They serve as a sort of plankton for the Bay Area innovation system. Before we conducted a series of interviews with various start-up actors, we wanted to acclimatise ourselves to this world. Towards this end, we drive to the HanaHaus in “downtown” Palo Alto. The long queue in front of the former cinema makes it clear that this has quickly become a central meeting place for the start-up scene in Silicon Valley.

In addition to coffee and cake and a pleasant atmosphere for creative work, the HanaHaus offers co-working spaces. Here, young founders have the opportunity to network, work or use various private rooms for meetings. The workspace’s design reminds us of the modern, creative workshops that we have seen in many Silicon Valley companies already. Although it is quite loud, the ambience is still one of concentration and stimulation.

The SAP exampleMany established companies in the Bay Area try to benefit from the creativity and innovation offered by the start-ups. It’s not just about the purchase or poaching of talented workers, but also about cooperating for mutual benefit. Start-ups play an important part in these corpo-rate innovation processes. Within the framework of its “start-up.focus” programme, for instance, SAP is coop-erating with more than 2,000 start-ups, which develop innovative applications in the areas of big data, as well as “real-time” and “predictive analytics” – falling back on HANA databases and SAP development platforms in the process.

As soon as a start-up succeeds in being included in the funding programme via the worldwide pitch sessions, it can count on the support of the startup.focus employees. They receive free access to HANA. In addition, they are advised by SAP on their company structures and are connected with potential customers. For SAP, the programme helps to place the HANA development envi-ronment prominently in the market and to demonstrate its application possibilities via concrete sample cases.

We had the opportunity to take a closer look at four exciting start-ups from the SAP programme. We talked to the founders and managers of Sensitel, AppOrchid, Capriza and Datiphy, among others. We were very impressed by the backgrounds of our interview partners. Some had already successfully founded start-ups in the past or worked in them, others came from established companies or were professors at universities. What became clear: Founders do not always have to be young, but can also already have a lot of experience. In any case, they share one thing: They are passionate about their ideas – and determined to make a business out of them. They are convinced that they will change the world with their products and are prepared to work 24 hours per day to achieve this. The concept of work-life balance is unfamiliar here. This is not least due to the fact that even the smallest start-up is set up globally, requiring it to operate in different time zones. From India to Taiwan to Israel – development is done globally, with international-ly distributed teams.

Money is no concernIn the interviews we conducted we learned a lot about the keys to success in Silicon Valley’s start-up culture. Compared to the rather slow development processes of Germany, for instance, two decisive factors determine success here: Failure culture and money In the Valley, founders cannot be afraid of being “blamed” if they fail with their idea. They are not regarded as “losers” as long as they learn the correct lessons from their mistakes. In addition to this, we repeatedly hear from our interview-ees: “Money is no concern!” After the slump that the Valley experienced in the course of the economic crisis

“It’s all about growing”Visiting the “HanaHaus”



of 2008, it is currently undergoing a boom. Investors are looking for investment opportunities. No one has to be indebted to realise his innovative idea. Other investors will take on the risk. In this way, mistakes can be “afford-ed” in the truest sense of the word.

Even for the successful development of a start-up, earn-ing money is not the foremost priority: “Start-ups are not about earning profit – it’s all about growing, “ is an oft-repeated sentiment. For: Investors are not interested

in fast growth, but in the largest possible profit. How-ever, this can only be realised if existing markets are fundamentally turned upside down. For the start-ups it is therefore essential to gain leverage with the money of venture capitalists in order to grow as quickly as possible and to prove their disruptive potential. ■

Photo: Tay A. Othman

The founders in Silicon Valley are convinced that they will change the world with their products

and are prepared to work 24 hours per day to achieve this.

21_digit-DL Silicon Valley – The Bay Area start-up scene

We’ve just finished a visit with a typical Silicon Valley start-up. Unable to hold in our excitement, we start discussing the visit in the bus ride back to the hotel. Along with the many talks we have already had here in the Valley, this example shows how innovation in Silicon Valley works. The start-up Savvy paints a picture perfect example.

We arrive at the start-up located to the south of San Francisco. The first thing we see is the façade of an older building: a former shopping centre, as we will learn later. We find the entrance door tucked away behind a car park. The door displays neither a bell nor any other sign or indication that these walls could house one of the future champions of the digital economy. With a phone call to Savvy, we are able to gain access to the building.

“You’ve already got the most difficult part behind you”, Thomas Arend, founder and CEO of the start-up Savvy, says as he comes to meet us in the unadorned aisles of the former shopping centre, leading us through steel staircases with nameless doors, behind which further start-ups house their small offices.

Thomas Arend is well acquainted with Silicon Valley and the local start-up scene. Following stints with SAP, IBM, Google, Twitter and Airbnb, he’s now starting his own business. It’s a career path that is commonly seen here. When time allows, he leads delegations through the valley and supports people who want to understand the start-up scene. On this occasion he’s agreed to help us better understand Silicon Valley.

The centre of the Savvy office consists of a space of about 40 square metres. Here, the employees – developers and sales specialists – have their workspaces. The interior includes four office tables with large Apple screens, a few sofas with tables provided by friends and a high table with two bar stools. The high walls are covered with post-it notes and sketches. These are the results of countless team meetings and creative discussions. Next door there is also a small, enclosed space, which is equipped as a

multifunctional room with copiers and books, and also serves as a retreat for confidential conversations and telephone calls. Above is a sleeping bunk, which is used by those spending another late night at the office.

A company in the seed stageThe company does not simply realise a new business idea; it pursues a vision. The employees want to jointly establish a marketplace on the internet where teachers and learners can meet for individual lessons. This is not one of the many new eLearning formats that offer learn-ers an interactive course, but a form of learning between two people – a marketplace for peer-to-peer learning.

Currently, Savvy is in the so-called seed stage. This means that enough starting capital has been accumulated from investors and business angels to allow them to real-ise the first stage of their business idea. According to CEO Arend, the money will last for about 18 months. Then the planned market place must have progressed to the point that it is clear to investors that it is worth financing the start-up further into the next development phase. For 18 months, then, the company is sufficiently equipped to concentrate fully on the realisation of its common vision. The money is enough for the employees to not to have to work second jobs.

Nobody is getting rich here – not even the two founders. Profit is not the goal in this development phase and it would be a mistake to make it the goal. Because every cent that comes in is reinvested to generate the fastest possible growth. In any case, growth is the primary goal of all start-up phases – all with the aim of propelling the project forward. “You really have to accept losses in the start-up phase,” is something we often hear in our talks with founders. It is not until much later, when a company has succeeded with its idea, that it will aim for profitability. Interestingly, the founders from the first stage are often no longer interested in their companies at these later stages, selling them or keeping their “options” as a source of income, and turning instead to new

Start-up unpluggedImpressions from the Silicon Valley start-up scene



start-up ideas. Thomas Arend and his colleagues at Savvy are still very far from this point. Now is the time to take advantage of the opportunity offered by many hundreds of investor acquisitions and to prove that the PowerPoint presentation on which the business idea was sketched was worthwhile.

The road to Silicon ValleyThomas describes an impressive path to the top. He started in Germany: He trained as a mathematician at the Technical University in Berlin, while working as a grad-uate student at the global enterprise IBM – all while he is already working for SAP, the largest German software company. His doctoral supervisor estimated the chance of his dissertation’s failure at 99% – but he succeeded nonetheless and to this day puts the exact same trust in his own skills, a valuable trait he needs to make his com-pany successful. His main focus in the software company was on global business strategies.

He thus quickly made it to the strategy department, following one of the founders to California. Here, he changed his career focus. He moved on to (back then)smaller, more dynamic companies like Google, Twitter and Airbnb. His old friends from the IT industry in Germany saw this as a move of descent. He himself saw it as an enriching experience. He got around, building up the global business for these companies. This is how he became a known personality in the networks of Silicon Valley. He became a person who was able to secure appointments with Larry Page and Sergey Brin, the founders of Google, to discuss his new business idea. He became someone with the necessary contacts and requisite reputation to convince investors with just one PowerPoint presentation to put almost two million into his company.

Ultimately, this money goes to the two founders. But it takes a half-year’s work to get there. Unlike many other start-ups, the company skipped the “Friends & Family phase”, during which a company gets money from friends

and family, living hand-to-mouth until the serious inves-tors come in. But the founders are not spared the task of convincing investors, via hundreds of conversations, to invest their money into Savvy. Thomas is very open about this: In total, he contacted 300 investors and other financiers, in order to convince four venture capitalists and eight business angels to come on board.

Reputation and persuasive powerThe consideration of selection strategies that the found-ers have to face is especially interesting. They all test whether the business idea is technically and economically promising and original. For Thomas Arend it’s absolutely necessary to do something new, not to copy an existing idea. The potential donors, however, mainly examine the reputation of the founders and their persuasive power. To this end, references are collected via the Valley’s net-work, and former employees and bosses are interviewed. The large investors leave the job of reviewing business ideas in the hands of specialised departments. If this step is successfully completed, it then becomes important to meet with the right investors. Because they don’t just provide money. They have contacts with customers and partners, know certain technologies or markets, and ideally support the promoted start-ups as strategic consultants.

Our interviewee emphasises that it is primarily important to find investors who cover certain strategic issues and have the potential to grow with the company. Because at the end of the day, the first contribution made for the seed phase is only the starting capital. Three, four or five further development phases, for which a multi-plicity of capital is needed, are to follow. In this respect, the trust relationship that develops between investors and founders is a decisive factor for success; those who gamble a few million on a start-up without great consid-eration are usually no longer available in the next phase if they lack confidence.

Savvy isn’t just realising a new business idea, it’s pursuing a vision.

Thomas Arend, Founder and CEO of the start-up “Savvy”


Our discussion also reveals that investors are important for the individual start-ups – and especially fundamental for the functioning of the Valley’s innovation system as a whole. First of all, of course, there is the money. Ulti-mately they provide money, allowing for the opportunity to make more money. Compared to the start-up scene in Germany, this mechanism is a peculiarity of the Valley. Without his own collateral, a founder like Thomas Arend would not have the chance to get such sums as he has in Berlin, Munich or Karlsruhe. The fact that it is possible to attain such sums with solely a PowerPoint presentation and a reference to years of experience in the industry and dealing with start-ups is typical of the Bay Area.

No fear of failureInvestors are important for reasons other than money, however. They serve as the gatekeepers of the system. Those who want to see their dreams become a reality must pass these gatekeepers. Thanks to their experience with thousands of business start-ups, they embody a substantial part of the innovation system’s intelligence network. The thousands of developers, sales specialists and founders of the Valley generate another part of this intelligence network. Once capital has been provided, investors often go beyond simply serving as strategy con-sultants and gatekeepers for start-ups. In the end, their “evaluation” following each development phase shows the quality and enforceability of the business idea. After each development phase, new money has to be recruited, investors have to be convinced again and the start-up must show what has been learned in the previous phase – and what measures need to be taken to reach the next

development level. In this regard, the investors serve as a sort of meta-expert group in the region and shape the focus of the entire social system when it comes to the Valley’s innovations.

Thomas Arend has been thinking a lot about this aspect; his company will ultimately be successful – perhaps even a billion-dollar company that operates a global market-place for peer-to-peer learning. Until then, it’s important not to fear failure. Even a defeat provides a basis for learning. Not to be afraid of failure – this is strongly encouraged in Silicon Valley, he says. He considers this to be one of the primary differences from German start-up culture. Further, it’s fundamental to have a vision. A vision forms the basis for one’s own drive. It provides the founders and their employees with the fuel to go forward, even in difficult phases. In Silicon Valley, such visions are often associated with an idea of world improvement. They give many of the young founders an aura of Indian guru sect members. Listening to Thomas, you can directly feel the importance of a vision that is focussed on values.

For successful start-ups, it is not only about the start-up spirit but often also about the pressure under which the founders find themselves. All of our partners talk about extremely long working hours and a constant willingness to contribute to the company 100%. This often leads to lack of sleep and waking up in the middle of the night. Those who see no subordinate meaning in the company’s purpose are more likely to give up and burnout – as we know from our burn-out research.


Start-up unplugged


A vision, as is emphasised by Thomas Arend again and again, is also indispensable for maintaining direction over long periods while searching for the right solution. The vision thus forms the focal point of the efforts of the entire company. It helps to keep everyone going and guides all strategically throughout each day. In its found-ing phase, the vision is the best thing that a company has to offer. Because often there will be nothing else convinc-ing to show for a long period. At the start, the vision gives the product-to-be its necessary shine.

“Think bigger”An additional factor for success for start-ups is the Google principle of “Think bigger”. Most ideas only make sense and have the prospect of success, if you dare to think them of them as being great. Thomas is thus grate-ful to those investors who encouraged him in the first phase to take more money – otherwise he would not have been able to bring his idea into the market or at least not with the necessary breadth. This would also be reversed in Germany. In Germany, one would be hugely indebted if an investment of a certain magnitude flopped. In the Valley, however, investors are the one’s carrying the risk, so if the worst-case scenario occurs, you can feel free to start the next adventure. This seems to be the central prerequisite for a culture that does not regard the failure of a start-up as a stain.

Our interviewee attaches particular importance to main-taining relationships in this context. This, too, highlights a central difference from classical inventors. Relation-ships in Silicon Valley are based on your willingness

to open up to others in order to learn more from them. Towards this end, Thomas has already discussed his business idea with many individuals in his network during the very early start-up stage. In Germany a fear of providing potential competitors with information that could be used to adapt an idea prevails; here, ideas are frankly spoken about.

Of course, an emphasis is placed on ensuring that the decisive factor for success does not become public. But during these talks many things are laid out on the table. This is the only way to get the crucial information needed from potential investors – and to get a realistic assess-ment of whether the idea is at all viable. Having large net-works seems to be a key strength of founders. This gives them access to strategic players and creates a successful mix of openness and secrecy that allows them to get the information needed for the company’s development without it being prematurely copied, adopted or nixed.

Extremely good networksWe leave the offices of Savvy with a positive feeling. You can feel the “spirit” that Thomas Arend radiates. His is a good example of the productive power of the Silicon Valley start-up scene. But his start-up is also a good case study for examining the importance of the start-up spirit, which – not only much discussed – is necessary for success although by no means enough to achieve success alone. Even more important to the success of Silicon Valley is the emergence of a social system for disruptive innovation. Behind this system is more than money, technology and start-up spirit. It rises and falls with the

Failures offer the basis for learning.


readiness of many people to willingly feed their data and information into a biotope of informatisation, thus laying the groundwork for a digital economy. In the German innovation system, on the other hand, the industrial core has for decades provided for the important guarantee that innovations continue in a successful direction. Here in Silicon Valley, it is the living digital society that serves as the basis for developing new business models for the digital economy. The peculiarities of this social innovation system continue to result from the extremely

good networks between the people who hold the Valley together. The manner in which they work together in a “give and take” interaction of openness and profes-sionalism is the social capital of this region – this can be seen nowhere else in the world. In this way, focus in the innovation system is steered and ideas are evaluated competently at an early stage. Only in this way can the masses of data that the Valley has amassed through advanced digitisation be transformed into meaningful information. ■


Start-up unplugged


The strategic game of social ties has reached new heights in Silicon Valley. The global information space makes new forms of organisation of work possible due to its unique quality as a novel social area of action. While the new organisational forms were previously seen as net-works, they are now mutating into patchwork companies. Thus, the concept of “working in the open” has become the new guiding concept for the organisation of work with weak ties.

Just like in Germany, companies are looking for a blueprint that essentially goes beyond a new social inte-gration mechanism. In particular, the contractual rela-tionships within value-add chains and with actors in the labour force, as well as location-bound connections, are to be dispensed with. We are familiar with this topic in Germany. Back home, I watched a small business opera-tor with a little truck, picking up mail at a photo shop that doubles as a post office. Not so long ago, this work would have been done by a uniformed postal office worker. At that time, the strong ties between the employee and the employing company was structurally characterised: The employment of a labourer was a visible expression of this social relationship. Today, this relationship is looser. Since the mid-1980s, strong ties have increasingly been replaced by weak links, which are often “vermarktlicht” (based on the principles of a market), as our colleague at the ISF, Dieter Sauer, puts it.

This development has now eaten deeply into social relations. Mark Granovetter’s network-theoretic reflec-tions on the “strength of weak bonds” were discursive with regard to the tendency to market in the 1990s. The current discussion about precarious self-employment, temporary workers and work contracts is an emphatic expression of this tendency to loosen bonds. Silicon Valley now shows us what direction this process could go in. At the same time, we can appreciate the questions we

have to think about in order to find a new way of dealing with these social ties in Germany.

Closed ShopFundamentally, it seems like all links in Silicon Valley are designed according to the principle of weak links. In fact, this is not the case. Silicon Valley itself is a gigantic complex of social networks with a pronounced closed attitude when it comes to the outside world. Despite the relaxed Californian attitude on display, it is very difficult for outsiders to get past the superficial American polite-ness and break into these networks. Writer Christoph Keese describe this impressively in his book. We owe the detailed insights we were able to gain into the inner life of the Valley to our good contacts from German companies, who were able to introduce us into the community. Without this, it’s difficult to get serious interviews; instead, you’ll likely get a nice showroom event without any substance. This specific means of closing others out works through personal relationships. Only those who have a personal recommendation within the networks can play ball. In contrast, those on the inside engage in astonishingly open exchanges about new business ideas and technical developments – thereby strengthening the social bond.

Against this background, it may come as no surprise that many companies favour a model of social integration that is by no means based on weak ties but rather on extreme means of closing out outsiders. Companies like Google or Airbnb bind their employees very closely with their corporate affiliation throughout their entire tenure with the company. They function much like an elite university 0 centred around a real place, the attractively designed campus. Those who belong here are part of a small and select inner circle. You spend most of your time with your colleagues on the campus, working together, doing sports or making the most of your free time.

Networks, patchworks and working in the openConcepts of social ties in Silicon Valley


27 digit-DL Silicon Valley – Social integration and society

In extreme cases, this campus model (as we call this con-cept of social integration) can seem like a sect. However firm the bonds to these companies are during the time of belonging, they can be easily repudiated. The duration of an employment contract at Google is very short, by German standards. Many leave the company in less than one year. That this does not harm the reputation of the company certainly has a lot to do with the lucrative stock options. The company pays part of an employee’s income in share certificates. Those who can endure Google for even a few years can do well with these shares after they’ve left the company – giving them leeway to explore new options, like setting up their own start-up.

The patchwork companyWhile a strong local concentration is the basis for strong social ties within the innovation networks and campuses, a second, quite contrary concept is developing in Silicon Valley. It generates the necessary links largely through the information space and is based on a radical application of the competition principle, combined with a non-typical application of game-typical cultural patterns (gamification). From the point of view of organisation theory, the fascination with these concepts is that they combine extremely weak bonds and low local concentra-tion into a novel organisational model.

In our view, this concept can only be inadequately under-stood with the concept of a network operator. Rather, it is a type of company that effectively focuses its integration performance on the information space and according to the principle of playful competition. For the time being, we call this type of company a patchwork company.

We found the most developed example of a patchwork company to be a crowdsourcing platform. This company, with a few hundred permanent employees, is organising a workforce of 900,000 “Crowdsourcees”. To do so, the freelancers from the “crowd” are inspired according to the principle of playful competition. All tasks to handled by the Crowd are divided into small parts, each one requiring just a few days of effort and distributed in the form of a competition via the platform. Only the winners of the competition, and sometimes the second place runner-up, receive any monetary reward. The others get consolation prizes like t-shirts and, even more impor-tant: reputation points. A ranking is created using these points, the individual’s project experience and qualifi-cations. A high score allows individuals to participate in the lucrative calls for tenders, similar to modern internet strategy games.

Networks, patchworks and working in the open


Everything and everyone is trackedFor us, it was unimaginable that a company could successfully transform thousands of freelancers into a functional “workforce” despite extremely weak local and social ties. But this is exactly what allows for the platform’s success. The analysis of this concept and its transferability to other areas is an important area of research that we have taken from Silicon Valley for further examination.

The company has an additional special feature beyond its organisation of the crowd that is worth noting, however. Namely: Even the permanent employees and managers work almost exclusively in the information space and are primarily connected only via this forum. Even the strategically important managers are very rarely in one place. Necessary coordination processes and decisions are made via communication tools like “GoToMeeting”. It is fundamental, however, that these decisions are made using an extremely differentiated pool of data – which the company has easily at its disposal since it does everything via the information space.

This ability to track everything and everyone creates a new kind of information base regarding value-add pro-cesses and the behaviour of all involved actors; the result combines the concept of a patchwork company with the approach of a campus company. Not even Google and Co. rely solely on the pattern of elitist closure when it comes to internal integration. Just like the platform company referred to here, they realise the importance of keeping employees informed of important company events. One wouldn’t expect anything less from a company like Goog-le, which subsists on measuring the information space.

Integration in the information space Our example company may have been the inspiration for IBM’s strategists when they developed the “working in the open” as a new guideline for the company of the future. This involves forms of the organisation of work in which value-add relationships between enterprises, as well as between enterprises and labour, are concluded via the information space for exactly the period for which they are needed. Organisations thus arise from situational closures in the information space, giving them a fluid character. This new type of company is therefore not the result of an “eroding of boundaries” but, on the contrary, the product of a closure and creation of boundaries. With regard to the ISF’s theoretical “Munich operational approach”, from the 1970s and 1980s, which regards the “operational character” of companies as a strategy for capital utilisation, this new type represents a strategy focused on the information space and without a physical operation – which removes the necessary social connections required for exploitation.

It is definitely a concept of organisation of work that deserves our attention. To the extent that it is possible to establish efficient forms of organisation on the basis of weak social and local links, national legal systems are threatened, as are mutually beneficial relations threaten to lose their material foundation, since these are fundamental to the regulatory system of labour. This is by no means the end of any regulation. It brings the topic of regulation, however, back to what it is at its core: a pro-cess of negotiating different interests – that is, politics. ■

Networks, patchworks and working in the open Silicon Valley is a gigantic complex social network

with a pronounced closed attitude to the outside world.


In Germany, much has been reported about the situation of women in the Californian tech industry in recent months. A common theme across this reporting: Silicon Valley is not as efficient and egalitarian as it likes to present itself but in fact proves quite problematic for women. About 80% of technical employees in the tech industry are men, while the rate of women dropping out of the workforce is more than 50%. Is the digital working world presenting limitations that do not take women into account from the outset?

At first, we were surprised by the multitude of women we met in the cafeterias and corridors of Silicon Valley’s tech companies. We also had the luck of speaking with some of them. These talks quickly turned to the question of how the relationship between work and home life can be balanced here, and whether a “life” is conceivable in Silicon Valley’s fast-paced digital work environment. The flexibility of working time and location is a central issue. In this regard, digitisation of course offers new opportu-nities: It makes it possible to decouple working hours and workplaces, allowing one to work flexibly and “remotely” from home; in doing so, there is at least a greater freedom of design when it comes to working life. But what does this principle look like in practice?

Part-time makes no senseAn interesting case study comes from a conversation with a female software engineer, who has several children and only comes into the company two days a week. The rest of the time she works from home. The new technical possibilities allow her to be in constant contact with her colleagues. As a scrum master, she can even lead the “daily stand-ups” from home. This flexibility is very important to her and was the decisive selection criterion for her employer ten years ago. She isn’t the only one: We are amazed to hear that the percentage of women in their team is over 50%. And: All of the other team members have an even longer working relationship with the company. Surely there is also an “understanding boss” (as she puts it) contributing to this. But is this the “only” exception to the rule, or perhaps a labour market strategy of companies in the “war for talent” here in the Valley?

When asked what role part-time plays for her and her colleagues, she only gives a tired smile: “Part-time makes no sense. Because what is half of everything?” If the working day has no defined beginning and no defined end, part-time means only a voluntary waiver of money. If you speak with Europe in the morning and with India in the evenings, those who make every effort to finalise a critical project “in time” may manage to allow themselves

What’s half of everything?Women in Silicon Valley



some small disruptions during the day – but not a regular full evening free of work. Is permanent availability the price you have to pay here for local sovereignty?

Flexible working times are possible and yet…Change of location and scenes: There is no single Silicon Valley, but several different types of Silicon Valley – and therefore also several different working realities. We next visited a hip and cool start-up company, with a lot of cre-ativity, reflection and even more money invested in order to create a unique “employee experience”. Of course, this also includes high-quality and free “organic food” – and bringing your dog to the office is not only allowed but encouraged. You can also bring friends or relatives to join you for a meal, or invite an acquaintance for a coffee here; there are also many different groups, like yoga classes, that meet several times per week; so, ultimately, quite a lot of life takes place in the office building, right?

The downside: It is, of course, expected that local employees will take advantage of this offering and integrate into this corporate culture – otherwise it would be a loss. “Flexible work is possible in principle,” says a manager, who we meet on site. However, the work in a start-up is so intense that the team actually requires regular on-site working. The topic of diversity also plays

a role in this fast-growing start-up, for example when it comes to hiring. However, the question of “employee retention” in regards to women seems to be a topic that will only be addressed in future development stages. The necessary organisational structures to do so are currently missing. And so while we see a lot of women here we primarily meet very young women.

Obviously it’s clear: This working model can be quite attractive for younger women. This doesn’t apply to all women, however. We get the impression that, above all, women with families find it very difficult here and have to look for specialised niches suit their needs – like the aforementioned software engineer we spoke with. ■

What’s half of everything?

Is permanent availability the price you have to pay here

for local sovereignty?


Work and life in the Bay Area middle class

On the way to our interviews in the chic offices in San Francisco, we again and again meet people who are obviously living on the streets, asking for donations or sleeping on stoops. There is a certain sense of disquiet among the well-doing people and tourists when it comes to the hopelessness of existence that radiate from these people. They simply don’t fit into the hip Silicon Valley image. But since our visit in 2008, just before the finan-cial crisis, the amount of people who live on the street has increased significantly.

The social contrasts here are enormous, something that we notice quickly. There is a well-developed middle class, which has gained considerable prosperity after years of economic recovery. Here in the valley, this middle class is striking in its ethnic diversity. Alongside white Amer-icans and Western Europeans, there are many people of Indian and Chinese origin. Many have already been living for two generations. In many cases, however, these are also people who are employed by companies for only a short time – which then go back to India or China.

In sharp contrast to this, there are many homeless people, who often emanate a sense of great hopelessness. Some sit in the same spot in the city all day long, asking passers-by for support. Some have even developed clever survival strategies, for instance by explaining the cumbersome Metro system to tourists like us. Many also come across as being so confused that it’s impossible to imagine that they will survive on the streets in the long term. The relatively warm weather here is likely a positive factor that attracts these people.

The service class and an “invisible” upper classAnd in between is a sort of “service class”: People who spend their time amidst the middle classes and on the brink of the boom, who – via the services they provide – help to ensure that others can devote their time to the digital transformation. They clean the hotel pools, man the supermarket cash register, serve as nannies to the children of the better off and provide the service in

restaurants. Unlike the homeless, they are an integral part of the economic system. They benefit, albeit only marginally, from the enormous economic power of Silicon Valley. In contrast to the homeless people, who rarely receive donations, it is quite common here for those working in the service industry to earn 20% tip – or, in the case of those cleaning hotel rooms, to earn a few dollars tip. They likely are in urgent needs of these funds.

The fourth group of the Silicon Valley social structure is invisible. Unfortunately, we were unable to figure out where to find the ultra rich – which surely exist here in relatively large numbers. They are not as visibly present here as they are in Russia, for example, where they show off their wealth almost aggressively.

The middle class under pressureIn our interviews, it became clear how the social struc-ture of Silicon Valley is viewed from the perspective of the middle class in IT companies. From their point of view, the glass façades of the office complexes in the interior are not as brilliant as they sometimes appears from the outside. From our discussions, entry-level salaries in the established IT companies are estimated t orange from 60,000 to 95,000 dollars. That may seem like a lot at first glance. In Germany, someone with the same qualifications would earn 40,000 to 65,000 euro. But here, an entry-level income is barely enough to support the life of a typical US middle-class family. A two-income household is needed for this, we are told.

The first reason for this is the high real estate prices. Since the 2008 real estate crisis, prices have risen signif-icantly. Compared to Germany, for instance, prices are well above those in Munich. The costs of sending a child to private school must also be factored in. The “educated people”, as they call themselves, pay about 20,000 dollars worth of school fees (per child) to send their children to a private school. In most areas, according to their assessment, it would be a risky social experiment to send their children to the available public schools. With

“There’s a lot of pressure on the inside here...”



an income of least $150,000 a year, it’s possible to live a good life here. It is not easy to earn income at this level, however, even for skilled IT workers. It thus becomes necessary for both partners in a family to contribute income – or for one partner to earn significantly.

In view of the high debt that must be entered in order to pay for a house, a great risk results – even in the current boom phase. In other words: Even the supposed winners in Silicon Valley live economically and under intense pressure due to the fact that the cost of living here is very, very high. A loss of income can quickly lead to dire consequences. On top of that, the inequalities in income have led to a displacement competition with respect to the residential areas. The desirable residential areas are only affordable for very well-earning specialists. People earning below the requisite level are pushed into the outer districts.

In this context, many people find it unsocial if already scarce living spaces are further restricted by Airbnb. And protests against Google buses, which the employees of the company use to drive comfortably from San Francisco to Mountain View, make it clear that the social differences for people below the middle class will not be simply accepted.

Success has its priceBut even for the wealthy middle class, the world does not consist merely of sunshine. As long as the boom here in Silicon Valley continues, they can imagine themselves to be. The price for being on the safe side: a lot of work. So the people who live and work here are people of conviction – they value a specific culture of the Bay Area that is built on openness, creativity and a relaxed approach, something which caught our attention already in previous visit. But we soon realise that something has changed since our last trip: “Everyone is very relaxed here, but at the same time there is also a lot of pressure” says one manager who we interview, summing up our impressions. A culture of being “always on” and sprawl-ing working hours are normal here. Calls with colleagues in different time zones in India, Europe and even Israel are on the agenda – even in five-person start-ups. Glo-balisation has become enormously important since our last visit in 2008.

When we talk about work-life balance in interviews, it is often felt that there is hardly any separation between work and personal life. Because these people want to change the world – be it with a breakthrough idea or a disruptive innovation – in order to be able to compete with the colleagues of Google & co. and to be able to “shine” at the next party. The result is permanent availa-bility. It seems as if the working day is merely “interrupt-ed” – for example, to see a daughter’s football game in the afternoon before going back to work in the evening. When we asked a young colleague about the possibilities of dismantling “overtime,” she confessed that she had never thought about it.

We are increasingly gaining the impression that the start-ups set a new benchmark for performance culture in Silicon Valley, which also permeates established com-panies. The drive to change the world and become the new Mark Zuckerberg with the right business idea results in an extreme work ethic, especially in the young start-up scene: 80-hour weeks, we are told, are common. Success has its price.

We can’t delude ourselves: It is not just “fame” that drives people. Looking at the high cost of living in Silicon Valley, it’s clear that material pressure is also driving this new performance culture. It is important to know that there is no protection against getting fired when it comes to the usual “at-will” contracts. Companies can dismiss their employees at any time and “without any conditions”. Thus, what we also observe in the Valley is a “system of permanent probation” without a net. ■

With an income of least $150,000 a year, it’s possible to

live a good life here.


A two-week field study in Silicon Valley: We were aware of the role the American digital economy plays in the current upheaval. What really surprised us, however, was the force of this change. We entered a proper biotope, which serves simply as a catapult launch into the digital society and digital economy – but with far-reaching consequences for the working world. A first result:

Always onThe “always on” principle is a lived practice in Silicon Valley. Work and leisure blur together here, as barely indistinguishable life activities. The uncompromising liberation from time and space allows for flexible self-ad-ministration – the fuel for the success of the American digital economy. But we can’t delude ourselves: It’s not just the desire for success that drives these people. Looking at the high cost of living in Silicon Valley, it’s clear that material pressure is also driving this new performance culture. There is no protection for the “at-will” contracts that are so common here. Companies can dismiss their employees at any time and “without any conditions”. Thus, what we also observe in the Valley is a “system of permanent probation” without a net.

Self-experimenting digital societiesIt is thus worth taking a closer look at the innovation system of the Silicon Valley. Throughout the entire valley, people are experimenting with a new digital society. They do nothing else – it’s as if they were living on their own planet. Everyone wants to be a part of it. Everyone is thinking about new business models and how to get rid of the traditional economy. While in Germany we are just beginning to understand that data will be the “oil of the 21st century”, we have indeed realised that digitisation has created a worldwide “information space” that will change societies and economies as fundamentally as machine systems – making data a driver much like machine systems were to the industrial revolution of the 19th and 20th centuries.

Disruptive innovations in the information spaceThis information space is far more than a technical information system or a gigantic data highway. It’s a new social level that reflects the material world but in terms of data and information – and reverts back to this world in order to connect all of society. The digital companies of the Bay Area are consistently making use of this scheme: The Airbnb accommodation platform makes the hotel industry look bad; Uber’s car service is about to turn global mobility systems on their heads; and the automotive manufacturer Tesla is using its vehicles to gather data for its development department. They are all creating new business models within the information space.

Revolutionising highly qualified knowledge workTruly disruptive, however, is when companies transfer the idea of the information space to the organisation of work. With cloudworking and crowdsourcing, Silicon Valley is lighting the way for the next stage of the platform economy. While negotiations are being made for temporary employees and subcontractors, platforms are already being developed as as marketplaces for this type of labourer. Instead of working with permanent employees, companies are increasingly using flexible and globally available freelancers. This also revolutionises the organisation of highly qualified knowledge work.

“Workforce” in the cloudDuring our field studies, we got to know a company from the field of software development, which has been able to organise a functioning “workforce” of around 900,000 “crowdsourcees” using a team of only some 1,000 permanent employees. Highly qualified tasks are divided into small work packages and distributed via the platform. Then the competition begins: Only the person providing the best solution from the company’s point of view receives any monetary prize. In some cases the runner-up also gets something. The others simply get a consolation prize, if anything; more importantly, they receive reputation points. These points are important

Catapulting into the digital world How long can blind technicism work?


34 digit-DL Silicon Valley – Results and reflexion

because, together with a individual’s project experience and qualification profile, they help determine the overall score of the “crowdsourcee” and thus pave the way for the next lucrative invitation to tender – in line with the motto “new game, new chance”.

Patchwork companiesPerhaps this software developer embodies the new IBM model of “working in the open”. The extent to which such a model can be applied to other sectors is now to explore. Especially exciting, however, is the fact that even permanent employees and managers work together almost exclusively in the information space. Using com-munication tools such as “GoToMeeting”, they are able to vote and make strategic decisions based on the mass of data they receive daily via the tracking of production processes and the working behaviour of individual actors involved. Such “patchwork companies” exemplify how work may develop in the digital economy: towards a new form of fluid and transparent collaboration, towards an industrialisation of highly qualified knowledge work.

Social dynamiteSocial connections are nonetheless not completely abolished in Silicon Valley. There are also other workspace variants, for example, such as the isolated campus structures modelled by Google, through which they create a cosmos that their employees – rewarded by lucrative shares – can hardly escape during throughout their term of employment. In view of such changes, the question arises about the right to workers’ protection and social protection. In tech-focussed Silicon Valley, however, such concerns play only a marginal role. On our journey, we have not only met those who have lost in the digital economy, who live on the street within eyesight of

the chic offices in San Francisco. We have met managers who, even though they appreciate the casual order of the valley, also suffer from its increasing expectations.

Start-ups as trendsetters for a new performance cultureEven “professionals” who excel in their business are under constant observation and have to regain their position again and again. They pay a high price for their success. Start-ups are the trendsetters for this new form of performance culture, functioning as the “base layer” in the Silicon Valley hierarchy. With their abundant ide-alism, they keep the start-up spirit alive via their visions of the “next big thing” – and lay the groundwork for the big players. Even without their own financial collateral, they are capable of acting quickly – provided they can convince potential donors of their good reputation and disruptive business idea, something they must accom-plish again and again, after every development stage.

The German wayWhile Silicon Valley innovation system works, it will probably hold only as long as the boom lasts. In Germa-ny, we must our own more sustainable way to cope with the historic upheaval caused by the digital revolution. This includes designing new production and working models based on our industrial structures, without dispensing with our tried-and-tested social model. Instead of blind technicism, we rely on people. This is why it is crucial to bring employees and executives into the new economy, and to enable them to help design, in a conscious and competent way, the future digital society and working worlds. ■


Since returning from Silicon Valley last autumn, we have been nagged by the question regarding the importance of disruptive innovations for Germany. It’s clear that we can no longer escape this question. Because no business model is safe from them. Disruptive change is expected in all major industries. Over the decades, they will obliterate traditional market structures. A look at current developments in the automotive industry shows how far-reaching these changes are.

What are Silicon Valley companies already among the most capital-intensive companies in the world today – despite having (for most part) come of age only in the 1990s, along with the internet? For a long time, these companies simply “fumbled around” with the internet, developing new business models that appeared to be on the periphery of the economy. Now, with the rise of the information space, they are competing in the core business areas of established companies in traditional industrial and service sectors.

So what are the prospects for established companies grappling with digital upheaval? Can a tanker be disrup-tive? How do successful companies overcome the digital upheaval in business and society? It is indeed exciting to see how some successful companies face the challenge of disruptive innovation and what strategies they are devel-oping to master the balancing act between innovation and stability.

The key position of start-upsFrom the point of view of Bosch, the central innovation to take away from the current upheaval is a new quality of

networking. Under the headline Connected World , the electronics group is pushing ahead with its innovations. Not only people and companies, but also things are increasingly networked in the “Internet of Things”. This development has transformed all business areas within the Bosch Group. Since the middle of the last decade, Bosch has begun systematically adapting to this transfor-mation.

In the eyes of Bosch experts, an important element for this strategic realignment is the founding of start-ups within the group structures. The “Bosch Software Innovations GmbH” is an example of this path. In this start-up, for example, the IoT suite is used to develop a software platform that can be used to link internet-com-patible devices. This forms the basis for the networking of value-added chains and the development of new networked business models across different business segments.

Meanwhile Siemens has set up a new division, “Siemens Innovative Ventures”, which organises systematic collaboration between core business areas of the group and innovative start-ups. Three examples demonstrate the forms such cooperation can take: Firstly, Siemens, like Bosch, is committed to establishing independent start-ups outside its core business areas in order to drive disruptive innovations. Secondly, Siemens equips external start-ups with innovative business ideas with the necessary technology, thus helping them to bring their business model to the market more quickly. Thirdly, Siemens supports start-ups in discovering new business potential for their disruptive technologies.

Can a tanker be disruptive?Spanning innovation and stability



The SAP SE was itself developed as the result of a dis-ruptive innovation in 1972. Five former IBM employees had jointly set up a company that, with the development of standard software for real-time data processing, disrupted the market for enterprise software, becoming one of the most successful software companies in the world. In order to continue asserting itself in the present upheaval, SAP is also working with start-ups and inte-grating start-ups into the company; additionally, they are transforming its internal processes, for example through a comprehensive introduction of agile methods in its development organisation. This aims to accelerate learn-ing processes in the development teams and encourages the disruptive potential of employees.

Direction: AgilityThese examples make it clear once again that talk of disruptive innovations in the wake of the spread of the internet and digitisation is very serious – in fact, it’s more than just talk. We must learn to rethink our economy and our society if we really want to be successful in this digital

transformation. However, unlike the pioneers of Silicon Valley, we can not start with a blank slate but must work to change established and successful companies from the ground up.

Success in the digital economy does not mean throwing everything away; rather, we must use the strengths of existing social relationships to achieve a disruptive change. Agility is becoming a key concept in this context. On one hand, established companies must learn to integrate innovations beyond agile into their innovation processes, making them available for the further devel-opment of their business.

On the other hand, it will be crucial to mobilise the disruptive potential within the organisation itself and to orient growing organisational structures towards agile organisations. We must find ways through which a company can also develop the potential for disruptive innovations from the inside out. One thing is clear: If we want to successfully accomplish the digital transforma-tion, we must first win over the people. ■

If we want to successfully accomplish the digital transformation,

we must first win over the people.



Publisher: Prof. Dr. Andreas BoesInstitute for Social Science Research (ISF – Institut für Sozial-wissenschaftliche Forschung e.V.)Jakob-Klar-Strasse 980796 MunichTelephone +49 89 [email protected]© July 2016 ISF München

Recommended citation: Boes, Andreas; Gül, Katrin; Kämpf, Tobias; Langes, Barbara; Lühr, Thomas; Marrs, Kira; Ziegler, Alexander (2016):Silicon Valley Special: The digital economy – under the micro-scope. Munich Editing: Thomas Lühr, Dr. Jutta WitteProofreading: Frank Seiß, ISF München; Felix Rüchardt, ISF München;Layout: Jochen Härtel, designteam.eu, Munich;Illustraation: Karla KempgensPhotos: Aaron Kohr 18; akoppo 1; Bastiaan Slabbers 12; Coolcaesar 1, 34; David Armano 1; dotshock 19; hanahaus.com 1, 21; Ingo Cordes 4, 5; ISF 1, 7, 17, 20, 28; Jennie Book 15; Jochen Härtel 2, 6, 13, 28; Kazuhisa Otsubo 1; Luis Rivera Gurrea-Nozaleda 1; Marte Kjelingtveit 1; Martial Red 1, 14, 16; MCCAIG 32; Picture-Factory 30; Pozdeyev Vitaly 27; salesforce.com 19; siemens.com 36; Sylvain Kalache 1; Thomas Arend/savvy.is 10, 22-24, 26; Undrey 30; waze.com 8, 9; wonderlane 39

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