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There Is Something in the Water in the San Francisco Bay Area

A lot has been said about the uniqueness and the great innovation that characterized the companies of the San Francisco Bay Area. A quick Google search of the words “Bay Area” and “innovation,” and you learn that the best innovations in health, pharmaceuticals and, of course, computing and technology all come from companies located in a very specific and small territory in the West Coast of the US.

So, what is it about Bay Area companies that makes them so innovative? I find it a very interesting question, to which I will offer an answer in this post. I will base it on a joint report published by consulting firm Booz & Company and The Bay Area Council Economic Institute. The report compares the answers of Bay Area firms to all other firms surveyed in the 2011 Booz & Company Global Innovation 1000 survey, themed “Why Culture is Key.”

The 2011 Global Innovation 1000 survey digs deep into the connection between a company’s culture and its ability to innovate successfully. The survey defines three optional profiles that incorporate the firm’s approach to innovation and the role that consumers play in defining future product needs. Need seekers are companies whose strategy and culture are oriented towards achieving first-mover position in the market. These companies engage with consumers in order to gain deep understanding of their needs, even before the consumers themselves understand them, in an attempt to be the first in the market to offer a solution for those needs. Market Readers closely monitor consumers and competitors and design their strategy and culture to support their position as “fast-followers” in the marketplace. Technology Drivers are firms that follow the direction of their technological capabilities, rather than the direction consumers are pointing to. These companies leverage their R&D investments to innovate and create top-of-the-line technology but only rarely take proactive actions to monitor the pulse of the market. In the survey, Need Seekers stand out as businesses that are able to capitalize, in both profitability and enterprise value, the compliance between their organizational culture and innovation strategy.

Which profile fits most of the Bay Area companies? You guessed it right—Need Seekers. Nearly half of Bay Area firms are Need Seekers, compared with less than a third of all companies surveyed in the 2011 Global Innovation study. As Need Seekers, Bay Area companies’ business and innovation strategies as well as culture are all aligned. Their innovation strategy is structured and is communicated top-down. They are also characterized by having a “flat” organizational structure.

Being Need Seekers is not the only reason for Bay Area firms’ prosperity, but it definitely plays a role in it. Bay Area firms enjoy extensive educational and research infrastructure, innovation-encouraging culture, and easier to access finance sources; however, their success is also related to their ability realize the potential of combining consumer insight and well-defined innovation strategy.
Based on: Jaruzelski, Barry, Matthew Le Merle, and Sean Randolph. “The Culture of Innovation: What Makes San Francisco Bay Area Companies Different?” Bay Area Council Economic Institute and Booz & Company Joint Report. Web.

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