Business Book Of The Week: Nuggets from the new frontier

Silicon Gold Rush

by Karen Southwick

(John Wiley, pounds 16.50)

THE HI-TECH companies of Silicon Valley, California, exert a hold on the public imagination like no others in world business.

This is made all the more remarkable by the fact that, while such names as 3Com, PeopleSoft and Cisco Systems are highly familiar, few people have much real idea of what it is that these companies do.

It is a heady world in which - as Karen Southwick, an experienced technology journalist, recounts - businesses can appear and disappear in double-quick time. In fact, speed is the over-riding theme of a book that sets out not just to describe what has been going on in this remarkable area near San Francisco but to demonstrate how events there are transforming the way all companies do things.

Southwick, whose book is subtitled "The Next Generation of High-Tech Stars Rewrites the Rules of Business", writes: "Everywhere you look today, older companies and those in traditional industries are adopting the organisational structures, business strategies, and operational methods of the Silicon Valley gang."

That is certainly the received wisdom. But, while just about every industry is being subjected to a quickening pace of change, few outside information technology are required to constantly transform themselves in the way that is commonplace in the area around Palo Alto and the other technology hotspots in Seattle, Austin, Texas and Boston that collectively form the state of mind known as Silicon Valley.

"The technology industry, like any frontier, has attracted a new type of executive and a new type of employee - indeed, the two are almost indistinguishable," writes Southwick. "The key attributes of both include a tolerance for chaos, disdain for hierarchy, willingness to fail, elevation of talent and brilliance, passion for technology, and naivete about limits."

One of the most remarkable aspects of all this is the explosion in stock options. Originally conceived as a means of retaining the loyalty of key staff, they have become so commonplace that, according to figures quoted in the book, 100 per cent of technology executives, 85 per cent of managers and 42 per cent of other employees participated in stock option plans in 1997.

Accordingly, organisations in an industry where the staff turnover rate can be phenomenally high are having to find fresh means to motivate staff. Jim Moore, an industry observer, says that paying employees well and treating them with respect are necessary but not sufficient. "You have to make them feel like they're making history."

Among all the factors for success - 10 commandments for next-generation businesses - perhaps the most fascinating is "develop mind share". Defined as "a calculated campaign to influence the influencers", this is an approach that some might describe as hype since it involves complementing the company's product innovation with brand marketing.

"Proclaim yourself the market leader by leading a paradigm shift, establishing a standard, or positioning yourself as an industry authority," says Southwick.

Many of the developments in organisational structure and people management described in this fascinating book will be replicated in other industries. But it says a lot about the hi-tech arena that such a concept is given such importance, and begs the question about whether this heady pace is sustainable.

Geoffrey Moore, another computer industry consultant, proclaims himself in the book's foreword "nervous" about the "breathlessness of Silicon Valley". Yes, he says, there are lessons for other industries from this amazing area. But that does not mean that other areas should follow them slavishly. Each of the other economics "needs to find its own expression of the insights accumulated here", he says. The British Government, take note.

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