The Transformation of Silicon Valley – Key Insights from 2020 to Tackle 2021

This article analyses the challenges, the opportunities, and the shift innovation hubs and tech companies have been facing in 2020, and how these may play out in 2021, and beyond.

The Transformation of Silicon Valley – Key Insights from 2020 to Tackle 2021

The end of the year season is known to require ambidexterity. While the term traditionally applies to people who are able to use the right and left hand equally, it has become an excellent way to describe individuals and organizations able to make sense of conflicting trends and navigate complexity effectively. Capturing and delivering value in today’s context – while planning and adapting for the future – is not an easy task. This is particularly true when considering the effects of the COVID-19 pandemic throughout the year and the uncertainty laying ahead.

As it is regularly the case when tumultuous times emerge, many are turning to Silicon Valley for inspiration. How is the Bay Area addressing these days’ uncertainty? What can we learn from 2020? How can we pave our way into 2021?

Since I joined swissnex San Francisco at the end of the summer, I have been working on the frontlines of an innovation hub being challenged in an unprecedented way. Yet, this fascinating ecosystem has been displaying inspiring sketches of transformation. Looking backwards, I can cluster my observations in three different categories, taking into account (i) individual, (ii) corporate, and (iii) societal responses to a “new” normal. These three levels of analysis allow me to draw two main assumptions impacting the transformation of Silicon Valley in 2021, and beyond.

The Employee

2020 brought many changes for employees all around the world, especially as they had to embrace remote working almost overnight. While the COVID-19 pandemic disrupted the idea of a physical work environment, it also brought to light some essential limitations attached to it that remained unnoticed for too long.

In fact, as tech companies are massively encouraging their employees to work from home on a permanent basis, a growing amount of tech workers have reestablished themselves away from big cities. Quoted by the WSJ, a survey of 371 Bay Area tech workers, conducted mid-May by the recruitment marketplace Hired, found that 42% would move to a less expensive city if their employer asked them to work remotely full-time.  This trend happened throughout 2020, even if it ended up being less important than anticipated, with “only” around 20% of the Bay Area’s tech workers having moved.

Yet, in San Francisco, this shift to working from anywhere had a specific flavor. In the past years, you could hear voices in the Bay Area complaining about the cost of living in that region, the important taxation, and a growing social crisis unfolding in the city of San Francisco. For decades at least, leaving the city seemed akin to refusing a life of privilege and career opportunities. It is not the case anymore. Trade-offs appear to be different for employees of companies encouraging remote work from anywhere. In a sense, ambitious young professionals do not have to choose between their careers and their quality of life in order to grow professionally anymore. New opportunities and new ways of organizing the workforce are being experimented with, challenging employees to consider trade-offs differently. This may impact our understanding of what working in Silicon Valley means.

The Company

Incentives have also evolved at a corporate level. In a complex economy, companies like Oracle, HP Enterprise, Palantir, but also public figures of the Bay Area such as Elon Musk have chosen to move their headquarters away from California. Beyond the media attention and debates that these announcements created, these departures seem to be rather connected to cost control, to access to a cheaper talent pool and to tax benefits, more than to the loss of relevance of the Bay Area ecosystem.

While some are leaving, others are expanding. Silicon Valley remains home to some attractive companies, including Airbnb, Doordash and several others who launched their public listing in the beginning of December, generating billions of dollars. It is also the case when looking at venture capitalism. According to the PitchBook, from April through early December 2020, the Bay Area has been home to 26.6% of all U.S. early-stage startups receiving venture capital funding, which is a minor decrease from the previous year level (27.4% average).

Nevertheless, we have witnessed the emergence of new trade-offs caused by these highly mediatized departures. New innovation hubs are offering relevant business opportunities that can, in some cases, appear as much more attractive than the Bay Area. While the examples mentioned previously highlight places like Denver and Houston, a proper mapping would bring to light a broader range of technology hubs reinforcing their attractiveness, including Austin, Seattle, Bellevue, San Diego, Las Vegas, and a few other cities. This trend is reinforced by informal nodes of tech workers working in a decentralized way from Lake Tahoe to the Sierra Nevada Mountains and Palm Springs.

The Society

Several societal debates shaped the Bay Area in a unique way this year. While the City of San Francisco has shown leadership in tackling the COVID-19 crisis (a preventive and strict shelter in place health order was implemented starting mid-March 2020), the city has seen a tragic record number of 621 people dying from drug overdose, outpacing by far the 173 deaths from COVID-19 at the time of writing this article. San Francisco is also facing a growing number of homeless people throughout the city, suffering from the economic impact of the pandemic. These issues remind us that Silicon Valley cannot be detangled from its physical environment and how it addresses broader societal challenges.

Simultaneously, key discussions about the nature of systemic racism and gender inequality are being tackled like never before in 2020, accelerating year-long debates about the lack of diversity and gender equality in big tech companies, where the African-American and Latinx community, but also women remain marginally represented. This debate goes beyond the adoption of diversity and inclusion policies. Moreover, the lack of diversity in the technology sector impacts society in dangerous ways.

This claim builds on several relevant publications and movies created in 2020. Adrian Daub’s “What Tech Calls Thinking” and Weigel and Tarnoff’s “Voices from the Valley”, discussed the unfiltered reality of working in Silicon Valley, and how unaware we are about the philosophies, worldviews and power asymmetries reflected in the products that are created. Shalini Kantayya’s “Coded Biases” showed “how machine-learning algorithms can perpetuate society’s existing class-, race- and gender-based inequities”. Overall, these arguments remind us that technology and the companies who build it need to embrace a broader approach to who their stakeholders are. It cannot simply be about user-centricity anymore and has to embed a society-centric approach. The way Silicon Valley understands its responsibility towards society needs to evolve.

CONCLUSION: TOWARDS TWO STRATEGIC PRIORITIES

From employees embracing “permanent remote working”, companies “expanding to new innovation hubs” and society requiring a “new level of responsibility from technology companies”, we have seen different illustrations of how Silicon Valley changed in 2020. What does it tell us about 2021?

First, Silicon Valley may well span beyond its iconic geographical location with employees and companies carrying its mindset and spirit as they relocate. One of its key historical reasons of success can be traced back to a network approach to innovation, and how different stakeholders interacted and reinforced each other. What we are witnessing today is the confirmation of what Silicon Valley has always been: a network that spans across different disciplines, and industries, but which is now evolving beyond California.  In 2021, engaging with Silicon Valley may involve engaging increasingly decentralized networks, including different both formal and informal nodes across different regions and industries – from Bellevue, Portland, Lake Tahoe to San Diego.

Second, Silicon Valley may well have to embrace higher levels of responsibility, and expand the nature of its core stakeholders.  As Silicon Valley moves beyond its geographical location, there is a need to also move from a “user-centric” to a “society-centric” approach in order to ensure that the technology being created delivers on its promise of doing good, for everyone. As major Silicon Valley actors will have to respond to anti-trust lawsuits emerging in the US and Europe in 2020, the time may be ripe for a broader discussion about the place of technology in our society.

Finally, these two assumptions have one key common denominator: interconnectedness. All throughout 2020, we have been reminded of how societies, cities, regions, as well as the issues and challenges we face are somehow connected and interdependent. By going beyond its iconic geographical location and integrating new stakeholders, the way Silicon Valley may evolve in 2021 illustrates well how interconnectedness, particularly as it relates to systems thinking, may be one of the most relevant parts of ambidexterity. A more decentralized geography will also increase diversity of thought and expose Silicon Valley to new networks, schools of thought and ways of life. This will ultimately contribute a more society-centric approach to technology.


Written by Yannick Heiniger, Head of Partnerships, swissnex San Francisco