Silicon Valley is the most innovative region in the world, making a huge splash around the world. In the past decades whole industries have either been created or destroyed thanks to companies that had their origin or came to full bloom in the Bay Area. The microprocessor, graphical user interface, web browser, smartphone, electric and autonomous vehicles, internet search, social media and so on had direct impact on the way we live.

Apple’s iPhone disrupted at least 30 industries. Not only telecom, but also navigation system vendors, mapping services, camera and film manufacturers, or personal planners to name just a few. But the iPhone also created a whole ecosystem around app development or wearable technologies. For some of the disrupted industries insult was added to injury when we consider that Apple didn’t even consider them competitors. Think of the navigation system industry. A year after the iPhone was introduced the navigation system business went down by two digits and has not recovered since. And Apple doesn’t even consider itself a navigation system vendor, that’s not what the main purpose of the iPhone is.

The same is unfolding live in front of our eyes in the car industry. Tesla hits at the electric vehicle sector, Google punches them at autonomous driving, Apple at the car experience, and Uber at how we use transportation services. At the same time traditional car manufacturers were holding on so long at their old technologies and tried to improve them that it exploded in their face. The VW-scandal will be a piece to study for long time in how innovation stagnation can bring down a company.

In other words: you could find yourself quickly in a critical situation fighting for survival of your company, if you are not close to where innovation happens. And this is where an innovation outpost can help.

Innovation Outposts

When the Stanford Research Park was founded in 1951 the university started to bring companies closer to the university. While the first tenants included local companies such as HP or Varian, also other US companies including GE or Lockheed joined. More and more companies opened outposts to benefit from the ecosystem that established itself around Stanford.

Today there are at least 160 innovation outposts in the Silicon Valley. An innovation outpost is mostly a small subsidiary with a focus on R&D having between 1-100 employees. Some may be much larger like the ones from Mercedes Benz or Fujitsu Xerox, or even grow to full-blown operations like SAP Labs with over 2,000 employees all around the Bay Area.

We maintain a list of companies that have innovation outposts in Silicon Valley and our count is currently above 160 and growing. Here is the list with the country of origin and the number of companies:

Table 1: Number of companies from countries with Silicon Valley Innovation Outposts (C) Enterprise Garage

Purpose of an Innovation Outpost

Innovation Outposts can come in multiple flavors and tasks. First, they are supposed to be closer to where innovation happens and discover and monitor trends. Second, they serve as a scout for companies with interesting technologies and services that could be acquired, invested in, or partnered with. Third, innovation outposts tap into the local talent and hire people that infuse critical skills and mindsets into the company. Fourth, an outpost can increase the company’s profile to talents by demonstrating openness to innovation and new ways of thinking. Fifth, larger outposts naturally turn into business development hubs that serve the local community with products. And this must not be underestimated: the Silicon Valley population is an eager consumer of new technologies. Sixth, a Silicon Valley innovation outpost can serve as model for a series of outposts in other innovative regions such as Tel Aviv or Singapore, or to bring in innovation concepts to all other corporate locations.

Making an Innovation Outpost successful

But it’s tricky to open an outposts. If you consider it only to be something for publicity purposes, then rather spend the money better. If you leave the innovation outposts alone and not give them executive support, then it’s the same. Innovation outposts struggle with a lot of things – and I speak from experience having work for 12 years in such an outpost (SAP Labs). They need strong executive support and openness to the recommendations. More often than not employees in the headquarters regard the outposts as the ones that have the crazy ideas, have all the fun, but the real work is done at home.

To overcome this make sure to allow temporary employee transitions between the locations to get the spirit infused. Executives need to make a strong commitment, ideally at least one board member moves to the Silicon Valley. You must also hire local people to tap into the local network and infuse the outpost with the innovative and entrepreneurial spirit of the Silicon Valley. And this is easier said than done. The people can be very different from the ones you are used to work with or hire in the past.

Finally, an innovation outpost is not a short term adventure. To really make an impact and the organization more resilient, you need to plan long-term. This is one element on the way to avoid being washed away by innovation and being the one making a splash instead.

More to read

If you want to read more, I point you to Evangelos Simoudis and Eilif Trondsen, who both have written about Innovation Outposts:

• Innovation Outposts and The Evolution of Corporate R&D
• Innovation Outposts in Silicon Valley – Going to Where the Action Is
• Innovation Outposts: A Growing Element in Silicon Valley’s Dynamic Innovation Ecosystem