This post is written by Alexander van Elsas. Alexander writes daily on his social media weblog, and is a regular contributor to the WinExtra blog by Steven Hodson.
I read an interesting article in the New York Times the other day. Clair Cain Miller interviews Judy Estrin about her new book “Closing the Innovation Gap”. In her book she discusses the problems Silicon Valley faces with respect to innovation. A quote from the article:
Ms. Estrin acknowledged that innovative ideas still appear all over Silicon Valley. But, she said, the technologies at the root of new products like Apple’s iPod or the Facebook social networking service were actually developed several decades ago. If entrepreneurs do not continue to develop groundbreaking technology, she said, the valley would be in dire straits in another decade. She compared the situation to a tree that appears to be growing well, but whose roots are rotting underground.
“In some ways, we have the problem that it looks like innovation is flourishing, but too much of it is short-term, incremental innovation,” she said.
The root cause for this lack of ground-breaking innovation, according to Judy, is that investors started focusing too much on the short term.
Ms. Estrin traces Silicon Valley’s troubles to the tech boom. She said that’s when entrepreneurs and venture capitalists started focusing more on starting companies to turn around and sell them and less on building successful companies for the long term.
She is right of course. It’s not just the innovation that halts. Silicon Valley unfortunately has become an industry. It used to be the exiting place where new things happen. Over the years the Valley has become a trap for any one willing to fall into it. The speed of innovation is dropping fast. There are thousands of startups working on great ideas, but most of them seem to be small improvements or tiny nuances of things that already exist.
This is a pretty normal phenomenon. Someone or something starts the cycle with a great idea, starts killing “old-school” market leaders. And then others jump on that same bandwagon and an industry is born. But the industry that marks Silicon Valley is different from other “Innovators dilemma’s”. There is a web 2.0 industry, but I doubt there is an equally large market for it. There are a few large players that earn some revenues, but the rest is burning up venture capital.
And the crowd hanging around this industry, that would be us tech bloggers and early adopters, are providing the necessary fuel to this industry. Every self respecting startup buys his way into TechMeme and all of the main tech blog sites. They get the early adopter crowd on board, hungry as they are to try the next cool thing. Everyone gets all crazy over the latest video, social, desktop, air, aggregator thingies. Of course after screaming Hallelujah the startup sees an enormous spike in traffic and the aura of success has been created. But after a while, when the excitement jumps to yet another great idea, the traffic that was there was simply created by that early adopter crowd. And it dies out again as the crowd moves on.
You would think that startups would learn from this and choose a different roll out strategy. But often it seems they don’t. And there seems to be a simple reason for it. Their business plan isn’t aimed at creating customer value. Their business plan is getting prepared for a take-over. It’s the only reason I can think of why venture capital is invested in business plans that aren’t aimed at customer value.
You can’t build an industry on that foundation. If a company’s sole purpose is to get investment after investment only to be sold to the highest bidder, then no real value is created, only destruction. And we already know who ends up paying for it (besides the customer). It is the old industry leaders, trying to become hip again, catching up with the Silicon Valley stars. The sucker that ends up buying that for a whole lot of money didn’t really understand this new world in the first place and ended up buying something useless for a lot of money.
I believe that startups working on great ideas (and great ideas do not necessarily have to be innovative) should try something else for a change. Why not leave the early adopter crowd in Silicon Valley for what it is and focus on your real customer instead. You don’t always need a Valley early adopter. There are people in your target market that can act like early adopters too. The good thing is that you can concentrate on creating user value, instead of trying to be the next darling of an industry that seems to have lost its sparkle. It might not be the easy way, but it has a lot of advantages too. Getting into Silicon Valley and the heart of the early adopter crowd is relatively simple. Once in, getting out again, crossing the chasm towards your target market ends up being a wall most startups can’t break through. That’s the real trap of Silicon Valley. It’s attractive, but once you are in there, you might find that you’ll never get out again.
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Wherever you turn these days web companies are adding social media features. In some cases it is nothing more than rebranding an existing service with a Twitter enhanced name. In other case it is adding a box load of social media crap in an effort to drag in new users. Either way we are being left with the impression that everything we use on the web must be socialized in some fashion in order to succeed.
Within the tech blogosphere there is a whole sub culture of folks that are commonly referred to as the early adopters. These are the people who without a moments hesitation sign up for any new service in the Web 2.0 and social media world that comes along. They are the one’s who clamor on about things like 
I’ve been watching this whole 
for it to come back online after its many crashes. We have bemoaned the taking down of various parts of the service which every time it happens have people talking more and more about how its days could be numbered.
watch what all the other people that matter to us are doing but in one centralized space. As Twitter hasn’t been designed to do anything more that share messages FriendFeed has been designed to be our personal library.
It doesn’t matter what part of our society of goods and products; online or offline, you look at there will always be a groups of folks that are willing to be the very first to use it and talk about it. Whether it is some new cool car like the 
be successful. Where there might be some disagreement though is over the extent of their impact.
There is no denying that there are definitely different strata of users in that wilderness called the Internet. In the broadest sense – especially in the tech blogosphere it can be divided into three fuzzy edged groups. The first being those irritating people called the early adopters which are followed by a slightly larger group of tech knowledgeable folks but the largest groups by far is the regular person next door type of user.
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