McDonald's, Ford, Wal-Mart and Nestlé - these are just some of the major firms that are keen to plug into the Silicon Valley ecosystem so as to spot at first hand disruptive innovations and changes that are just around the corner.
Market Street is the latest fashionable address for high tech companies. Twitter, Uber, financial and merchant services aggregator and mobile payments company Square, and enterprise social network Yammer have all decided to set up shop on this central San Francisco artery. Then in late June they were joined by a rather unexpected neighbour: McDonald's. The fast food giant is not selling hamburgers or French fries there. Instead it has opened an operations centre that will serve as a sort of laboratory for digital innovation.
McDonald’s hot on the heels of its competitors
In doing so, McDonald's is joining a long list of companies from the ‘old economy’ who have set up in the land of the new economy. In the last few years many have opened research centres in and around San Francisco, a move which seems to be becoming the norm for large multinationals that fear being left behind in technology terms. “Digital changes the needs and expectations of consumers and our objective is to be ready to move at the pace our customers are,” explained McDonald's Chief Digital Officer Atif Rafiq in an interview with marketing and media specialist site AdAge. The restaurant chain is being quite tight-lipped about its detailed plans and projects but these will certainly include using the new setup to catch up in the field of mobile payments now that its rivals Burger King and Wendy's already offer this option in all their restaurants across the United States.
Apart from that, “we want to come up with ideas that we haven’t yet thought of,” revealed Atif Rafiq. One recent idea was the move by McDonald’s, which was one of the main sponsors of this summer’s FIFA World Cup, to launch of a downloadable augmented reality app that, when users had scanned their FIFA World Cup fry box, brought up a soccer trick shot game on their smartphone screens.
Carmakers in the driving seat
Automobile manufacturers were the first ‘old economy’ firms to set up in Silicon Valley, looking especially to find ways to capitalise on the increasing volumes of data they were collecting. General Motors, Ford, BMW and Nissan have all set up in the area. “This is where innovation really happens,” underlines Maarten Sierhuis, Director of the Nissan Research Center in Silicon Valley, whose job is basically to provide support for connected car and driverless car projects.
Other business sectors have followed. Wal-Mart, the world’s top retailer, and its rivals Target and US department store chain Kohl’s, rub shoulders with the many Silicon Valley startups specialising in e-commerce. Beth Jacob, the recently-resigned CIO and Vice-President of the Target Technology division, pointed out that “retail is experiencing a major revolution,” stressing that Target “must be able to act and innovate really fast.” Last year giant Swiss agro-food corporation Nestlé opened a research centre there. Leading French firms listed among the CAC 40 stock market index – energy giant EDF, telecoms provider Orange and insurer AXA – are there as well. “Silicon Valley is no longer just a high-tech ecosystem. Its innovations create new business models and change the way all companies operate, from manufacturing firms to service organisations”, underlined a spokesman for 650 Labs, a Mountain View strategy consultancy start-up which specialises in assisting companies wishing to set up innovation labs in the area, adding: “That’s why it’s not just technology companies that should be in Silicon Valley, it’s everybody.”
Spotting the next big thing and attracting talent
All these companies setting up in the area are looking to plug into an ecosystem which is radically shaking up our lifestyles and consumption patterns. By staying in close touch with what is happening there, they hope to be able to spot the coming trends and get on board faster. Being there helps them forge partnerships and get their hands on promising innovations. Wal-Mart arrived there three years ago and has since acquired 13 promising startups. General Motors has invested in dozens of companies. “Being part of this ecosystem enables us to set in motion new collaborative efforts,” says Maarten Sierhuis, something which is not so easy to do if you are not coming into contact with small innovative startups on a regular basis. Moreover, he adds, “Silicon Valley hosts some major universities – among them the prestigious Stanford University – and research labs with which we also work.”
Another fertile talent pool out there is the IT engineer fraternity. McDonald’s hopes to be able “to attract the best people,” although competition to recruit talent is fierce in a sector which has a shortage of highly qualified tech staff. In fact the fast food chain, which is looking to recruit 15 to 20 staff quickly, has already taken on a number of engineers from such companies as Facebook, Yahoo, PayPal and AOL, with the task of developing and testing out new digital experiences. However, innovating is also a mindset and the newcomers are keen to absorb the Silicon Valley culture. Far away from company headquarters it should prove somewhat easier to think outside the box, try out different ideas – in short, to take risks. Opening the Ford Motor Company’s research centre in Palo Alto in 2012, Chief Technical Officer Paul Mascarenas pointed out to his audience that “minds that are open to new ideas will be essential to meeting the challenges facing us in the coming years.” Far from its native Michigan, the carmaker hopes to “broaden the tradition mindset of automotive manufacturers and stimulate innovation”.