Conference 7.286::digital

1184.0. "Interesting: Boston vs. Silicon Valley" by STAR::DIPIRRO () Tue Sep 11 1990 13:33

	[ Mail forwarding headers deleted...]

	The following two columns were written by SAN JOSE MERCURY NEWS
	Business Editor, James J. Mitchell.  They appeared consecutively
	on Sunday and Monday, Aug 26 & 27.

	While Mitchell reportedly has little to do with the daily operation
	of the MERC's businesss section, he writes several market-watcher type
	columns/week.  He spent last week visiting the East.  I think his
	opinions speak volumes to how DEC is PERCEIVED from the outside.
	
				###
Sunday August 27, 1990

		WHY THIS VALLEY BEATS BOSTON
				James J. Mitchell - Chelmsford, Mass.

Griffith Resor, president of MRS technology, likes to tell the story of what
happened to one of his salesmen in Silicon Valley when they both worked for a 
Massachusetts chipmaking equipment company.

One morning, the salesman called on a purchasing executive at Fairchild 
Semiconductor in Mountain View.  After lunch, the salesman met with a
purchasing agent at Raytheon, which was across the street from Fairchild.

The purchasing agent at Raytheon turned out to be the same person the salesman 
had talked to at Fairchild.  The man had changed jobs at lunch -- and hadn't
even moved his car, Resor recalls with a chuckle.

The story epitomizes Silicon Valley, Resor says.

Then there's the rule of thumb on how you can tell if a speaker at a high-tech
conference comes from Massachusetts or Silicon Valley.  If he comes from 
Massachusetts, he arrives, gives his talk and leaves.  If he's from Silicon
Valley, he sticks around for a day or two to meet and talk to people.

Although Silicon Valley and Boston's high-tech community in some ways are quite 
similar, there are also significant cultural, economic and philosophical 
differences.

While these differences can be humorous, they can also have important effects
on high-tech businesses and on the two local economies.  Indeed, they have
helped Silicon Valley replace the Boston area as this country's technology
capital. Here are some of the most important differences:

DENSITY: The high-tech community is much more concentrated in Silicon Valley,
enabling high-technology firms to define the business climate here. In 
Massachusetts, high-tech companies exist in a generally more conservative 
business environment, where it's often tougher to find funding and other kinds 
of support for risky ventures.

LOYALTY: In Massachusetts, most employees work for one company for a long
time and are reluctant to leave in hard times.  In Silicon Valley, people
will leave at the drop of a hat.
While in some ways this is a plus for Massachusetts, it also prevents
some of the cross-pollination that has contributed so much to the creation
of new technology and products in Silicon Valley.

NETWORKING: Partly because the high-tech density is greater and partly
because we tend to be much more talkative, high-tech executives and
engineers in the valley tend to talk to each other far more than in the
Boston area.
In Silicon Valley, there seems to be "a personal need to let people know
how well you're doing," one Boston venture capitalist says.
He was astounded at all he overheard during lunch at the Decathlon Club.
"If you hung out there, you'd learn more than in two years of market
research," he says.  
But he acknowledged that while individuals may give away a few secrets, the
exchange of ideas is good for the industry.

THE AGE OF COMPANIES AND THEIR LEADERS: Massachusetts companies and their
chief executives tend to be older and more set in their ways than their
Silicon Valley counterparts.  The largest Massachusetts high-tech companies
have had serious management-succession and product-transition problems.
Large Silicon Valley companies are generally younger than their counterparts
from the Boston area.  One exception is Hewlett-Packard, which had an 
extremely smooth transition from its founders to its current chief executive.
It's unclear how well the valley as a whole will do in this regard.  Intel
and Apple seem to have done a fine job, while AMD and National Semiconductor
haven't.

RISK AVERSION: Executives at Massachusetts companies are less venturesome.
One result is that the biggest companies have stayed in proprietary
technologies even though many customers have come to prefer standardized
systems.
Massachusetts companies are less likely than Silicon Valley companies to make 
aggressive bet-the-company decisions either in strategy or in the choice
of chief executives.
That's one reason companies like DEC, Wang, Data General and Prime have been
so reluctant to move away from proprietary systems.  And its a reason Apollo
Computer in 1984 made the disastrous decision of bringing in Tom Vanderslice
from GTE as chief executive.
Large Silicon Valley companies have been more venturesome.  Intel, for 
example, made a bet-the-company decision when it got out of dynamic,
random-access memories and focused on microprocessors.  HP did the same
when it invested tremendous money and time in RISC technology.  And Apple
did when it hired John Sculley. All three moves paid off.

BREADTH OF COMPANIES: Silicon Valley companies deal in more technologies
and in more steps between what God made and what the customer buys.  Their
products range from chips to disk drives to personal computers and
workstations, and they make products ranging from the tiniest components
to huge mainframes.
Massachusetts companies, especially the larger ones, tend to concentrate
on large, expensive products, such as minicomputers.
As one Massachusetts company president who considers Silicon Valley better
positioned than companies in his own state says, "If you put chips on more
numbers in roulette, you're more likely to win... You'll have more failures,
but that's the price you pay."

MIT VS STANFORD: MIT tends to be more technically rigorous than Stanford,
but Stanford seems to be closer to the business world, and its students 
are better able to capitalize on ideas that come from academia.
"MIT trains scientists; Stanford trains engineers," says one Massachusetts
venture capitalist.

SELF-RELIANCE VS. BUYING FROM OTHERS: Large Massachusetts companies tend
to make a far higher proportion of the parts that go into their products
than do Silicon Valley companies.  That strategy was a good one when products
changed slowly and reliable suppliers were hard to find.  But that's no longer
the case.
Today, making most of the parts you need requires a lot more capital and makes
it much more difficult for companies to change products or technologies.
Users of this strategy are usually at a competitive disadvantage.

CHAOS AND CREATIVITY: Because of the constant job-hopping and the meteoric
rise and fall of companies, Silicon Valley is a much more chaotic environment.
But that chaos enables high-tech executives and engineers to be more creative
and flexible.
In Massachusetts, high-tech companies play by the rules," one executive
says.  "In Silicon Valley, there are no rules."

AVAILABILITY OF VENTURE CAPITAL: While Boston has a significant venture 
capital community, it's far smaller than the one in Silicon Valley. So Silicon
Valley entrepreneurs have more stores to shop in and are more likely to
find the funding, and the advice, they need.

REWARDS: Massachusetts companies usually restrict stock options to top 
executives. In Silicon Valley, they're spread much deeper into the ranks,
in some cases to all employees.  Being able to share directly in the 
success of a  company is a tremendous motivator.  And it can also make
you a lot of money.

			###

Monday August 27, 1990

	TOUGH TIMES ON ROUTE 128
			By James J. Mitchell - Waltham, Mass.


Venture capitalist Stephen E. Coit recently has been taking on a most unusual
job: trying to convince Massachusetts high-tech executives and engineers
that there's a bright future in high technology along Route 128.

"I try to make people aware that the basic negative message is wrong,"
says Coit, a former Hewlett-Packard executive who's a partner of Merrill
Pickard Anderson & Eyre.

People feel so bad that Coit gets a good response when he tells them, 
"It is not impossible to succeed here."

It's surprising that such an effort is necessary in one of the world's 
high-tech capitals.  But it seems to reflect accurately the mood in 
Massachusetts these days, which is quite opposite the optimism and
buoyancy we saw only two years ago.

Indeed, a week here was a grim reminder of how quickly an economy can
deteriorate and made me wonder if the same thing is likely to happen to
Silicon Valley, which has replaced this area as the nation's leading high-tech
region.

Some of Massachusetts most important problems weren't created by high-tech
firms.  The state's largest banks, pillars of the establishment, have
reported billion dollar losses, mostly from real estate, and have
sharpley reduced their lending.  The residential real estate market,
which had been soaring, has come to a standstill.  And the state government
is in a financial mess that the governor and legislature seem only to be
able to make worse.

But high tech, which did so well during most of the late '70s and '80s
has also contributed significantly to the state's economic downturn.
The state's largest and most visible high-tech companies -- DEC, Data
General, Wang and Prime -- all are having serious problems, losing
money and laying off thousands of workers.

While many of the state's small and medium-size high-tech companies are
doing well, their success hasn't come close to compensating for the problems
of the Big Four.

Fortunately, the business climate in Silicon Valley seems to be different
from what I found here.  And perhaps we can learn from the errors this area's
high-tech companies made.

Probably the biggest mistake committed by the Big Four was ignoring significant 
changes in the marketplace.  While customers wanted machines that operated
according to industry standards, they stayed with proprietary systems.

Indeed, proprietary systems at one time were a proven way to lock in customers.
But times have changed, and no longer are these companies main competitors
earlier models of the same machines.  Instead, they're computers built
across the country or overseas.

DEC, Data General, and Prime made another mistake.  They thought they were
in the minicomputer business, when in fact they were in the computer business.
So they ignored personal computers and workstations until it was too late.

Massachusetts also suffered from its concentration of electronics in a few
areas -- mainly minicomputers and defense -- and in a relatively few companies.

Silicon Valley is lucky on that score.  While 15 years ago chip-making
dominated, the area now has a wide range of electronics industries that 
should protect it from a collapse in any one area.

It remains to be seen whether Silicon Valley is nimble enough to change
rapidly with industry trends.  The area seems well positioned now since
only a few companies -- including Apple -- rely on proprietary systems.  But
customers preferences can change rapidly, and companies must react just
as quickly.

Fortunately for Massachusetts, MIT, Harvard and the other schools keep
producing new ideas and many would-be entrepreneurs.  In addition, because
of the Big Four's problems, small and medium-sized high-tech companies
here are now hiring talent they couldn't get before -- and often
at bargain prices.

So high tech here is likely to bounce back.  But the journey will be
painful and slow because the big companies are on their backs and the mood
is so bleak.


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    A very informative article, so who is hiring right now?
    
    Dave