Innovating out of Recession: The Next “Next Thing”

The AlwaysOn & STVP (Stanford Technology Ventures Program) Summit at Frances C. Arrillaga Alumni Center on the Stanford University campus featured a panel with the unwieldy title "Silicon Valley in the New Millennium: Chief Geeks & VCs of the Old Guard lay out the New Software & Computing Agenda." It was an attempt to articulate the next “next thing” for Silicon Valley in the wake of social media, the iPhone, and a major recession. As panels go, this one touched on the conventional wisdom appearing in every tech story about futures: Cloud computing, social networking, media technology, and portable devices.

However, a couple of impressions from the discussion, moderated by Craig Menden, a partner at Sonnenschein Nath & Rosenthal LLP, are noteworthy. Foremost is that content is being developed without consideration for the devices consumers will use to access it. Furthermore, devices are being developed without considering the content that these devices will be accessing. Furthermore, neither content creator, nor device manufacturer are creating devices that address the use model of the consumer. To be fair often the consumer has not found the use model until a device has become available. Who at Apple anticipated the Tsunami of apps flooding the iPhone?

Panelist Dan Scheinman, senior VP and GM for the Media Solutions Group at Cisco Systems, Inc. articulated the position big media companies find themselves in: struck dumb with Google-envy. Scheinman cites a big media company committing 95 percent of its revenue to developing technology. He cited Turner Broadcasting System, Inc.’s CNN as the model for what big media should be doing: creating new content tailored to a new media distribution system—cable versus over the air broadcast. He said that the “CNN” of the Internet has yet to arrive—though you could argue that the Yahoo web portal and Google search constitute successful content models tailored for the web.

Norm Fogelsong, general partner, Institutional Venture Partners, another panelist raised the point that it’s a three-screen world: portable media device, desktop/laptop PC, and the 40+ inch screen in everyone’s living room. Furthermore, he contended that media has to be fluid across these screens—instead of siloed as they are today. The solution said panelist Tom Malloy, chief software architect at Adobe Systems Inc. is smart content that automatically adapts to the device the consumer is using. A crude example is a web browser that conforms to handheld devices. Malloy cited the PDF and Flash platforms as early versions of tools to create such content.

One question from the audience asked, what’s being done to have technology serve humanity rather than the other way around? Scheinman articulated the answer earlier in the panel discussion by stating that long term the consumer will be in charge, “consumers want to be able to access whatever they want, whenever they want, on whatever device they want.” Scheinman stated that ultimately, the value is going to reside in knowledge of the consumer. For example, when the consumer logs on, the system will know he’s on a Blackberry, that he’s an avid baseball fan, and that he wants to learn something about the Major League Baseball trade deadline, without him having to click around to find it.

As to who will be financing the next “next thing”, don’t expect deep-pocketed venture capitalists to be overly forthcoming. “Venture capital is going to go through a painful adjustment cycle,” said panelist Fred Wang, general partner, Trinity Ventures, “right-sizeing itself to something that looks like $15 to $20 billion a year, about a half to a third of what it’s been. The companies that venture capital will fund will have to be much more capital efficient.”

However, don’t right off Silicon Valley just yet, Fogelsong concluded, “once you get to the point we are now, the system feeds on itself. Everybody here wants to be an entrepreneur. Half the students at this campus have a business plan they’re working on for the next Google. Ah! “Silicon Valley in the New Millennium.”