Business and Technology Trends in 2007

FountainBlue's January 19, 2007 panel on Business and Technology Trends in 2007 featured John Verrochi, marketing executive and strategist and founder for the HP and Sun Alumni Associations; Steve Bengston from PriceWaterhouseCoopers; Rick Ellinger, Founder and Board Member, Wireless Communication Alliance; Tom Foremski from SiliconValleyWatcher.com; Fred Greguras, Of Counsel, Fenwick and West.

The beginning of the year is a time of optimism and promise, a time for planning ahead, reflecting on the past, leveraging the learnings into the future. As you consider plans for the new year, we invite you to attend this month's Connections event, where we've assembled a prestigious panel to share their predictions, their advice and their strategies for the year.

Below are some big-picture take-aways from the meeting:

General Business and Financing Trends

• Private equity funds have gotten so big that few companies are now beyond their reach. This is good for Silicon Valley and businesses in general if it helps fix and repackage ailing firms, but not-so-good if it's for the purpose of financial re-engineering alone.
• IPOs continue to be weak and M&A market will continue to dominate - Trend for early-stage companies is to invest 5, 10, 15 million an make an average of 60 million in M&A, not the hundreds of millions in an IPO
• It continues to be tough to scale and grow firms sustainably
• AIM market - 2/3 of companies that went public on AIM are not at IPO levels now
• Outsourcing trend to continue as it makes economic sense
• Foreign relations becomes more important as companies become more international
• No materials changes in Sarbanes-Oxley or stock option back-dating for this year expected
• Corporations will continue to give back to the community, through corporate foundations for example
• Investments in consumer-facing companies that are compelling products, easily delivered with a unique value
• Companies are successfully using viral marketing techniques to build brand, momentum and revenues

Technology Trends

• Wireless is hot, especially when it involves education, entertainment, social networking, video uploading, business collaboration, inter-connectedness
• Increasing importance of 'local' applications, targeted local marketing
• Software as a Service and Open Source will be very attractive
• Life Science Trend - There will be more opportunity/more up-sides in life science companies in Southern California
• Clean Energy Trend - Filtering, purification, pumping and other local activities that don't involve distribution of energy are easier to implement. But when distribution is involved, safety, connectivity, legal and other issues arise which make it more difficult, more time-consuming to develop.
• Media is hot - content and advertising plays like Yahoo and Google are examples of how we are becoming a 'Media Valley'

Silicon Valley Remains Strong

• 35% of VC investments in the US are in Silicon Valley, and US gets 20% more financing than anywhere else in the world
• Market shared hasn't declined in 10 years
• Our rich culture of failure-tolerance, innovation, multi-ethnicity, business-technology integration remains strong. Our solid infrastructure of support services from VCs to lawyers and accountants to serial entrepreneurs to academic institutions and their partnerships with businesses has been developed over many decades. This makes Silicon Valley difficult to replicate elsewhere.

Trends that Affect Our Personal Lives

• There will continue to be breeches in privacy. Until there is accountability for parties responsible for protecting our privacy, privacy breeches may continue to occur.
  Lines will blur between business and personal lives
• Entrepreneurs are less likely to make the financial returns once expected. Entrepreneurs should choose start-ups for the culture, lifestyle, passion, not as much for the money as there is less to be had and less favorable distribution to entrepreneurs after investors take their share
• Education for our children becomes more important - there will likely be fewer jobs for well-educated, liberal arts majors
• Pensions are gone; only 20% of Fortune 500 companies have them vs 80% of them 20 years ago. We need to manage and plan for pensions ourselves.
• The aging baby boomer population will impact us all - from the strain on social security, to caring for elderly parents to retirement ages.

Thanks to our facilitator, John Verrochi, for compiling other trend reports below:

McKinsey

• Centers of economic activity will shift profoundly, not just globally, but also regionally. As a consequence of economic liberalization, technological advances, capital market developments, and demographic shifts, the world has embarked on a massive realignment of economic activity.
• Public-sector activities will balloon, making productivity gains essential. The unprecedented aging of populations across the developed world will call for new levels of efficiency and creativity from the public sector. Without clear productivity gains, the pension and health care burden will drive taxes to stifling proportions.
• The consumer landscape will change and expand significantly. Almost a billion new consumers will enter the global marketplace in the next decade as economic growth in emerging markets pushes them beyond the threshold level of $5,000 in annual household income—a point when people generally begin to spend on discretionary goods.
• Technological connectivity will transform the way people live and interact. The technology revolution has been just that. Yet we are at the early, not mature, stage of this revolution.
• Individuals, public sectors, and businesses are learning how to make the best use of IT in designing processes and in developing and accessing knowledge.
• The battlefield for talent will shift. Ongoing shifts in labor and talent will be far more profound than the widely observed migration of jobs to low-wage countries. The shift to knowledge-intensive industries highlights the importance and scarcity of well-trained talent. The increasing integration of global labor markets, however, is opening up vast new talent sources.
• The role and behavior of big business will come under increasingly sharp scrutiny. As businesses expand their global reach, and as the economic demands on the environment intensify, the level of societal suspicion about big business is likely to increase. The tenets of current global business ideology—for example, shareholder value, free trade, intellectual-property rights, and profit repatriation—are not understood, let alone accepted, in many parts of the world.
• Demand for natural resources will grow, as will the strain on the environment. As economic growth accelerates—particularly in emerging markets—we are using natural resources at unprecedented rates. Oil demand is projected to grow by 50 percent in the next two decades, and without large new discoveries or radical innovations supply is unlikely to keep up.
• New global industry structures are emerging. In response to changing market regulation and the advent of new technologies, nontraditional business models are flourishing, often coexisting in the same market and sector space.
• Management will go from art to science. Bigger, more complex companies demand new tools to run and manage them. Indeed, improved technology and statistical-control tools have given rise to new management approaches that make even mega-institutions viable.
• Ubiquitous access to information is changing the economics of knowledge. Knowledge is increasingly available and, at the same time, increasingly specialized. The most obvious manifestation of this trend is the rise of search engines (such as Google), which make an almost infinite amount of information available instantaneously. Access to knowledge has become almost universal. Yet the transformation is much more profound than simply broad access. New models of knowledge production, access, distribution, and ownership are emerging. We are seeing the rise of open-source approaches to knowledge development as communities, not individuals, become responsible for innovations.

Red Herring

• Brain Implants The hope is that by sending or blocking electrical pulses, the power of the nervous system can be harnessed to treat problems like depression, migraines, and even blindness.
• Attack of the Mobile Virus Nasty viruses, long a threat to PCs, will likely start to menace the humble little cell phone in 2007. With cell phones getting smarter and with the proliferation of mobile advertising and applications, the communications world’s first widespread cell phone virus attack is a near certainty.
• Private equity goes shopping for technology giants. EMC, Dell, Yahoo Become Buyout Bait
  Google signs first ad contract, step one in dominating the 30-second spot.
• Nanotech Will Heat Up now know that when materials like metals are broken down into particles the size of a few atoms—called nanoparticles—their properties change, enabling a host of innovations like stronger, lighter tennis rackets, better flash drives, and stain-resistant fabrics.
• Some day, it might provide cheap solar energy in homes across the world.
• SOX Gets a Makeover Law will be fixed to make IPOs less costly.
• HD-DVD and Blu-Ray: DOA Internet downloading will bypass physical media.
• Rollins to Get Booted Out At Dell? Watch for Kevin Rollins to gracefully step down to "spend more time with his family" in 2007, but don’t expect him to do it willingly Dell shares were down about 38 percent at one point in 2006, over worries that top management had become overly committed to the direct-sales and made-to-order business
• Solar Gets Simpler Solar will get easier in 2007, which will be a step up from where it’s been
• New Year, New Jobs This year will usher in a boomlet for a new breed of jobs. With two populations—MySpace and AARP—seeing explosive growth, there’ll be a need for a Social Networking Liaison for the Over-50 Set. This person’s job is to find a way to bring them together

San Francisco Chronicle

• Clean tech -- which includes technologies for removing heavy metals out of groundwater or reducing power consumption through sensors and switches. Clean tech plays to the region's strengths. Silicon Valley excels at making tiny products such as controlled chemical and biological processes and electronic devices
• Net neutrality (in which telephone and cable companies prevented from charging exit tolls on their high-speed Internet wires) 2.0 fight to resurface in 2007
• Shift to a consumer-driven tech industry (see CES and MacWorld shows) will continue to cause friction within the industry as well as a general anxiety because fickle consumers with short attention spans make for brutal product cycles
• Nanotech, biotech, robots
• Round 2: Blu-ray vs. HD DVD fight heats up
• More video on the Web

San Jose Mercury News

• You (recall Time’s person of the year, community, collaboration
• Mobility, e.g., video to go (cell phones, iPods)
• Renaissance of electric car (see Tesla)
• Windows Vista: reliability, security, compatibility, new features. Estimates are that 82M units will be sold, primarily on new PCs
• Games: Microsoft, Sony, Nintendo part of $28B WW market in 2006
• Continued reduction in privacy (hackers, identity theft, social networking sites like My Space
• Digital living room (AT&T and Verizon rollout of IPTV, Apple’s iTV device
• LEDs replacing conventional light bulbs
• GPS in cell phones