American investors always ask me a curious question
American investors always ask me a curious question: What are the differences between European and Silicon Valley tech companies?
It’s an interesting question, because one might think that successful tech companies, regardless of their region, have a similar structure, way-of-working and a culture built on the drive to win. True! Given today’s direct access to volumes of information on the internet regarding techniques and methods to build high-performing tech companies, I would say that – at a high-level – tech companies in Europe and Silicon Valley are similar. They focus on product development, solving their customer’s problems, delivering a quality product, and growing sales.
Yet when we speak about differences, two very important areas come to mind. In fact, these two points just might be the reason why the valuations are so drastically different between the regions. We’re talking about Product Management and Competitiveness.
The Product Manager is King/Queen in Silicon Valley
In my years of working in Silicon Valley, the Product Manager was always King (or Queen). At Cisco Systems, that person had as much influence and power as the Business Unit manager. The Product Manager was expected to build products and design a roadmap that delivered significant revenue, 65% gross margins and quarterly growth that exceeded 10%. At that time, Telcoms products were in a historic growth phase. The Product Manager had immense leadership responsibility and accountability for the product-success and the success of the business unit, through building the right products, targeting the right markets, and delivering a quality product.
In many European companies, I’ve seen the Product Management role buried in the Development or Engineering group. This individual usually leads and runs the product delivery schedules and owns huge coordination tasks, such as bug prioritization and software releases. There is certainly a need for this type of role in a tech company, but in Silicon Valley the Product Manager is more business-focused and drives a high-ambition, product-leadership agenda. She/he is more customer and market facing, while also coordinating the internal roadmap and prioritization of releases.
In my opinion, many European tech companies are missing that product-market-vision leadership role in their teams; that person who understands the customer’s needs before the customer does; that person who drives the product vision.
Now, about competitiveness! How do you compete?
So, are there different attitudes to ‘competitiveness’ between the two regions? Well, in Silicon Valley, competitiveness circulates in the blood of every employee and is spiked with a little more octane than I’ve seen in other regions in the world. It’s not the elbow jabbing or stealing documents kind of competitiveness I’m referring to – it’s more an awareness that in order to succeed, your company must offer something unique and that offers the tangible value that your customers demand.
In Silicon Valley, the awareness of the competitor seems to be on everyone’s mind through each and every stage, from product development to delivery. How do we do better? What is our competitive edge? What value is our product bringing to our customers? Will our customers find another solution more attractive? Why?
In most of the core meetings we had at Cisco, from Product Requirement Reviews to Roadmap Planning to Monthly Operations Reviews (to name but a few), the competition was mentioned multiple times from all levels of the teams. This awareness was top-of-mind, in the air, and almost verging on obsession.
Who knows the competitor’s product as well as their own?
In Europe, it’s a little different. One of the central aspects of Spark’s offering is to help company’s re-position themselves, and/or to build their messaging. The workshops we conduct involve deep analysis of the competition and what the competition claims to deliver. One of the more surprising aspects of these meetings is how little the teams bring up this competition element. The team members may have a top-level view, yet they haven’t really determined who their competition is – and why. The sessions we have with many European teams put tangible data on the table concerning their competition; what message the competitor is capturing, how to conduct research on them, and what matters when comparing your products and company to another. These workshops give the teams a huge boost, empowering them with newly acquired knowledge and a fresh perspective of the market.
Obsession with growth
Another aspect of competitiveness relates to the demands on the CEO for growth, usually originating with the company’s board and investors. Without going into too much detail, the pressure and expectations to deliver revenue is very different in Silicon Valley. It’s a fact that Silicon Valley companies are known for stratospheric growth numbers – and they seem to have the particular rocket fuel required to reach these heights. That fuel, I can guarantee, is a direct product of these growth expectations and the need to compete.
In Europe, I’ve seen investors and boards be satisfied with revenue growth rates of 20% for a young-ish company. The time horizon for capturing significant market share is much farther away and there’s a steadier approach to building revenue.
Product Management and the Competitive spirit
So, to summarize the answer to that question from American investors; the difference between European and Silicon Valley tech companies may just lie with the emphasis of the Product Management role and competitiveness within the company culture.
We can’t say definitively that one way is better than the other; each and every company has its business and market cycles. But we in Europe might consider testing that rocket fuel by strengthening our Product Management leadership – and dare ourselves to be just that little bit bolder and more competitive!
If you’d like to continue the conversation, reach out. Product Management and being competitive are two of my favorite topics.
I’m happy to discuss further, if you’d like to know more about how we work at Spark. Just reach out.