Governance Lessons from Silicon Valley

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Silicon Valley executives and boards understand that emerging economies have the same aspirations the U.S. had 50 years ago, when it promoted math, engineering, and sciences during the Cold War and space race. In 2006, 1.3 million students graduated from college in the U.S. A total of 70,000 were engineers. In the same year, India graduated 3.1 million students, of whom 465,000 were engineers. China graduated 3.3 million students, 600,000 of whom were engineers.

Silicon Valley CEOs have stressed that the U.S. needs to improve education, or it will become a second-class citizen globally. Valley companies are investing heavily to bring staffs up to global standards. However, high-quality talent will continue to emerge elsewhere. And as more high-skilled jobs leave the U.S., greater political and societal pressure will be placed on U.S. companies and boards, and they must be prepared to respond. When shareholder interests entwine with society's, boards cannot stay neutral.

Lesson 4. The Internet is the primary business model; not just a tool. Internet networks and applications are the foundation for business, regardless of sector, and connectivity and information are available to all.

The current generation of senior corporate executives focused on building proprietary networks to connect computers. However, young managers today don't think about technological plumbing. To them, the Internet is a new business paradigm, not just a tool they have had at their command since high school. The difference between having seen the transformation of the Internet from a tool to the primary business model vs. viewing the Internet as something one takes for granted is key.

While it is unconventional to think of placing a thirtysomething Internet entrepreneur on a board, there could be tremendous benefits gained from such a person's perspective. This, of course, assumes the thirtysomething brings other skills of being a good director, such as business experience and judgment. What a young manager can help boards and executives understand is how markets have changed dramatically since 2000 and how business models have shifted.

There are few niches left where one can thrive or even survive without the Internet. Boards need a sense of urgency and understanding of how companies are developing and deploying Internet business models.

Moreover, they need to know how the Internet is evolving and what companies must do to keep pace. The lessons of Dell (DELL), eBay (EBAY), Google (GOOG), and Amazon.com (AMZN) are well-known. The Internet has changed the core of manufacturing, distribution, publishing, and retailing. Discussions of Web strategies should be front and center in the boardroom.

Business opportunities, societal issues, cultures, and management strategies collide in Silicon Valley boardrooms in a way not seen in most other industries. However, as the world continues to globalize, all companies increasingly will feel this pressure, if they have not already, and they could be well-served to heed the lessons of Silicon Valley.

Jonathan Visbal leads Spencer Stuart's global Technology, Communications & Media Practice and focuses on the globalization of businesses via new technologies.