Silicon Valley’s greatest export is no particular technology. Quite the opposite, it is in fact a New Way of Doing Things, a management style: The Silicon Valley Management Style (SVMS). SVMS can be contrasted against MKMS (McKinsey Management Style) that dominated the previous wave of Globalization. 

Silicon Valley Management Style (SVMS)

• “Software Way of Doing Things”

  • Develop product alongside the business

  • Find product-market fit and then iterate rapidly

• Horizontal organization structure

  • Hire only the very best

  • Software Generalists can eat not only large number of technical problems but also management problems

  • Very high autonomy

  • Equity compensation

• Aesthetics

  • Open office space

  • No dress code

• Finance

  • Growth, long-innovation

  • Backed by Venture Capitalists like Marc Andreessen

• Companies using SVMS

  • Google

  • Facebook

McKinsey Management Style (MKMS)

• “Powerpoint Way of Doing Things”

  • Business is number one, product takes orders from account managers

  • Product developed long time ago, find novel ways to sell to more people

• Vertical organization structure

  • Low autonomy

  • No equity compensation

  • More specialists, more MBAs or people who specialize in “business management” 

  • High quality management, low quality rank and file

• Aesthetics

  • Cubicles

  • Suits and Ties

• Finance

  • Defending or extending existing position, short innovation

  • Backed by “Value Investors” like Warren Buffett

• Companies using MKMS

  • Procter and Gamble

  • The Coca-Cola Company

Why SVMS Now?

There is a macro reason for why SVMS is winning right now: the fact that the gains from the previous wave of Globalization are fading away. It is no longer possible, for example, to double your income by expanding into a Developing Country. All the Developing Countries that were penetrable already have been. Every toothbrush you buy anywhere in the world is already either made by Unilever or Procter and Gamble. 

And other countries are now developing rapidly and competing on Developed Country standards. Therefore the only thing remaining to do right now is to create more wealth using technology, since war is no longer viable. SVMS optimizes for intensive growth: going from 0-1, doing more with less, creating new capabilities. On the other hand, MKMS optimizes for extensive growth: going from 1-n, copying things that work, scaling things that are already proven.

Thanks to Brian Schimpf for helping develop some of these ideas.