Partner and Managing Director of BCG Digital Ventures’ Manhattan Beach Global Center, Walter Delph, originally published this piece on Pollen — an outward expression of BCGDV — to discuss his journey to Silicon Beach.

Innovate or die. We’ve probably all heard this saying before, but it’s never been more true than today. While it may seem extreme, the reality is that corporates who do not embrace innovation face possible extinction. No matter the industry you’re in, there’s a startup out there — probably quite a few — trying to disrupt it.

The good news is that bleeding edge technologies present unlimited potential for growth, but they also require some degree of risk. If we’re willing to take on risk, we’re fundamentally willing to fail. But let me be clear — failure itself is not risky. The startup industry is predicated on this very concept, and incumbents must learn to separate the notion of failure and risk.

As a general rule, big companies are subject to more constraints than startups and therefore slower to change. While working at one of the original innovators, Verizon, home of the famous Bell Labs, I took stock of my surroundings, and what struck me was the risky career trajectory before me. If you don’t want to work in another division, or if your boss’ boss is fired — you’re done. You’re stuck spending the next 15 years waiting to climb the next rung on the corporate ladder. Most people only ever get to climb one or two levels. I knew then that I wanted to pivot my career towards pioneering new ways of growth rather than spending the next 20 years moving through outdated corporate structures.

The Startup Ecosystem

A startup ecosystem is a complex network of interdependent organizations. Its success is built upon the collective effort of local investors and entrepreneurs working towards a shared objective. The if you build it, they will come mentality is not always true. Financial investment alone will not do the trick, and cultural ethos may be more critical than seed funding. Silicon Valley’s pay it forward culture has widely been recognized as the “secret sauce” making it so impossible to reproduce.

The ecosystem must be in place in order to attract talent, entrepreneurs, founders, investors and so on. If you join a startup that’s not part of a greater ecosystem, the risk is astronomical. You could find yourself stuck without a job or, even worse, a career path. But if the ecosystem is flourishing, you can just walk next door and move to the next one. In Facebook’s early days, it acquired a large number of talent from failed startups, and this is part of what has made it the company it is today.

While it is possible for this ecosystem to be expanded to different markets, it cannot be created out of thin air. Would-be entrepreneurs in almost every city across the globe are trying to get in on the action right now. Not all will succeed, but there are several up-and-comers worth watching. For one, the community in Austin is flourishing due to a number of factors such as favorable tax laws, The University of Texas at Austin and, of course, SXSW.

More so than any other ecosystem outside of Silicon Valley, Los Angeles has bested them all. Not just about the glitz and glamour of Hollywood anymore, LA’s “Silicon Beach” has quickly become known as a mecca for startups, with over fifteen thousand venture backed companies to date. We can’t talk about LA’s tech scene without mentioning Snap, the “Google of LA, whose IPO has been dominating headlines recently. Heralded as a game-changer for Silicon Beach, Snap, and companies like it, will produce the next round of alums seeding innovation for years to come.

Southern California’s entrepreneurial base has been growing for some time. Myspace was the original unicorn and helped jumpstart the ecosystem with a graduating class that includes Jam City, Demand Media and more. Myspace alumni have gone on to found many successful companies because they applied their experiences back into the iterative process to achieve something new. This process should be embraced, not feared. In this way, we must all strive to ‘fail smart,’ and we must do it as often as possible. In reality, this isn’t really failure at all, but the nascent stages of innovation.

BCG Digital Ventures chose to build its global headquarters in Silicon Beach three years ago, before it was a household name. The year-round perfect weather didn’t hurt, but more importantly we saw the value of growing a business in an ecosystem reflective of our philosophies. At our core, we are a new growth firm and believe corporations will own the next horizon of innovation. Though they can’t act exactly like startups, they can learn to fail smart, and modify their processes to create new growth.

How do you treat failure in your organization?

Walter Delph is Partner and heads BCG Digital Ventures’ Global Headquarters. To learn more about corporate investment and incubation and how BCGDV brings together corporate partners with the passion, pace and capabilities of the startup community, please visit https://www.bcgdv.com/.

BCG Digital Ventures invents, launches, and scales industry-disrupting new businesses with the world’s most influential companies.

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