Profile
Innovation and creative services firms provide high-value services to other industries including the semiconductor, software and computer and communications hardware firms. Services are frequently delivered on a contracted basis.
- Innovation services are the professional, consulting, engineering services that
support other industries and provide an important part of the habitat for innovation
and entrepreneurship in the Valley. These services have been growing, especially as
larger firms have continued to outsource many functions once done inside the firm.
Firms that focus on design and IP, will contract out to engineering services and
consulting firms to help develop their products.
In addition, some components of
the innovation services support Silicon Valley’s “habitat:” including highly-specialized
venture capital and legal services specifically tailored to nurture entrepreneurial firms.
- Creative services are highly specialized business services, focused on design, marketing, advertising and architecture. Firms in this sector consider the aesthetic and functional design of products and services. Many provide services to the larger Silicon Valley IT sector. Design is considered to be fundamental to market appeal – especially in the world of consumer electronics. A prime example of integrated function and design is Apple’s iPod – which integrates unique design, attractive aesthetic, and innovative functionality - all in a hand-held package.
Changes driving opportunities
“At the beginning of the 21st Century, a robust alliance between arts and design has formed a new domain of information technology and creative practices (ITCP). Encouraging, supporting, and investing in ITCP will provide major benefits.”
Beyond Productivity, National Research Council
- Multi-purpose design: Design has moved beyond just aesthetics and functionality. Design for ease of use, manufacturability, aesthetic appeal, recyclability and reliabilility are just some of the factors brought into the design of a product at the very start.
- The emerging alliance of information technology with the arts and design. Increasingly science and technology is being integrated with a human aesthetic. This convergence of technology and design results in unique consumer electronics products such as the iPod and in the digital information services provided by companies like Knight Ridder Digital. These companies integrate the technical creativity and the marketing conceptual, and aesthetic components of making a product or service desirable.
- More rapid movement of ideas: Driven by pressures to reduce costs, companies are contracting out for many creative and innovation services. This creates a “portability” of ideas as workers move across firms, products, and teams.
- Growth of consumer markets internationally: The rise of a large middle class in India and China is driving demand for consumer products people all over the world need and desire. Big companies like HP, eBay and Electronic Arts, are increasingly focusing on these consumer markets.
- Rise of gaming as a major industry. The falling price of computing power and technical improvements in graphics design tools, have made video games more compelling. New games are attracting a larger market worldwide.
Where the opportunities are
Silicon Valley’s innovation habitat supports the drive to create innovative consumer products: What distinguishes the Valley is not its scientific advances or its technological breakthroughs. Instead, its edge derives from a “habitat” or environment that is tuned to turn ideas into products and take them rapidly to market by creating new firms. This habitat includes supportive government regulations for new firm formation, leading research universities that interact with industry, an exceptionally talented and highly mobile work force and experienced support services in the such areas a finance, law, accounting, headhunting and marketing, all specializing in helping new companies form and grow. – Silicon Valley Edge, Stanford Business School Press, 2001
Silicon Valley firms excel at integrating technical savvy with appealing aesthetics in products and services. The speed of innovation together with a workforce that specializes in the ability to conceptualize new products or new markets is a key Silicon Valley skill.
Silicon Valley Firms
- IDEO helps companies innovate by designing products, services, environments, and digital experiences. IDEO created the first production computer mouse for Macintosh, the Humalog/Humulin Insulin Pen, a disposable prefilled insulin injector, and the Palm V, a connected organizer.
- Apple Computer, Inc’s core business is computer technologies. Apple helped
start the personal computer revolution in the 1970s with its Apple II and shaped it
in the 1980s and since with the Macintosh. Apple is known for innovative software and
hardware, such as the iMac; its iPod digital music player; and the iTunes Music Store.
More information: http://en.wikipedia.org/wiki/Apple_Computer - Knight Ridder Digital is a pioneer in electronic publishing. “Knight Ridder
Digital is a separate, stand-alone business unit that manages all of Knight
Ridder’s Internet operations and Real Cities, a national network of local
news Web sites in more than 110 markets, including 23 of the top 30 U.S.
media markets. Knight Ridder Digital creates and maintains a variety of online
services in classifieds, entertainment, shopping, news, search and archives.”
More information: http://www.knightridder.com/papers/krd_profile.html - Electronic Arts, the world’s leading independent developer and publisher of
interactive entertainment software for personal computers and advanced entertainment
systems such as the PlayStation®2 Computer Entertainment System, the
PlayStation®, Xbox™ video game console from Microsoft, the Nintendo GameCube™
and the Game Boy® Advance. Since its inception, EA has garnered more than 700
awards for outstanding software in the U.S. and Europe.
More information: http://www.ea.com/global/corporate/aboutea.jsp - Redwood City-based DreamWorks Animation develops and produces high quality computer generated (CG) animated films. Utilizing world-class creative talent, a strong and experienced management team, and advanced CG film-making technology, DreamWorks Animation has produced a number of highly successful movies including Shrek, the first-ever winner of the Academy Award® for Best Animated Feature film; Shrek 2, the third highest-grossing movie ever and the number one animated film of all time; the Academy Award-nominated Shark Tale; and the recently released film Madagascar. More information: http://www.dreamworksanimation.com/
Major labor market trends
The creative and innovation services together employ roughly 59,000 Silicon Valley people. Innovation Services is the majority of the employment, with 48,337 jobs in the first two quarters of 2004. Employment in scientific research and development services, a large component of Innovation Services grew 30% from 13,400 jobs in 1990 to 17,400 jobs in 2004.
Innovation Services
Labor market overview
| Innovation Services Cluster | 2004* |
|---|---|
| Employment | 48,337 |
| Pay per employee | $ 91,340 |
| Employment Concentration** | NA |
| Share of Silicon Valley Employment | 4.2% |
| Number of Firms | 4,583 |
Source: California Employment Development Department
*2004 is the average of quarters 1 & 2 based on data availability,
**Employment concentration is given in 2003
Innovation Services employed 48,337 in 2004, about 4.2% of all Silicon
Valley employment. About 4,538 Valley firms specialized in the innovation services cluster.
The concentration of employment in the sector was 1.2 in 2003.
Employment in scientific research and development services, a large
component of Innovation Services grew from 13,400 jobs in 1990 to 17,400 jobs in 2004, an increase of 30%.
Pay per Employee
| Innovation Services Cluster | 2001 | 2002 | 2003 | 2004* |
|---|---|---|---|---|
| Pay per employee | $ 91,584 | $ 92,153 | $ 95,273 | $ 91,340 |
Source: California Employment Development Department
*2004 is the average of quarters 1 & 2 based on data availability.
Pay remained relatively flat at about $91,000 during the four-year period from 2001 to 2004.
Creative Services
The Creative Services cluster is a relatively small component of Silicon Valley’s economy. With just 10,700 employees in 2004, creative services makes up about 1% of all Silicon Valley employment. At 91% of the national employment concentration, Creative Services is less concentrated in Silicon Valley than it is nationally.
The number of firms in the sector increased from 1,597 firms in 2001 to 1,638 in 2004,
despite the downturn in the economy.
Labor market overview
| Creative Services Cluster | 2004* |
|---|---|
| Employment | 10,700 |
| Pay per employee | $ 61,189 |
| Employment Concentration** | 0.91 |
| Share of Silicon Valley Employment | 0.9% |
| Number of Firms | 1,638 |
Source: California Employment Development Department
*2004 is the average of quarters 1 & 2 based on data availability,
**Employment concentration is given in 2003
In the Creative Services cluster, pay fell during the economic
downturn – declining from $65,453 per employee in 2001 to $61,189 per employee in 2004.
Pay per Employee
| Creative Services Cluster | 2001 | 2002 | 2003 | 2004* |
|---|---|---|---|---|
| Pay per employee | $ 65,453 | $ 64,213 | $ 66,663 | $ 61,189 |
Source: California Employment Development Department
*2004 is the average of quarters 1 & 2 based on data availability.
Venture Capital Investment
Most venture capital investment in the creative services is oriented towards media and entertainment companies. These companies are a small component of the VC portfolio, capturing just 1.7% of all dollars awarded to Silicon Valley firms in 2004. The amount of funding awarded has fallen slightly since 2002 from $73.12 million to $68 million in 2004.
Venture Capital Investment in Silicon Valley Media and Entertainment Firms
| Media and Entertainment |
Media and |
Silicon Valley | |
|---|---|---|---|
| 2002 | $ 72.45 | 1.4% | $ 5,045.26 |
| 2003 | $ 73.12 | 1.7% | $ 4,269.55 |
| 2004 | $ 68.23 | 1.7% | $ 4,100.51 |
| Grand Total | $ 214 | 1.6% | $ 13,415 |
Dollars in Millions
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey
Cluster Infrastructure
Cogswell College: Strategically located in Silicon Valley and with over one hundred years
of academic history, Cogswell provides accredited higher education that empowers students to
innovate through the integration of art and technology.
More information: http://www.cogswell.edu/html/index.html
ZeroOne: The City of San Jose will host the 2006 edition of the internationally
renowned International Symposium on Electronic Arts (ISEA). ISEA is an international
non-profit organization fostering interdisciplinary academic discourse and exchange among
culturally diverse organizations and individuals working with art, science and emerging
technologies – a global festival of art on the edge.
More information: http://isea2006.sjsu.edu/.
Specialized Silicon Valley Law Firms
Cooley Godward
Fenwick and West
HiTech Law
Skornia Law Firm
Venture Law Group
Wilson Sonsini Goodrich and Rosati
Creative and Innovation Services Components
| NAICS Code | Description | Industry Category |
|---|---|---|
| 523910 | Miscellaneous Intermediation (includes venture capital) | Innovation Services |
| 5411 | Legal Services | Innovation Services |
| 5412 | Accounting, Tax Preparation, Bookkeeping, and Payroll Services |
Innovation Services |
| 54133 | Engineering Services | Innovation Services |
| 541370 | Surveying and Mapping (except Geophysical) | Innovation Services |
| 541380 | Testing Laboratories | Innovation Services |
| 541611 | Administrative Management and General Management Consulting Services |
Innovation Services |
| 541612 | Human Resources and Executive Search Consulting Services |
Innovation Services |
| 541614 | Process, Physical Distribution, and Logistics Consulting Services |
Innovation Services |
| 541690 | Other Scientific and Technical Consulting Services | Innovation Services |
| 541620 | Environmental Consulting Services | Innovation Services |
| 541710 | Research and Development in the Physical, Engineering and Life Sciences |
Innovation Services |
| 5418 | Advertising and Related Services | Creative Services |
| 54131 | Architectural Services | Creative Services |
| 54132 | Landscape Architecture Services | Creative Services |
| 54134 | Drafting Services | Creative Services |
| 54191 | Marketing Research and Public Opinion Polling | Creative Services |
| 54192 | Photographic Services | Creative Services |
| 541410 | Interior Design Services | Creative Services |
| 541420 | Industrial Design Services | Creative Services |
| 541430 | Graphic Design Services | Creative Services |