Facebook is more proof innovation is thriving in Silicon Valley

Recently some of the digerati have bemoaned Facebook’s rise as the end of Silicon Valley. The argument goes that because social media companies don’t make computer chips or cancer drugs they don’t advance science, technology, or society at large. To some, this means Silicon Valley’s salad days are done. Bullshit.

Innovation is thriving in Silicon Valley. The true arbiter of innovation is the market. And buyers/users are embracing new innovations and technologies that are having just as much, or more, of an impact on the way people work, play and live as the hardware and microprocessor breakthroughs that have traditionally defined Silicon Valley.

Over the past five years, for example, we’ve witnessed a consumer technology revolution led by companies such as Apple, Facebook, Google, Pandora, GoPro and Pinterest. As consumers, we are enjoying breakthroughs in social media, mobile devices, cloud services and, generally, simpler user experiences. Personal technology has never been more fun or effective.

The San Francisco Bay Area is ground zero for companies driving these innovations.

Detractors argue that many of these companies, especially the social media group, don’t represent the real spirit of the Silicon Valley. Sorry, but 900 million Facebook users disagree. Have you forgotten the people who gushed over how social media was a critical enabler of the so-called Arab spring and the Occupy Movement? Social media has empowered people to affect real change in the world around them – from driving Egypt’s Mubarak out of power to embarrassing United Airlines into paying for a broken guitar.

Apple alone is proof that innovation is alive and well in Silicon Valley. Four years ago, it introduced the iPhone. Today, sales of its smartphone are bigger than all of Microsoft’s sales combined. In essence, Apple created a new business that generates more revenue than a company the federal government wanted to break up in the 1990s for being too powerful. And let’s not forget the iPad, a product that singlehandedly reenergized the tablet computer category. In a little more than two years Apple claims to have sold more than 55 million units. Some analysts project sales will cross the 100 million mark this year.

Silicon Valley is also home to a new generation of enterprise software startups harnessing momentum in cloud services, social networks, mobile computing and big data to introduce fundamentally new ways for businesses to do just about everything. These startups offer digital channels for marketing and revenue generation. They provide new platforms for engaging with customers. They support collaboration internally and across supply chains. Some are overhauling basic functions such as billing, accounting and transactions.

During the late 1980s into the 1990s, business innovation was often driven by top-down initiatives for the sake of business process re-engineering and enterprise resource planning software. These approaches were basically forced on workers for the benefit of management.

Today’s wave of innovation sweeping Silicon Valley today is profoundly different.

Business people are embracing consumer-like technologies at the office. These “bizumers” (business consumers of technology) are using cloud services, new social collaboration approaches and mobile devices to create a bottom-up transformation in the way work gets done. This new generation of knowledge worker promises to drive a whole new level of enterprise innovation; far exceeding the productivity gains realized during the previous generation.

The emerging field of Big Data is also attracting tons of interest from entrepreneurs and venture capitalists across Silicon Valley. Some are building software that can be applied to solving critical problems drug discovery, genomics, computer science and biology. Others are re-imagining the traditional database, business intelligence and storage markets

The Startup Genome Project figures that Silicon Valley’s startup ecosystem is 3x bigger than its closest rival, New York. What’s more, 22 percent more companies make it to the scale stage.

One reason: the Bay Area also offers a ready-made pool of engineers. According to researcher PayScale, the Bay Area and Silicon Valley are home to 2.5x more IT jobs with high-tech startups than the national average.

Silicon Valley is also home to a lot of smart money. Many of the best venture capitalists in Northern California are not finance wonks that view the world through spreadsheet lenses. They are former company founders/builders who bring experience, knowledge and contacts with their money. This is incredibly valuable to entrepreneurs.

Mind you, Silicon Valley is far from perfect, despite its legacy of innovation. It has problems of overcrowding, income disparity, pollution, few women in positions of power, and escalating real estate prices — to name a few. Looking into the future, some smart people argue that federal and state tax policy must change to stimulate research and development investments and new hiring. You could argue that technology companies in the Bay Area are overly focused on product development and not enough basic research. While this may be true, corporate Darwinism has a way of rewarding innovators and punishing laggards over time.

Anyone with a great idea, tenacity and the willingness to fail can land at the San Francisco airport with no connections and start a company. This is less true in many other places and cultures. I’m not saying that becoming Facebook’s Mark Zuckerberg, Oracle’s Larry Ellison, or Google’s Sergey Brin or Larry Page is an easy feat, but it is far more possible in the Bay Area than in many other locations.

The free market has made it clear: Silicon Valley is still the mecca for technology startups and innovation.