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California is Deceptively Competitive, For Some Things: Donovan

When I look at the rankings in CNBC’s“America’s Top States for Business” study, it is hard to disagree with the conclusions.

Californiais an expensive place to do business, it is not a company friendly place (especially compared to Texas), the cost of living is astronomical in the Bay Area and the public education system struggles to fulfill its mission due to structural problems and budgetary constraints. However, any study like this one is by its very nature generic and business is specific.

San Francisco, California
iStock
San Francisco, California

What do I mean? In our business, internet advertising software, the Bay Area hosts a large group of innovative companies that, while small, push the envelope every day on what is possible to achieve using internet advertising.

We all know each other and talk to each other all the time, which keeps us in the flow of new ideas. The business environment for internet advertising in general and search marketing in particular moves so fast that if our company were to remove itself from that flow it would create significant risk and we would miss out on important opportunities. For example, when we recently decided to add some significant features to our conversion tracking and automatic campaign construction approach we had ten expert people we could validate our ideas within a few minutes from our office.

The employees trained in these companies and available for hire have the skills we need to turn these ideas into reality. More importantly, they have the risk appetite to work on issues where the ultimate outcomes are often highly uncertain and unpredictable. Risk taking is a well-developed element of company culture in Northern California, but is less developed in many other areas of the country. For example, we recently hired a senior-services person from one of our larger competitors. We didn’t need to move her from across the country, she was just down the street, and she was excited, rather than being put off, by the notion of moving to a smaller, higher-risk firm with big upside.

America's Top States For Business
America's Top States For Business

Finally, capital providers here understand these types of game-changing, but risky, propositions and will fund them. The process of educating them around our business is a quick one – instead, we are likely to get tough, to the point questions about our value proposition that makes the capital raising process fast and efficient for both sides. But more than money, they also bring relevant expertise and important connections to the deals they do that can dramatically accelerate progress.

My guess is that if we manufactured curtains, the Bay Area's specific advantages would mean little and the overall survey weightings might reflect our outlook better. There have been lots of articles about the declining competitiveness of California and California’s performance with regard to job growth and overall economic trajectory seem to reflect this falling competitiveness. But for search marketing, a business that is moving at an incredible pace with a highly specific ecosystem, California has to be ranked high. I suspect this would also be the case for many businesses that have a similar pace of evolution, personnel needs and capital requirements.

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Dean Donovan joined as CEO SearchForce in 2011. Prior to SearchForce, He was COO of Nimblefish, a marketing technology firm that pioneered the use of personalized variable creative content and other technologies — both online and in print. He also co-founded Volaris, the second largest airline in Mexico.

From 1989 to 2003 Dean worked at consulting firm Bain & Company, where he helped set up the Latin America business, ran the African business for several years and, at various points in time, ran the airline and auto practices. Dean graduated Summa Cum Laude and Phi Beta Kappa from University of California-Berkeley, where he studied Economics and Rhetoric. He received an MBA from the Wharton School in 1990, where he made the Director’s List.

CNBCand YPO, Young Presidents’ Organization, have formed an exclusive editorial partnership, consisting of regional “Chief Executive Networks” in the Americas, EMEA and Asia-Pacific. These “Chief Executives Networks” are made up of a sample of YPO’s unrivaled global network of 19,000 top executives from 110 countries who are on the frontlines of the economy. The opinions of “Chief Executive Network” members are solely their own and do not reflect the opinions of YPO as a whole or CNBC.

Top States For Business 2013