HotShot Business

You have to check this out.  Disney and the Kauffman Foundation have an entrepreneurship game that is actually kinda fun.

It’s called: HotShotBusiness.com

Not sure if this bodes well for my entrepreneurial career – the game kicked my butt…the first time.

Z’s CERN Report

I always love hearing what Krisztina “Z” Holly, the USC Stevens Institute for Innovation executive director, has to say about…well just about anything – from business innovation to one-handed space hang-gliding (which I’m sure she’s trying to arrange right now with Richard Branson’s Virgin Galactic people).

In her latest BusinessWeek article, she observes how cooperative innovation works at CERN.  The Geneva based European Organization for Nuclear Research, depicted recently in Ron Howard’s film Angels & Demons, is focused on the really big questions of “life, the universe and everything.”

She observes that CERN is run as a big ‘collaboratorium’, where the culture makes it almost uncool to keep ideas to yourself.  The notions of ownership and hierarchy are managed to promote sharing.

The big problems – like finding out whether ’42′ really is the existential answer Douglas Adams predicted – lend themselves to the kind of collaboration that we can only dream about in day-to-day business.

For now, finding ways for people to work closely and substantively with each other across company lines remains as challenging as recreating the conditions present at the beginning of the universe.

Oh, but then that’s what CERN plans to do this summer.

Kevin Surace on Serious Change

Yesterday, I had the pleasure of attending an event in Palo Alto where Serious Materials CEO, Kevin Surace gave us his rapid-fire fact safari on climate change and how to address it.

The Serious Materials story is a terrific one of solving global problems while creating local opportunities.  Recently, Kevin’s team famously bought an old-line window manufacturer in Pittsburgh which had just shut its doors and laid off over 100 people, turning it into a center for making Serious’ amazing ‘green’ windows.  It was a great story, and if you watch any of the national news networks, you saw it when President Obama showed up to give a speech at the plant’s reopening earlier this year.

But what struck me about last night was Kevin’s own personal transformation.  He started as an electrical engineer but found himself writing code and working in software and computer hardware companies for a big part of his career.  When I asked him after his talk what took him from software to advanced building materials, he said, “I just decided to do it.”

There is the adage, “Do what you know.”  And many advisers and financiers of entrepreneurs often urge them to focus on opportunities where they have deep knowledge.  That makes sense.  But it is also true that sometimes it takes someone who is willing to leap into the unknown.  And like Kevin, when you do that, eventually you will have acquired that necessary deep knowledge.  Better, you will have a unique perspective, combining insights from your previous experience with your new experience.

When it comes to climate change, maybe it is a good thing we have leaders like Kevin, who understand personal transformation.

Later this week, I’ll be posting the next installment of “People Worth Backing.”  The person featured in that piece is another great example of the transformational entrepreneur.

IXC – Still Making Cooperative Innovation a Reality

Check out IXC – short for InnovationXchange.  When it comes to promoting cooperative innovation between people in different companies, IXC is on the vanguard of the cause.

They actually employ people inside a government-backed non-profit and then embed them inside research labs in a variety of capacities. Because they work, from a legal perspective, for the non-profit, they are able to share deep, sensitive information about the companies with each other – on the strict condition that they do not share that information with the companies they are serving unless they can find win-win connections.

Many people in other roles working for single firms, consultancies, and law firms say that they are a kind of ‘intermediary,’ and I’m sure that is true.  But what is unique and useful about IXC’s intermediaries is that, unlike consultants and lawyers, their sole function is to find connections between different companies in what is called a ‘multi-party fiduciary’ arrangement.  In other words, their legal and moral requirement is to act in the best interest of all companies in the group, not just the company they work for. This is anathema to consulting firms, who erect “firewalls” between consultants working in companies that might potentially compete.

Take an example.  Say an intermediary working inside a big pharmaceutical discovers that the lab intends to pursue a new approach to clinical trials that could vastly increase the speed of their FDA approval process.  Working with his IXC colleague inside another pharmaceutical, the intermediary discovers that the other company intends to take legal action to prevent the new approach.  As an intermediary, his legal and moral requirement is to keep his mouth shut.   Pharma A must proceed with the new approach without knowledge of Pharma B’s intentions, and vice-versa.  Exposing the firms’ information to each other would inappropriately harm the intentions of one company or the other, and because the intermediaries have a fiduciary role to uphold the interests of both, they must stay silent.

Take another example though.  This time, the intermediary discovers that there is a big technical problem preventing Pharma A’s cancer drug from working the way it should in some people.  Pharma A is baffled by the problem.  But Pharma B has a secret project working in a new field of science unknown to Pharma A, and it can be used to eliminate the problem with the cancer drug .  But Pharma B has no cancer drug with that kind of problem and is unclear what to do with the new research.  Working together across company lines, the intermediaries find a win-win opportunity to solve Pharma A’s cancer drug problem while solving Pharma B’s research commercialization problem.  Lives are saved.  Both Pharma’s benefit from working together.

There are many interesting problems with this kind of model.  But the promise of the up-side, finding world-changing connections between companies that didn’t even know they should talk to each other, is too compelling to let the problems with the model stop the program.  Funding for IXC in the UK and Australia has continued since 2004, so they are starting to show some real longevity (contrary to my own recommendation in 2006, I must admit).

One problem I notice with IXC is that they don’t get to report publicly any of the positive results of their work.  Their role, by definition, is secret.  But I’m told that if people knew some of the connections that IXC is making, and what those connections are leading to, it would be front page news.

NUMMI, GM & Toyota: The Staying-Power of Cooperative Innovation

General Motors is in bankruptcy and planning to close fourteen more plants, six of them in Michigan near its headquarters.  But sitting clear across America in an expensive and complicated State to do business, one of its plants is slated to remain open.

California’s New United Motor Manufacturing (NUMMI) plant is not only planned to stay open but is also expected to return to a five day work week this summer.  (Many plants across America have been operating on reduced work weeks to respond to slumping orders.)  Here’s yesterday’s report from KQED’s California Money.

NUMMI is a joint venture of GM and Toyota.  It makes both the Toyota Corolla and the Pontiac Vibe.  (Yeah, NUMMI stays open even though the entire Pontiac line is slated to go away.)

The 88-football-field-sized plant opened in 1984 as the first automotive joint venture in the US.  GM got into the partnership to learn lean manufacturing techniques from Toyota.  (Ironically, Japanese auto makers learned many of these techniques from American, Edwards Demming decades before while Detroit ignored him.)  There have been many reports of NUMMI’s positive influence on overall GM quality.

But yesterday’s news about NUMMI staying open was not about the power of quality.  It was about the power of open innovation.

As regular 3% readers know, I observe a general trend where corporate operations that are able to “cross the border” of the firm and work deeply and directly with external sources of insight, resource, and capability tend to have enormous staying power.  There is no way to know what reasons internally GM uses to justify continued support of NUMMI, but we do know that other plants which now have equal-or-better quality scores are still closing.  And many of these are much closer to home in areas with much cheaper labor rates.

Even as it sheds billions in assets, GM can not shed NUMMI’s source of external innovation with Toyota.  In contrast, many of GM’s internal “innovation programs” are falling prey to the restructuring axe, as innovation programs nearly always do in times of austerity.

GM’s decision is further evidence that cooperative innovation – specifically operations that directly connect teams in multiple companies – tend to survive and thrive much better than innovation programs trapped inside a single firm.

iPhone, Blackberry, Apps – Models for Business and Use Needed

If you write applications for the iPhone, Blackberry or other smartphones, you likely know a lot about object oriented programming.  This way of thinking about writing software code, developed in the 1960′s but not widely used until the 1990′s, treats software as sets of cooperating objects, each of which exist as a kind of independent machine able to receive messages, do something with those messages, and send new messages on to other objects.  Seems like a sensible approach.  The cells in your body operate more-or-less along the same lines.  The pattern of how these objects relate to each other is called the object model.

But what many software developers know so well in terms of their code is forgotten on the humans that ultimately use their applications.

Take the recent news about the upcoming iPhone 3.0 update and Google’s Latitude location system.  It allows you to see where your friends are on a Google map, and by many accounts, the code is beautiful.  But beyond the obvious feature of seeing where other people are at any given time, what is the object model behind the use?  What will real people use this feature for…and when?

Timing is one of the essential frameworks behind object oriented programming.  An application needs to know what triggers a certain event, when, and in what context.

So regarding Latitude, I ask:  What triggers my need to see where other people who I may or may not know are?  What prompts me to broadcast my position for others to see?  And what prompts me reliably to turn off this function when I want privacy (assuming I’m not someone oblivious to living in a privacy-free environment)?

An engineer’s answer may be, “Well, we give you all this granular functionality to decide who sees where you are and when.”  But in my view this ignores the human context in a day-to-day setting, where one is overwhelmed by a constant stream of messages and tasks which we must perform to maintain any number of other objects spinning in our lives.  We feel often as though we work for our machines, rather than the other way around.

Loopt is a similar application to Latitude, and my friends and I – mainly early-adopter tech geeks – tried frequently to use the app to find each other.  It was fun…once or twice.  But without an event in my life that prompts, “Use Loopt (or Latitude) now or you can’t do something you really need to do,” these apps are like a gun without a trigger. And they join the long list of untouched icons on the back pages of my iPhone.

Software developers need to remember that the object model doesn’t end with the code.

Stay tuned for the green transportation application UpStart is building.  I hope you’ll agree that we take this object lesson seriously.

People Worth Backing #3: Isaac Squires and Carly Gloge

Isaac Squires is one of the very best examples of what a software developer/entrepreneur should be.  I’ve lost count of how many developers I’ve hired over the years, but only one in several hundred combine the ability to write brilliant, elegant code with the ability to imagine what code he or she ought to write, wrapped up in the ability to see the organizational/commercial implications of what they are writing.  Seriously, as a mere self-taught and admittedly utilitarian coder myself, I can read Isaac’s code like it was English.  He’s the only developer I ever let submit code without extensive documentation.  His stuff is that good.

Isaac has what I wish more people would aspire to:  The ablity to imagine great commercial ideas and then actually build them.  And, if that weren’t enough, he also has the ability to marshal people.  For three years, he convinced a whole community of top developers to help him build the first fully-functional 3d graphics engines in Microsoft’s emerging C#/.net standard…for free.  For anyone who knows code, this is one of the most difficult projects one could take on.

If that weren’t enough, Isaac’s colleague, Carly Gloge is one of those rare graphics artist/Flash developers who has excellent design skills and the ability to write the code herself.  And she is a terrific communicator and teacher for her clients.  Between the two of them, they have everything they need to build anything they can imagine.  And to quote Han Solo, They can imagine quite a bit.

Check out only a tiny slice of Isaac and Carly’s work at WarbWeb.com.

If you ever have a chance to back a Squires/Gloge project, do it.

Disintegration and Open Innovation #2 – Plug & Play Tech Center

Yesterday, I commented on Wired Magazine’s most recent feature story about the disintegration of industry.

My concern was for the prospects of cooperative or open innovation in a world of small, legally independent organizations.  The most obvious issue is that sharing intentions and know-how is anathema to relatively weak small firms and startups. Even in the Wired article, Charles Mann mentions that one of the budding automobile industry startups in California he interviewed had offices strewn with non-disclosure agreements.

So many non-disclosure agreements have spewed from the printers on the tables that they must be capable of producing them without human intervention.

This is not the hallmark of “open innovation.”

But then I see places like Sunnyvale’s Plug and Play Tech Center.  At any given time, there are over 200 startups living together in this huge, open space.  It is getting to the point in Silicon Valley (not to mention many places around the world, like Germany, Australia and Spain) that if you have a startup to start, the first thing you do after incorporation is get a cube at Plug & Play.

Why?  Because there is hardly a day spent inside Plug and Play that doesn’t have you bumping into someone who can help you – help you solve a problem, meet a potential stakeholder, find talent to hire, get funding.  (The word on the street is that Plug & Play has been responsible for raising over $700 million for startups in the past three years.)

In such an environment, even potentially competitive startups can hardly help getting to know each other, building trust, and learning to be good neighbors.  It reminds me of that Warner Brothers cartoon of Sam Sheepdog and Ralph Wolf who punch-in to “work,” fight all day, and then go home friends.  Coopetition is easier when you grow up together in the same house.

So maybe a swarm of independent firms can work together in a collaborative way.  If so, places like Plug & Play provide an important platform for establishing the trust needed to share intentions and know-how across company lines.

Disintegration and Open Innovation

In an obvious homage to Michael Lewis’ 1999 book, The New New Thing, Chris Anderson, Charles Mann, Kevin Kelly and Steven Levy collaborate to write Wired’s June 2009 feature story, “The New New Economy.”

I know, I know – we’ve heard this all before.  The corporate dinosaurs are going to sink into the tar pit of history, and nimble, warm-blooded little companies are going to crawl out of their hiding holes and into the sun of a new age.

What struck me about the story was not whether 2008′s economic meltdown was the proverbial asteroid triggering this long-awaited transition, but whether more corporate disintegration would lead to an age of more open innovation.

On the surface, things look rosy:  Imagine a world where many small, independent companies form organically around specific objectives to create ‘virtual flash firms’ that can just as quickly and easily reorganize in response to new opportunities.  Sounds terrific, though the dinosaur analogy doesn’t seem quite right.  There are, and have been, plenty of huge, lumbering mammals, many of which are also now extinct.  No, these writers seem to be talking about a world not of elephants but of insects…or rather, a world of insects collaborating to pose as elephants.

No doubt, as Chris Anderson points out by quoting micro-investor, Paul Graham, “The rule, ‘large and disciplined organizations win,’ needs to have a qualification appended: ‘at games that change slowly.’” This speaks to the truth of how poorly large hierarchies of humans respond to rapid change.

But looking closer, there are obvious problems with the notion that swarms of legally separate entities are better at quickly identifying new opportunities and cooperatively responding to them.  Chief among these problems is that legally separate entities, especially very, very small ones, are skittish and not typically prone to trusting each other. While it might be difficult for a team in a large company to be open about its know-how and intentions (the two things that absolutely need to be shared in order to initiate open, collaborative innovation), vulnerable startups find it almost impossible to be so open.  Startup entrepreneurs frequently refer to themselves as being in “stealth mode.”  The only thing that will freak out a typical startup entrepreneur more than the sound of a big company stomping through the forest is the sight of another startup suddenly close to its nest.

People in big companies tend to have a hard time sharing.  And people in small companies tend to have a hard time sharing.  You see, whether we organize in hierarchies or swarms, the problem with collaborative innovation is not that we are insects or elephants, but that we are human.

Innovation’s shortest good definition:

Innovation = paradigm shift

Ray Kurzweil

I think that says it all.