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When Bill Joy said: "There are always more smart people outside your company than within it," he wasn't trying to be a smart-alec.  Instead, he was urging companies to leverage ideas from outside to solve some of their most challenging problems.
 
Now, in a world of frozen financial markets with justified discouragement about returns to investors in conventional venture capital models, how can needed innovations be funded in relatively mature, but suddenly stressed,  industries such as plastics, electric power delivery, alternative energy, and energy delivery?

I think the answer is to form Solution Collaboratives.

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A while back I blogged about Opening up Reverse Innovation in which I tried to make the case for another business model where solutions become the focus of "open collaboratives,"  Let's call this a solution collaborative:

Companies with a strategic interest in solving a problem or a class of problems can participate by funneling resources (money, labs, information, smart people, etc.) through the collaborative; by participating in direction; and by contact with analysis and expertise. Information from a collaborative world would logically lead to new entities which make problem-solving investment, but also could be individually exploited by strategic players.
How to Organize a Solution Collaborative

A solution collaborative is created in 2 stages, just as a proprietary venture might be formed. The first stage is to collaborate in researching and analyzing the solution to a technoeconomic problem of general interest across an industry or industries.  The result of this stage is a stream of information and consultations which flow back to all participants.   The collaboration brings technical expertise and knowledge of market needs to bear on any feasible solutions to this need, together with actionable information for individual collaborators to pursue.

The second stage is conditional.  If demanded by participants, the collaboration can even evolve to creating an organization to bring about the solution, to the mutual benefit of collaborators.   Since the collaboration is organized and has access to the "best and the brightest" from everywhere, and especially  benefits from having excellent feedback about market needs, a collaboration removes most of the risks which attend venture capital firms or the use of a proprietary R&D effort.


establishcollab.gif Why Collaborate?

Others have talked about the anecdotal benefits of a collaboration curve.  We can assure you that the benefits of collaboration are not anecdotal - but quantifiable, economic benefits.

Studies have shown that too many firms mistakenly applied an "outsourcing" mindset to collaboration efforts. This fatal mindset leads to three critical errors:

  1. they focus solely on lower costs, failing to consider the broader strategic role of collaboration.  
  2. they don't organize effectively for collaboration, believing instead that innovation could be managed much like production and partners treated like "suppliers."
  3. they don't invest in building collaborative capabilities, assuming that their existing people and processes are already equipped for the challenge.
To be successful requires you developed an explicit strategy for collaboration and make appropriate organizational changes to aid performance in these efforts.

Collaboration is a new and important source of competitive advantage. Speaking from experience, one of my companies - PTAI - has been doing collaboratives among industry competitors since 1972.  Back in the day, we called them "multiclient studies."  We acted as if we were a corporate staff group but with better access, studied the heck out of an issue, wrote a detailed analysis and sold it to the many interested parties.  Those in the plastics, automotive, paper, packaging  and other industries bought them widely on a variety of technoeconomic  issues.

Then, in the 1990s, PTAI innovated a method to benchmark performance among competitors in an industry, allowing any participant to quantitatively place its performance among competitors along hundreds of variables.  We continue to execute this method to the advantage of hundreds of global businesses in 55 specific industries and both numbers continue to grow.

Now we're turning our attention to solution collaboratives through another one of my companies - Townsend Solutionsto address some of the most pressing problems faced by some of the mature industries.

The problems that best lend themselves to a solution collaborative. 
When companies have problems that are not necessarily central to their core strategic business but still large enough to drain their resources, these problems become prime contenders for a collaborative. Widespread problems are even better candidates for a collaborative. A collaborative allows even direct competitors to solve a problem without poaching each other's competitive advantages. Of course there are many legal and anti-trust issues that need to be handled well. PTAI and TS have done collaboratives for over three decades now and deal with these issues.

In conclusion, a solution collaborative gains a company access to outside expertise. It is also a platform that promotes collective experience gains, propelling the collaboration curve for the whole solution. A collaborative not only allows participants more access to smart people but also creates an environment where these people actually becomes smarter through the interaction with other participants. 

shanghaismog.jpgThe view from Shanghai, China

A recent New York Times article - “China Leading Global Race to Make Clean Energy” by Keith Bradsher - reminded me to write down some thoughts about industry progress in reducing carbon dioxide emissions—a road less traveled.

The Times has finally discovered that the Chinese will dominate the clean energy world by using cheap labor, a huge and hungry domestic market, governmental uber-subsidies and hordes of trained technologists.   By clean energy, the author means wind and solar, with hydro and new nukes thrown in for good measure though not really discussed. Ironically, a raft of other, recent articles make the same point, and although the brevity of their treatment makes them worth reading, it leaves one wondering how much of this (“The Chinese are coming, the Chinese are coming!!!”) is truth and how much hyperbole.

So what should we do as patriotic Americans?  Fortunately, a young Ms. Miley Cyrus is on the case, so we can all breath a little easier. Incidentally, her song “…Wake up America. Tomorrow becomes a new day. And everything you do matters. Yeah, everything you do matters… Oh, it’s easy to look away, but it’s getting harder day by day…” was more popular in Europe than in the US.

We Have Already Lost the Race for Wind Turbines and Solar Panels
Let’s concede this point.  It is now practically impossible for European or U.S. industry to catch up with the Chinese in building and installing equipment such as advanced wind turbines and piezoelectric solar cells.  So we can expect that wind and solar equipment manufactured in China will be at least cost-competitive if not dominant.   Our response should be to buy those components from China and install them wherever they make economic sense.

But even in China, these clean energy sources will not necessarily be economically competitive with other traditional energy sources.  All of these innovations are necessary. But they do not preclude in any way the need to innovate in the conventional energy sector, which will still be around and important in the year 2030 and beyond.

Even if the Chinese win this race, so what?   

This still leaves plenty of room for new technological innovation in other areas. The question is: where does it make sense for us to innovate?

Here are some suggestions:

- radically better wind turbines or solar cells
- storage of off-peak clean energy
- better long distance high voltage transmission of clean power
- new methods for CO2 capture and sequestration
- geo-engineering (see previous post on Nathan Myhrvold’s Stratoshield and Salter Sink)

The Chinese are also beginning to lead the world at long distance, high voltage transmission as well. However, installation and maintenance is another ballgame. We could innovate in areas that are part of this ecosystem where we already have an established lead and huge expertise.

Let’s Not Ignore the Biggest Clean Energy Contributor
This brings me to the original purpose of this blog entry. We must not overlook the ways to do Carbon Capture and Sequestration (or Storage), which we’ll abbreviate as CCS.  Conventional power generation stations, either those already in place or the newer generation of coal-and-gas-fueled thermal power stations being rapidly installed in China, India and elsewhere are between half and 80% of capacity in many places.  The huge stock of sunk costs in coal-and gas-burning thermal power units will not be replaced by the best Chinese wind and solar equipment. unless their carbon emissions cannot be economically reduced. 

So the biggest opportunity is to create clean, economical fixes to the world’s stock of existing electric stations.

The owners of these coal facilities have the lowest variable power cost in many areas of the world.  In areas like the Middle East, gas is provided at such low value that this is the least cost producer of power. So most big utilities would like to continue to operate these sunk costs.

Refitting existing plants with proven CCS technology, especially ethanolamine absorption and desorption, is difficult at many existing plants; is capital intensive; uses from 15 to 30 per cent of the capacity of the power station to remove CO2 and other pollutants; and seems to add about 3 to 4 US cents per KWH ($30 to 40 per MWH) to costs of generation of power.  A good, concise treatment of the technology and cost for this approach is in Energy Procedia 1 (2009), 1289-1295.

Yet the mega-utilities seem to be betting politically on this retrofitting plus transporting, pressurizing and injecting of relative clean CO2 streams to subsurface storage sites.  Once again, many environmentalists don’t like this solution either (go figure!).

Of course, for a sizable fraction of coal/thermal power facilities, a shutdown will be preferred to refitting.  Yet coal is forecasted to be so much cheaper than other primary energy sources that massive refitting is still seen by utilities as the best answer.

Enter Shale Gas—The New Kid in the Block

In North America and soon elsewhere, new discoveries of shale gas deposits will make natural gas competitive with coal for most new facilities equipped with CCS.  This is because gas generates about half as much CO2 and because gas-fired plants are cheaper to build than coal-fired ones.  Existing wind and solar technology will not be competitive with shale gas using new CCS technologies.

China Needs Coal CCS, but Someone Must Lead in Innovating

Despite news to the contrary, this is where the U.S. and Europe have an innovation window!   There must be some way to climb off of the experience curve for this mature CCS technology and develop a better, even radical improvement which has its own, lower experience curve. 

So here’s my nomination: instead of pure CCS, as currently envisioned, we need to develop Crud-O2 (explained below) as our CCS. 

Let me explain: in the conventional coal power scheme, the flue gases are sequentially treated to remove nitrogen oxides (NOx), fly ash and particulates (including some heavy metals), sulfur oxides (SOx) and then subjected to CO2 capture. The emitted flue gas contains nitrogen, water and tails of each pollutant.  Each processing stage adds costs for chemical and energy and subtracts net, available energy from the plant.  Each pollutant needs separate handling and disposal and creates additional environmental exposure.  NIMBY (Not In My Backyard) always rears its ugly head.  So instead of doing this sequentially in a multi-stage, muti-handled operation, we need to develop means of recovering these streams as essentially one liquid stream, rich in CO2 but containing solids, metals, SOx, NOx, and perhaps some water: let’s call it Crud-O2.

This recovery is similar to proposed schemes, where relatively clean CO2  having been absorped and desorped in an amine plant, must be compressed to a liquid for transportation.  We propose that the entire flue gas stream, probably with solids filtered out, be compressed in multiple stages with intercooling, probably taking 4 or 5 stages.  All components heavier than CO2 will condense, some in the intercooling step, some at the end of the train.

As an alternative design, refrigeration loops can lower the temperature of the Crud-O2 until it forms a liquid at lower system pressure.  Optimizing the use of compression or refrigeration, including the draining of liquids from the intercooling steps, is a design process very familiar to chemical and power plant engineers.  As an end result, our Crud-O2 storage vessel will contain all (or most) of our bad actors.  Energy still contained in the flue gas, resembling the existing flue gases from a coal-fired plant with amine-CCS added, can be recovered back into the system, reducing net energy consumption.

With Oxygen Combustion, Crud-O2 May Be Even Better
There is much R&D being done on replacing combustion air with oxygen, either partially (let’s call it enrichment) or completely.  Current materials of construction will not withstand the temperatures generated with pure oxygen combustion, so designs use a recycle of cooled flue gases into the combustion chamber to limit the maximum temperatures.  This approach makes a flue gas with progressive reduction of nitrogen content, hence more easily captured by compression/refrigeration into Crud-O2.  At the limit, it approaches zero flue discharge.  Obviously, the energy for producing oxygen from air must be netted out of the net energy production, and the capital for an air separation plant must be added to the capital costs of such a scheme.  Optimization is required, but the net result is the same, with all of the bad actors in our Crud-O2 and ready for transport.

Crud-O2 Spends Eternity Under the Sea
But where in blazes do we take this Crud-O2?  Here, we enter Wonderland.  As proposed for pure CO2 over several years by many creative types, we propose putting the Crude-O2 in some appropriate place on the bottom of the ocean. 

Depending on the properties of the Crud-O2 and the temperature at the bottom of the ocean, it requires over 1000 meters of ocean depth, and some sources (here and here) suggest 3,500 meters of ocean depth. It’s easy to find out and scout unlimited places which fit, all over the world.  The ocean has many square miles of such places.

Shades of Captain Nemo 
At this depth, there is virtually no solar radiation, the population is mostly primitive worms, the bottom is covered with debris and plant/animal material which drifted down over the millennia, currents are rare or slow, and (importantly) CO2 or Crud-O2 are denser than the water overhead.  A quiescent layer of CO2 on that bottom would slowly diffuse into the water above at the interface, which environmentalists do not like.  We don’t see why they don’t like it, since the oceans of the world already contain gajillions of tons of CO2.  Better the deep oceans than our lungs?  But there is an easy answer to how to keep the Crud-O2 components from leaving this dark, underwater tomb.

We suggest that a membrane made of fibers, coated with polymeric material to be relatively impermeable and permanent, be installed at the bottom of said ocean before Crud-O2 is injected beneath the membrane.  Hydrodynamics virtually guarantees that the membrane, as it slowly rises atop the lake of Crud-O2, is under very minor net forces.  The membrane prevents diffusion of Crud-O2 components up into the water (and the obverse, of course).  but since they are acting on both top and bottom of the membrane, they cancel each other out.  We envision rolls of coated fabric, with Velcro or other connectors at all margins, dispensed and connected by remote vehicles.  A trench would be an ideal location, so that as the reservoir is filled, the membrane rises at the virtually flat water/Crud-O2 interface.

Using a protective membrane at such depths suggest several advantages to a good design engineer.  Polymer science knows how to design the membrane for a lifetime of centuries, given the cold, dark, quiescence in ocean trenches.  Resisting any corrosive effects of the Crud-O2 components is relatively easy for a polymer chemist, but the lack of light, temperature or cathodic currents makes this an ideal environment for long life. Also, the Crud-O2 can be delivered down to the bottom with minimal pumping pressure, enough to overcome flow pressure drop, as the head in a standpipe will be approximately the same as or slightly larger than the head in the surrounding water.  The same consideration means that a standpipe from the surface down to the membrane can be light gauge pipe, as internal pressures and external pressures are virtually identical.  Hydraulics also makes a “blowout” very unlikely and of minimal impact.  A “blowdown” would be much more likely.

In each of these cases, contrast the situation with high pressure pumping into depleted oil or gas formations, where high pump costs and high energy usage are the norm.  Blowouts are possible.  Safety is problematical.   With Crud-O2, you need only liquefy the stream and more energy use is not major.  This is an elegant solution.

And in the worst case, someone in the year 2050 or 2150 or 3010 can easily fix any unforeseen developments. 

Transporting Crud-O2
We envision towable, multiwall pressure vessels coated on the inside to resist Crud-O2 components.  Think giant kielbasa with double casing, having buoyancy and stiffness between the two walls.  Crud-O2 can be shipped either at high pressure at ambient temperatures; insulated/refrigerated to low temperature and modest pressure; or somewhere in between.  Unloading would not require any change of conditions to all injection to the bottom.  These tanks can be rolled into a stream or river near the source; towed by virtually any tow boat to join more tanks; be towed as a “train” out to sea; stationed by a platform above the storage site; unloaded by low head pumps in good weather only; sent back with a “heel” of Crud-O2 or else inflated with nitrogen (say); and eventually show up at some other Crud-O2 source for refilling.  Repeat over and over.

Of course, we could design to deliver the Crud-O2 by pipeline in those cases where this is preferable.  A subsea pipeline could be made of flexible material and would be almost neutrally buoyant, since liquid CO2 and water are close in density.

Bonus Clean-up Opportunity: Bunker Fuel
Once the elements of the Crud-O2 system are in place, we would find other uses beyond stationary power stations and industrial plant furnaces.  The International Maritime Organization (IMO) of the UN is trying to reach final rules governing the quality of bunker fuel used by the great majority of the world’s largest ships. Closer to home, the  Environmental Protection Agency is targeting an 80% cut in nitrogen oxide, or NOx, emissions by 2016.

bunkfuel.jpgBeach Beautification with Bunker Fuel

Bunker fuel is literally the bottom of the barrel in the world’s refineries, blessed with several percent sulfur and scads of heavy metals.  Only petroleum coke is somewhat heavier (a solid) and bunker fuel has roughly the same consistency as road asphalt.  The proposed IMO rules will limit the allowable sulfur in bunker fuel from the current levels of 3.5% to 0.5% by 2025.  Oil refiners are skeptical about whether they can meet this new spec at any  reasonable cost, which begs the question, since bunker is used only because it is cheap.  Really cheap, compared to any alternative liquid fuel.

We envision multistage compression on the ships, with seawater heat exchangers, to create Crud-O2 from the stack gases.  Multi-wall, cylindrical tanks would be ideal repositories, as these could be stowed with freedom anywhere on these large ships.  When near a port or a Crud-O2 repository, the ship could let the tank overboard … it could even be towed … for pickup by a sea train of CO2.  Thus equipped, the ship would be able to burn whatever bunker was available with pollution of the air as is occurring today. 

There are approximately 50,000 ships over 5,000 DWTons which rely on bunker fuel. 

The largest bunker burners - the largest container ships - burn 75 to 125 tons/day of bunker fuel when under way.  Even larger tankers and bulk carriers actually burn less as they move at slower speeds.  But at 2.5 T/day of CO2/Bunker, and assuming only 50 T/day for 50,000 ships sailing 250 days per year each, the annual CO2 load is over 1.5 billion tons.  And this CO2 recovery would happen all over the world.  In the case of bunker fuel, the recovery of the sulfur is the driving force, not CO2 reduction.

Even under IMO’s proposed regulations, these ships would still be allowed to emit CO2 without limit, and be carbon taxed.  There are probably 400 significant oil refineries in the world which produce bunker.  These will be required to invest to improve their bunker fuel and produce less of it, given the proposed IMO regulations. 

The scope of this is enormous. 

What we need to compete with the Chinese, is not so much incentive, but imagination.  Our existing industrial solutions won’t cut it.  We can and must innovate our way out, or learn to live with the smog, the pollution, the global warming, and the global insecurity it produces.

NEXT: More fun clean-up applications for Crud-O2! You betcha.

In a recent column titled Off to the Races, the New York Times' Tom Friedman describes the "Earth Race":

In the cold war, we had the space race: who could be the first to put a man on the moon. Only two countries competed, and there could be only one winner. Today, we need the Earth Race: who can be the first to invent the most clean technologies so men and women can live safely here on Earth.
and

I believe that averting catastrophic climate change is a huge scale issue. The only engine big enough to impact Mother Nature is Father Greed: the Market. Only a market, shaped by regulations and incentives to stimulate massive innovation in clean, emission-free power sources can make a dent in global warming. And no market can do that better than America's.
There's a lot of truth in what Thomas Friedman has observed through the eyes of a world class propagandist.  Through the LASIK-enhanced eyes of an industrial economics and politics junkie, however, that view is a good, simplistic place to start.

Copenhagen has shown us that politics trumps science, so, if we want to make a difference, we are going to have to innovate our way out of the mess we're in. We're going to have to disrupt the traditional oil-based economy by motivating thousands of efforts to produce real, practical solutions on the ground.  He's right in pushing The Market, as manipulated by laws and policies, as the only way that thousands of potential innovators can be harnessed to the common aim.

The goal of this blog is to start a discussion about these solutions, to bring together individuals and companies involved in making a difference, and to build an idea platform for some of the more "wacky" solutions we come across  (some of our most innovative ideas come straight out of the field, not the corporate labs).

So let's discuss this "Earth Race" toward green American technology.   As always, global participants are welcome, even critical, but the focus on innovation in America, the great incubator. First, we need to find a politically achievable way to place a disincentive on the global warming effects of carbon dioxide emissions.  The direct taxing of carbon emissions seems much more efficient than is the cap-and-trade approach.  As we have seen, establishing a system of capping and trading has devolved into lobbying and politicking, seeking favorable treatment.  A suggestion of how to do a time-staged, certain taxing of carbon dioxide emissions, and how to mitigate unintended consequences, will be posted here. But we need to embrace other tools beyond the carbon tax.

Let's begin by dividing the problem of global warming into three specific approaches which can be tackled collaboratively, many of which have been proposed and are being pursued somewhere out there on Earth.

1. Mitigation: ways to minimize the effects of greenhouse gases
2. Reduction: ways to reduce the current production of greenhouse gases
3. Substitution: ways to substitute cleaner alternatives which minimize the expanding  production of greenhouse gases

Taken together, these three approaches will help us begin the Earth Race in earnest. The next few blog posts will highlight examples of each of these approaches. Others will synthesize new approaches, or synthesize new approaches from what is already known. 

Who's got a really crazy idea?

With Copenhagen around the corner, let’s begin with a statement for the deniers of global-warming: despite a few overzealous scientists who have fudged their data, the science does overwhelmingly point to the burning of carbon-containing fuels as being partially responsible for increasing atmospheric concentrations of CO2 - and causing global warming. 

Instead of getting caught in this silly, finger-pointing, pointless debate, let’s look for real solutions. 

Here are the sources of greenhouse gases by industry sector (via BBC):

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And let’s look at the breakdown of greenhouse gases:

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We know that we have to deal with the carbon dioxide problem, and to do so, let’s look at carbon capture & sequestration.

Wikipedia descibes carbon sequestration as a “geoengineering technique for the long-term storage of carbon dioxide or other forms of carbon, for the mitigation of global warming. Carbon dioxide is usually captured from the atmosphere through biological, chemical or physical processes.”
 
Across the globe, we are seeing the rise of “carbon storage” projects, often at unsustainable costs, and sometimes with an accompanying set of issues

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In my view, for any process which accomplishes carbon capture and sequestration (CCS), to remain sustaining, it would also need to be financially rewarding. This reward might flow either through the markets or directly by politically-powered subsidies. And second, rural areas and agriculture use more fossil fuels and generate more CO2, both directly and indirectly, than do urban areas and services, CCS processes would, therefore, ideally be located in such rural areas.

But most impo
rtantly, we must treat carbon capture and sequestration (CCS) as a business process, as a core competence for sustainable industry.

Capturing carbon from CO2 and storing it for a century or longer (CCS) needs to be treated as a separate business process practiced all over the world. Developed areas will need to develop improvements on the schemes being proposed today, such as the CO2 absorption and deep earth injection that is being put forward as “clean coal.” The components of this technology are relatively mature, yet the process is still capital- and energy-intensive, which suggests that only massive scale can drive down the cost.  With a mature technology, we cannot expect that this economics will change with foreseeable experience gains. Therefore, the CCS business will not be profitable at carbon taxes of $20 to $50 per ton, the range usually projected. So far, all such projects are dependent on heavy government subsidies and we do not expect this to change in the near future. We conclude that a new approach, descending a new experience curve, is the only way that the CCS business will ever be viable. Therefore, a lot more work needs to be done in this area to address the questions being raised.

A possible and sustainable solution is Bio-CCS. Interestingly, there are islands of scientific enquiry suggesting that Mother Nature has already provided us with the elements for this new CCS approach.

For instance, there is a global cottage industry to enable production of “bio-char” (smallish particles of carbon produced from plant material by pyrolysis a process involving burning in an oxygen deficient environment). Refer to Dr. Johannes Lehmann’s work at Cornell University, Ithaca, for example:

biocha_cycle.jpg

This bio-char industry has studied the soil productivity effect of dispersed bio-char, emphasizing that since microbes do not decompose bio-char that the projected half life of this carbon in soil is probably in the centuries. Apparently, water and nutrients are absorbed into the carbon, dispersed in the soil, serving a similar function to plant matter (hummus). This makes bio-char a perfect form of fertilizer since nutrients are released over an extended period of time.

Fuel gas or liquid can be a co-product, useful for generating electricity or as a chemical feedstock. This bio-char is capable of upgrading secondary or distressed land to higher productivity, therefore, adding real value to the land. Thus, growing plant material by absorbing CO2 combines with pyrolysis to bio-char, creating a BioCCS process with side benefits.

In our next post, we examine this BioCCS process in detail, and address both environmental and business issues simultaneously. 

We must explore these alternatives with open minds. That much we owe to our children and grandchildren - whose future we have changed by our inconsiderate use of the Earth. 

And being distracted by ethical lapses in studies - that’s treating the symptoms while ignoring the disease!

In an important Harvard Business Review article - How GE is Disrupting Itself, by GE's Jeff Immelt and Dartmouth professors Vijay Govindarajan and Chris Trimble, we are introduced to the idea of reverse innovation - an innovation likely to be created or adopted first in the developing world and then marketed worldwide.

The article also shows that reverse innovation presents an "organizational challenge for incumbent multinationals headquartered in the rich world," as Govindarajan explains it, and also presents an organizational model for overcoming that challenge.

A great set of ideas--especially if you are the CEO of a global company rich in resources for innovation!

But what do we learn about the rest of us innovators--those who see important problems solvable with identifiable technologies?
The innovation literature predicts that big companies acquire their most critical innovations--from individuals, academicians, "skunk works"--essentially from "islands" of innovation. Let's look at how to extend this model of how to manage the development of island-based innovation. Then these insulated innovations gain help from the "mainland"--resources of all sorts--without which they would grow slowly or not at all.

The gist of the HBR article is that the flow can then be reversed to the developed world--the mainland. To do so, it makes two fundamental assumptions--assumptions that, unfortunately, do not hold true for the majority of us. And these are, first, you have islands of talent available in your company, and second, these islands have access to a mainland rich in resources.

The non-GE world, therefore needs a new business model to help these islands of innovation create and develop solutions to pressing problems.

What if we were to combine reverse innovation as described in the article with Henry Chesbrough's concept of open innovation? A quick reminder on what it is:

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology". The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (e.g. patents) from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company (e.g., through licensing, joint ventures, spin-offs).

openinnovation.jpg

Procter and Gamble's now famous "conversion" to their open innovation model shows us that large multinationals can use the innovations produced by the "islands" (individuals and small companies) and turned into massive revenue streams for the "mainland."

So why can't a company like GE follow down this path with "open reverse innovation" - inviting small companies in India and China to submit their products, services and ideas to be evaluated by GE for global distribution.  Of course, the open model would require an environment of trust - but what better way to create goodwill in new markets than to be seen as a development partner in the China, India, and resource-starved Africa?  A.G. Lafley sits on GE's board; surely he could help them get started.

Question: does GE have the culture to embrace open reverse innovation?

Over 20 years ago I was called in by Bill Stavropoulos , now the retired Chairman, to meet with the top polymer managers at Dow Chemical.  He asked the following: "How should Dow change the way it manages to build Dow businesses in new areas like high performance plastics?"  The edited answer is smoother after so many years, but it is the same answer I gave all those years ago:

Large organizations like Dow must struggle to become more open systems, not closed systems, if they wish to innovate for the outside world.  Staff spend too much time working with people inside the system, not embracing the ideas of outside people.  And large companies worry too much about keeping their knowledge secret: conversely, they do too little interacting with outsiders, including their target customers, or ivory tower types, or just plain dreamers. Company culture is an obstacle to success.
 
Another business model, if needed, is where solutions become the focus of "open collaboratives,"-- new entities that can acquire and make available the same or similar kinds of resources available within GE to the island-based problem solvers. Companies with a strategic interest in solving a problem or a class of problems (including GE) can participate by funneling resources (money, labs, information, smart people, etc.) through the collaborative; by participating in direction; and by contact with analysis and expertise. Information from a collaborative world would logically lead to new entities which make problem-solving investment, but also could be individually exploited by strategic players.

In other words, islands without mainland support can come together to form "virtual mainland", thereby, exponentially increasing their problem-solving capabilities. Again, the model is applicable in both East and West.

Sidenote: although the venture capital model is one alternative to what VG and Jeff describe--it is clearly focused on developed markets and making profits for the financial (i.e. not strategic) investors. All VC collaboration is mostly through balance sheets, not among experts or teams. So VCs are inherently not designed to meet the same needs.

Here are a couple of examples of possible "collaboratives" we have been working to create.

Village Empowerment: The 3 billion or so people of the developing world who are not part of the modern economy need us innovators to create practical ways that villages can have enough food, electric power, clean water, education, and sources of cash income. Most of all the villages need to create elements of a good life without having to emigrate. Trying to solve the urban problems because of increased influx of rural population is more of a symptomatic treatment. It doesn't address the root cause. Better would be to take the jobs to the villages and remove the basic need for villagers to move out. Currently, here are many technologies working in individual silos aimed at solving some of these problems. They need to come together in a holistic way, which we believe needs a collaborative effort. Once developed, this set of tools will find applications back here on the mainland.

Climate Change: Another example is that the whole world needs better ways to stop global warming. Adding carbon taxes provides the necessary drive--but who or what solves the problem? There are numerous approaches to "fixing" carbon which need intensive development and the solution is really many solutions. A collaborative effort to fix carbon in many ways is a natural for creating and developing as many island-based solutions as possible. And every company (or government) with a carbon problem or a possible carbon solution should be part of the one (or more) such collaboratives, hoping to get the problem solved well for all our good.

Compressed Natural Gas (CNG): CNG can be the bridge to a clean, secure vehicular fuel future.  The elements of this system are on various islands.  First, new technology to find and produce economical natural gas in many places seems likely to result from the North American "shale gas" revolution: CNG will be available and relatively cheap for several decades.  Second, adapting both large and small internal combustion engines to operate on CNG is proven and important already in India, Argentina, Thailand: about 8 million vehicles out of the world's billion or so vehicles have been modified to run on CNG. Clean air was an important driving force. Innovative ideas exist for more efficient on board storage of CNG, replacing today's Rube Goldberg storage systems, and modifying the existing fleet saves years of development.   CNG filling stations are a known technology ... and other innovations such as interchangable storage tanks are suggested by the battery venture, Better Place.  What makes CNG look most interesting as a possible collaboration?  There are many strategic players who would benefit from a rapid adoption of CNG as transport fuel: gas producers; progressive auto manufacturers; fuel retailing chains; oil-less countries; megaretailers; and even Al Gore! 

Even GE is too small for solving these gigantic problems. But we bet that somewhere,  someone on some island may have the answer...or at least part of the answer. And a collaborative can help find those who have the other part.

Again, there is historical precedent for these collaboratives.  The WWII Manahattan Project comes to mind - why can't we bring the best and brightest together in peace time?  Is war our best motivator?

Surely we can do better - as individuals, companies, societies, and yes, nations.

Here's to open reverse innovation!

About "Wild Phil" Townsend and this Blog

Hi, welcome to my blog. Over the years I’ve been called many names (some of which cannot be mentioned in polite society) Skipper, Phil, “Mad Professor” Townsend and now - more appropriately, I guess - “Wild Phil.”  I’m an entrepreneur who loves to innovate, invent, and tinker with ideas and technology.

mit_logo.gifAs a teenager raising cattle in a farm outside of Muncie, Indiana I would look at passing by car registration numbers and wonder if they were perfect squares or cubes. When it came  time to decide on college, it was only natural to that naive 17 year old that I should go to MIT.

The fact that I was the first person in my family to go to college did not bother me a bit. I ended up getting my diploma in Economics and Chemical Engineering.  Afterward, I attended Purdue on an NSF Fellowship and obtained a Masters in Chemical Engineering.

My industrial background came next during 5+ years with Shell Chemical in Houston, where I did and supervised chemical process design and development and managed chemical plants.  The entrepreneurial bug in me, however, made me realize pretty soon that I was better off being my own employer, so I went back to school at Harvard’s Doctoral Program in Business.

hbs.gifI wore a T-shirt that said “Harvard, because not everyone can make it into MIT” while pursuing my business doctoral studies at Harvard Business School teaching management of technology to the MBA students.

However, just short of submitting my doctoral thesis, bigger opportunities in form of the world’s first energy crisis beckoned me back to Texas.

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ptai.gifHouston - the Bayou City - has been my home ever since.  I founded several companies including Phillip Townsend Associates, Inc. a leading global benchmarking company and Townsend Solutions, a global consultancy on plastics and materials.
 

townsendsolutions.gif I was also chairman and part owner of a large utilities services company which had 2,000 employees across 23 states in the US for clearing and maintaining electric distribution lines.

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Some of my other fun ventures include Wild Phil’s Buffalo Ranch.


So what’s the big idea? 

Why blog, and why now? 

I started this blog for several reasons:

  • to create a space to discuss ideas and innovations we’ve encountered to build a more sustainable industrial ecosystem

  • to connect with individuals and companies involved in making a difference

  • to build an idea platform for some of the more “wacky” solutions we come across in our day to day activities (some of our most innovative ideas come straight out of the field, not the corporate labs)

  • to rant and rave, and occasionally bring something worthwhile to the innovation table

  • to invent better ways to collaborate across the value chain and make these ideas happen

Won’t you join the conversation? 

You can contact me at phil [at] philtownsendideas.com
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