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As we learn more about the events in the Gulf, we learn more about BP's failures. Not just technical failure, but managerial and leadership failure as well.  While President Obama puts together an independent commission to look into what actually happened, we can start the discussion as follows:

Subject: The whole world needs offshore oil, so it's time we gave everyone enough insight to help solve the BP/Horizon accident and make sure there are no repeats anywhere in the world.

• The whole world needs offshore oil from areas which are not a part of OPEC, to bridge to a post-OPEC world and hold down oil prices. Some countries such as Brazil, Angola, China, Australia, India, and others will produce offshore oil no matter how the BP/Horizon accident is resolved.  We need them to have a disaster prevention and recovery tool kit to make offshore oil clean and safe.
  
  
• It took 40 years to get over the Santa Barbara accident in 1969.  I worked for Shell at the time; in 1970, Shell had their own platform explosion in the Gulf of Mexico.  In 2010,  the USA government briefly considered drilling off of the Pacific coast of North America.  Whoops.  After the BP/Horizon experience, however resolved, offshore drilling is set back by N years.  N may be approaching infinity this time, unless new management and technical tools are developed.
  
  
• BP is nearly the worst major company to lead that effort.  The current top management of BP have been playing catch up and trying to change a slipshod culture since the Texas City refinery accident.  In the real world, the Amoco component wrecked the Amoco Cadiz tanker in the Bay of Biscay long before that.  It becomes apparent that a safety culture would have: 1) not hired the Horizon rig without changes, and 2) would have established a management system and culture which made good long term decisions about safety and environmental protection.  Management should have responded to anomalous pressure readings from an exploratory well by ceasing everything out of the ordinary until the condition of the well was understood.  Murphy was the first recorded safety engineer.
  
  
• Those of us who have tried to help BP solve this problem have learned that BP is a closed system whose communication with the outside world is in a coma, induced by their lawyers.  A whole succession of other bright people have found the same.  Those silly engineering solutions tried so far are demonstrably off target, but who is listening?
  
  
• For the Secretary of the Interior, Ken Salazar to announce that BP has all the smartest people included in looking for solutions is sublimely naïve.  Did BP offer him Kool Aid?  Why did he drink it?
  
  
• The offshore technology community has a lot of smart people, but it becomes apparent that the best work for someone other than BP, Transocean or Halliburton.  Are they being listened to?  We get from others that there are 500 engineers and scientists from 160 companies working at the Houston war rooms of BP.  So why is BP not dispensing needed information to smart people elsewhere to work on this unprecedented problem?  Why did a Purdue professor have so much trouble getting their videos so he could assist by estimating how much oil was spewing? This is no longer "confidential information"; it now falls into the domain of public interest. Measurements show the flow from the well to be closer to 70,000 barrels each day, not 5,000 as BP has been repeating, all the while incorrectly saying the flow cannot be measured. BP has even had the audacity to say that they have not embraced better estimates because it does not matter enough.  To whom?  If you don't know how to measure the flow, how do you design a solution?
   
• This circus is proof positive of a leadership crisis at BP.  Over the weekend, we learn that not only was this the first well drilled into the same formation by Horizon, but that the first well was a dud.  A shouting match broke out between BP and Transocean over how to seal this second, troublesome well with anomalous pressure readings.  Now, I am as skeptical of TV journalism as the next thinking person, but look into the eyes of one of the coolest, bravest people I have watched being interviewed and see what you think about how this accident came about.If you wish to get the facts in writing, see this.
  
  
• The worst strategic mistake that BP has made is not being an open system to the many bright scientists and engineers who are eager to help.  There will never be a "safety culture" or an "ecofriendly culture" at BP until the very top management creates and supports it.  And that culture requires that BP embrace help where it is clearly needed.
  
  
• Here's the most frustrating part: clowns from BP, Transocean, and Halliburton being grilled by other clowns in Congress (and a couple of very good public servants) is great theatre.  But refer back to point 1 above.  The world needs safe, clean offshore oil as a bridge.  Almost the whole world suspects that getting offshore oil cannot be clean and safe.  Everyone loses if we leave the world with that impression, which must be corrected.  At the very least, BP is part of the problem and a very much smaller part of the solution.
  
  
• I had hoped that with 400 or 500 engineers reported to be working on the problem at BP war rooms, the flow would be drastically reduced by now.  I believe that management of the solution tool kit must be wrestled away from BP.  President Obama has begun that process by recruiting the O-Team, but they are not (yet) in charge. This team includes brains and experience from NASA ventures into space and decades of US work on atomic weapons, energy and research.  Why have these creative, skilled people waited until now to learn what they need to know about the accident and the aftermath?   Why wasn't that conveyed widely? Why was there no contingency plan? Or why is the current state being called a "contingency plan that is working"?  Why does it take a global scale disaster and an act of God/the President to bring together a team of experts to look at ways to solve this problem after the fact?
  
  
• The world needs all offshore-interested parties to participate in one or more open collaboratives to fix the problems highlighted by the BP/Horizon accident; more importantly, the collaboratives must create a priori technology and management systems to prevent or fix the next offshore accidents, without regard to who is running the show.  Finally, these collaboratives must truly embrace anyone who can help with solutions - they must be open and transparent.

Let me leave you with a visual.  If we believe BP, they said the spill is at 5,000 barrels a day. That's 210,000 gallons per day.



A typical tank truck holds 8000 gallons, Then, BP's claim looks like this:



However, if we are to believe the worst-case scenario, it looks more like this:

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.



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.


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 Solutions- to address some of the most pressing problems faced by some of the mature industries.

In my last post, Beyond Copenhagen: Thomas Friedman’s “Earth Race”,  I proposed dividing the problem of global warming into three specific approaches:

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.

In this entry, we look at mitigation - specifically at two ideas proposed by Nathan Myhrvold and his team at Intellectual Ventures.

Here’s the first of these remediation schemes - ladies and gents, the Stratoshield.  The Intellectual Ventures team says:

We’ve been working on some ideas related to climate change, as a kind of backup plan in case human effort to curb emissions don’t succeed fast enough to prevent devastating ecological damage. One of the ideas that has captured our imagination is replicating the way volcanoes have at times brought down the temperature of the planet by erupting sulfur dioxide particles up into the stratosphere. We’ve invented a hose to the sky we call the Stratoshield, which is a comparatively cost effective way to do this.

Take a look:

My view is that we do need to try something like this before it’s too late. If you thought the CO2 impact is bad, wait till the methane gets going. Actually, it already has. More to the point, we can’t even afford the risk that the alarmists are right.

My perspective (1) as an earth-based carbon-leased life form; (2) as a pretty good scientist; and (3) as a lifelong business manager working under uncertainty, tells me as do all my instincts: we must not let our primeval biases about ideas keep the world from running all experiments which show even a long-shot chance of helping solve global warming in the worst cases. Intellectual Ventures has hit on one such tool…and we need to push for its experimentation so we’ll know if it works.

We can fight later with the “Gore-ites” over the morality, but we need to find out enough economic incentives so that we can find someone who will be ready to pay for it.

The question I have is about the delivery mechanism.

With 100 mph winds in the upper atmosphere, the hose as suggested by Nathan, won’t easily stay up. And that first step, from no stratoshield to one stratoshield is a doozie. A better way would be to adapt the freighters such as UPS and FedEx planes with a sulfur-dispensing module which they use while they fly, scattering sulfur particles on each flight.  This module can be safely engineered to burn liquid sulfur using ambient air. It would resemble a turbine engine that is not mission critical, as propulsion turbines are. This will enable us to test the impact of the sulfur delivery over time, and will provide for a far wider range of distribution than would a single point source.

A second way to run tests or to supplement the stratoshield is to use the airships already being built by the military for their intelligence gathering tasks. There are patents on a new generation of lifting airships which can use helium to lift multiple tons of cargo to heights needed for the stratoshield. By either lifting sulfur and a burner designed to utilize the jet stream for mixing, or alternatively, by lifting liquid SO2 and “spritizing” it, a 21st century airship could be a cost competitive way to “SO2-ize” the atmosphere. And we can sell photos or videos to anyone who is interested—mostly intelligence agencies—to pay for mission. Did I mention that this would be an unmanned vehicle?

And here’s mitigation idea #2: Use over-ocean clouds to reflect sunlight back to space, reducing net sunlight to reach the surface just as the CO2 clusters reduce the heat leaving earth. Numerous people have suggested ways to put more clouds up over the oceans, but Intellectual Ventures has checked in with ideas on this too. More clouds mean lower ocean temperatures, countering the adverse effect of CO2 or methane.

Both of these ideas are easily reversible. Even if Intellectual Ventures is wrong…though I do think they are not. So as we work to lower CO2 (and methane) we can get to work learning to counteract; and we can always change our minds later, as and when we learn magical new ways to reduce or mitigate CO2. This is so simple that both Al Gore and Rush Limbaugh can understand and support it.

Then there is the Salter Sink concept. This Intellectual Ventures idea from Stephen Salter aims to take energy out of hurricanes/typhoons by lowering ocean surface temperature in zones where such storms get their “oomph”. Here, let Nathan and company tell you about it:

The Salter Sink works as a wave powered pump. Waves push hot water into the top of the cylinder, which pumps the water inside down. It comes out the bottom (around 200 meters below) and mixes with colder water. This brings the temperature on the surface down over time. A Salter Sink can move about a gigawatt of thermal energy! It may take thousands of these to protect Americas Gulf region (for example) but we estimate the cost would be much lower than the damage caused by one of these storms.

What’s intriguing about these ideas is not that they seem rather farfetched but their sheer audacity and, here’s the thing, their sheer simplicity. They may actually work. And so we may be able to sell them politically, since they are both (1) incremental and (2) reversible.

Again, what’s more interesting is, however, their marketing and economics. Who will pay for them?

Martin Varsavsky suggests we get the Saudis to fund these experiments, which may work, but, as an economist,  I have my doubts. We want to become less dependent on the Middle East, not more. I think a sure way to make the Salter Sink idea succeed is to give the locals a way to profit from it.

Let me explain:

If we have thousands of these floating cylinders pumping hot surface water to the colder depths, I agree, the storm intensity will be diminished. And that’s mostly good, although we need to test the idea to find all the consequences for ocean life, currents, and navigation…whatever. And we may have also helped counter global warming by bringing cold water to the surface. As a bonus, each Salter Sink collects warm, oxygenated surface water containing plankton and other fish food and pumps it 200 meters down over several hours.

Does that sound like a good place to raise fish? It does to me! And lo and behold, we have a potential natural fish farm that once appropriately designed raises some of the most healthy and fresh exotic sea fish ready to be supplied all over the world.

I suggest we find also ways to charge those who gain from lower storm intensity—insurance service providers, coastal town or cities’ real estate developers, states and federal agencies responsible for disaster management, electric utilities, and off shore oil operators.

Eventually, unless we learn from the economic theory of commons and build it into our model, we may have a great idea but no takers!

In today's Wall Street Journal they're blogging about Paul Mc Cartney - bashing him for trying to make a difference. And when you look at the list of all the blog entries for today, there's not one mention of Copenhagen, not one mention of the very real issues at stake for the world.

Instead we see a concert of ignorant swift-boating going on, targeting the masses with false claims and irrelevant chatter - in order to obstruct the work that needs to get done. This type of obstructionism is not going to help business interests, only hurt them.

The science historian (and physicist) Spencer Weart says in the WaPo:

The theft and use of the emails does reveal something interesting about the social context. It's a symptom of something entirely new in the history of science: Aside from crackpots who complain that a conspiracy is suppressing their personal discoveries, we've never before seen a set of people accuse an entire community of scientists of deliberate deception and other professional malfeasance.

Even the tobacco companies never tried to slander legitimate cancer researchers. In blogs, talk radio and other new media, we are told that the warnings about future global warming issued by the national science academies, scientific societies, and governments of all the leading nations are not only mistaken, but based on a hoax, indeed a conspiracy that must involve thousands of respected researchers. Extraordinary and, frankly, weird. Climate scientists are naturally upset, exasperated, and sometimes goaded into intemperate responses... but that was already easy to see in their blogs and other writings.

The Copenhagen diagnosis is bleak.  It documents the key findings in climate change science since the publication of the landmark Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report in 2007.

The new evidence to have emerged includes:

• Arctic sea-ice has melted far beyond the expectations of climate models. For example, the area of summer sea-ice melt during 2007-2009 was about 40% greater than the average projection from the 2007 IPCC Fourth Assessment Report.
• The sea level has risen more than 5 centimeters over the past 15 years, about 80% higher than IPCC projections from 2001. Accounting for ice-sheets and glaciers, global sea-level rise may exceed 1 meter by 2100, with a rise of up to 2 meters considered an upper limit by this time.  This is much higher than previously projected by the IPCC.  Furthermore, beyond 2100, sea level rise of several meters must be expected over the next few centuries.
• In 2008 carbon dioxide emissions from fossil fuels were ~40% higher than those in 1990. Even if emissions do not grow beyond today's levels, within just 20 years the world will have used up the allowable emissions to have a reasonable chance of limiting warming to less than 2 degrees Celsius.
  

The report concludes that global emissions must peak then decline rapidly within the next five to ten years for the world to have a reasonable chance of avoiding the very worst impacts of climate change.And here we have the Wall Street Journal bashing Sir Paul.  The press has abdicated its responsibility, it seems, and so have far too many businesses. 

The US Chamber of Commerce has also laid out an aggressive agenda of obstructionism, causing several of its members to resign.

On the other side, some scientists, like James Hansen for example, point out that the "cap and trade" regime being advocated in Copenhagen is faulty from the outset. Hansen's point is solid: "only a direct tax on fossil fuels as close to the source as possible would succeed in stopping the rise of emissions."

So what's the big deal about Copenhagen, anyway?  

What should business be doing?

If you believe that there are important reasons to reduce CO2  levels in the atmosphere, or even to stop the growth of CO2 levels, then Copenhagen is crucial. You should hope that most of  the world's CO2-emitting countries cobble together individual targets and commit at Copenhagen to put teeth into individual company targets for future CO2 emissions. Let's call these the Copenhagen Rules.

The organizers of Copenhagen correctly emphasize that two other results will be important.  First, that all of us rich, developed countries agree to fund specific CO2-related activities by poorer, developing countries.  A series of big, important arguments going on there, since most of the increase by 2050 in the Global Middle Class will be in such countries.  And the global middle class drives CO2 emissions. Second, that recipients countries commit to a set of listed actions to use that help to minimize their emissions of CO2.  That negotiation will go on long after Copenhagen closes.

Instead of beating around the bush, businesses need to face the reality of climate change and craft new, innovative strategies to meet the challenges ahead.  Burying their heads in the sand is not exactly a business strategy.

Here's what needs to happen:

• A carbon tax must become a reality: the free-lunch is over. Emissions must be controlled world-wide.
• Businesses must invite all stakeholders to the table and look for collaborative solutions. Yes, that means Big Coal needs to sit down at the same table with Judy Bonds.
  
• Collaborative does not mean industry-led.
  
• Countries will not reduce CO2 emissions!  Innovators must reduce CO2 emissions.  Countries set either arbitrary, bureaucratic rules which incentivize and constrain innovators; or countries create economic incentives which guide innovators to the desired goal, in this case slowing and eventually reversing the CO2 content of the atmosphere from the current 380 parts per million (PPM), back toward the 19th century level of 280 PPM.  Until Copenhagen Rules have be agreed upon and later made effective, thousands of innovators are partially hamstrung in launching thousands of actions designed to reach that CO2 goal.
  

We have a strong bias against the individual governments getting in the way of innovators.  Applying a variant of Occam's Razor, the best way is probably the simplest way to guide innovation to reduction in CO2 concentrations.  We strongly suggest that, to make a difference, all emissions of CO2 must be taxed and economic mechanisms used to adjust the distortions and any unintended consequences. 

The truth (plus a simple carbon tax) will set innovators free!

If Copenhagen Rules emerge and are ratified and given teeth, then innovators will have a defined playing field for "getting the ball rolling."  Sustainable energy development needs to know that it will be allowed to create returns on a very large investment.  Taxing unsustainable energy will stabilize returns on any sustainable energy.  Currently, such projects are dependent on large, inefficient subsidies, funded by governments which would rather pick winners than let the innovators make and lose money by creating winners.  Well-intentioned people have for years agreed to use sustainable energy subsidies, and the ball is indeed rolling is some places. 

Copenhagen Rules are about freeing up global innovation, which should not be limited to those rich countries who have been generous enough to pay for these large subsidies.  Copenhagen Rules will transfer the responsibility globally and cause the solution to also be global.

So even though Copenhagen Rules are certainly not optimal, they are a crucial first, global step.  Reducing CO2 emissions will not only help lead to lower CO2 levels and therefore help (by an amount yet to be determined) slow global warming, but it produces the following desirable results:

• It will make coal mining and burning pay its own way, which probably will slow or reverse environmental damage.  If there is a viable technology called "clean coal," the Copenhagen Rules will replace dirty coal with clean coal, and replace all coal at the margins.  This is critical in China and India.
• The Copenhagen Rules will quantify the incentives for better Carbon Capture and Sequestration (CCS) technologies.  Innovators are working on these, but they need clear signals.
• The potential for new natural gas supplies will be aided by Copenhagen Rules, since natural gas will be favored over liquid petroleum and especially over coal.  And new natural gas is apparently quite abundant at a "middling" price relative to petroleum.
• Since new "shale gas" technology shows promise of domestic gas supplies in many countries on the Earth, the Copenhagen Rules will assist this new, domestic gas in displacing imported, OPEC-priced petroleum.  The economic influence of slowing the need for new liquid petroleum will improve the living standard of many poor and some rich petroleum importers.  
• Development in emerging economies does not have to follow the same road we took in the west.  New alternatives can and will work, if the price is right to encourage technology transfers.
• But maybe the biggest, vaguest impact of new, domestic gas production could be the geopolitical influence.  If the global community is less vulnerable to importing more petroleum, the Middle East might be a more stable region.  Or maybe not, given history. And the Copenhagen Rules are a step in this direction, away from petroleum addiction.
  

One final observation on swift-boating: we know that drama sells. In the American media, "climategate" is beginning to push Sarah Palin off the front page.  But it is also a big, fat, smelly red herring.  Throw out all that theater (for now) and Copenhagen Rules are still justified and important - for all the reasons above.

We are running out of time, and there are no bail-outs for the Earth.

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):



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




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. 



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 importantly, 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:



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).

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!

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.

As 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.

I 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.




Houston - 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.
 

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.


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