The Summer 2010 issue of American Educator (a publication of the American Federation of Teachers) ably illustrates one of the lessons we teach in Conquering Innovation Fatigue: metrics to drive performance can have unintended consequences that may actually hurt rather than help. Indeed, unintended consequences are a major theme of our book, as we explore the problems arising from metrics, corporate and government policies, corporate innovation initiatives, laws, taxation policies, and other factors, all of which can contribute to innovation fatigue.
In terms of education and the danger of improper metrics, Linda Perlstein’s article, “Unintended Consequences; High Stakes Can Result in Low Standards,” examines a highly celebrated school in Annapolis, Maryland that received media attention and praise for seemingly miraculous success in education. The new principal arrived in 2000 to find Tyler Heights Elementary School in a dismal state with only 17% of its students getting satisfactory scores on the state test. She began redirecting efforts in the school to address this problem. Eventually her laser-focus efforts paid off, delivering the stunning success of 90% of third-graders performing well on the Maryland State Assessment, when only 35% of third-graders did so two years before. Several newspapers recognized the amazing turn-around and people at the school celebrated the success. But was it real success?
To achieve good performance on the Maryland State Assessment, education for the children was largely focused on how to do well on the test. Students learned how to write BCR’s (“Brief Constructed Response”) to deal with expected questions about poems and plays, and practiced writing these short answers for many hours, without actually studying poems or plays. “What gets tested is what gets taught,” the principal told the teachers, even if that meant leaving behind the material that was supposed to be taught according to state standards. Bins of equipment for studying science were largely unused.
Tyler Heights’ third-graders got only the most cursory introduction to economics and Native Americans, and much of the curriculum was skipped altogether. The students were geographically ignorant. . . . The third-graders had heard Africa mentioned a lot but were not sure if it was a city, country, or state. (They never suggested “continent.”) At the end of the year, the children in Johnson’s class were asked to name all the states they could. Cyrus knew the most: three. He couldn’t name any countries, though, and when asked about cities, he thrust his finger in the air triumphantly. “Howard County!”
The state standards required a broad curriculum, but the metrics for assessing that were based on one particular test and all the incentives were for helping students pass that test. In spite of the praise for the miracle at Tyler Heights, had the children really been helped?
Campbell’s Law
The problem with unintended consequences from metrics such as tests is hardly unique to Tyler Heights. Daniel Koretz, also writing in the same issue of American Educator (see page 3 of the PDF file on unintended consequences), explains that in education and other fields, score inflation is a common and well known but widely overlooked problem. In the social sciences, a phenomenon that leads to score inflation is known as Campbell’s Law. While widely applied to education, it was developed while looking at business. Donald Campbell, a prominent social scientist, examined the role of corporate incentives on the performance of employees. His research led to this general formulation: “The more any quantitative social indicator is used for social decision making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.” (Donald T. Campbell, “Assessing the Impact of Planned Social Change,” in Social Research and Public Policies: The Dartmouth/OECD Conference, ed. Gene M. Lyons, Hanover, NH: Public Affairs Center, Dartmouth College, 1975, p. 35. See also Can New York Clean Up the Testing Mess? by Sol Stern.)
Campbell’s Law is at work when schools game tests to get better scores, at the expense of education. It is at work when cardiologists choose not to operate on patients who might need surgery rather than risk hurting their own published statistics on mortality rates among their patients (Koretz refers to a 2005 story from the New York Times reporting the shocking results of a survey of cardiologists). It is at work when a company tries to boost innovation with metrics or incentives that result in game playing, while leaving the real problems from culture, systems, and vision unaddressed.
In our experience, metrics and incentives can play a valuable role in driving innovation, but only when the corporation has a culture that genuinely encourages innovation, when there is a shared vision of innovation and success, and when sound systems are in place to advance innovation. Without those, you can not only waste a lot of resources in attempting to drive innovation with metrics and incentives, you can actually make a weak culture become pathological and lethal, sometimes exacerbating fatigue factors like the Not Invented Here syndrome, theft of credit for innovation, and breaking the will to share. Adding incentives linked to metrics without the right culture and systems can be sort of like throwing raw meat into a school of sharks or piranhas. You can generate a lot of activity, a lot of exciting thrashing and splashing, but in the end there will just be a lot of blood in the water and fewer thinkers and producers in your school.
As always, innovation success requires that you carefully monitor for harmful unintended consequences from the policies, programs, and incentives you have in place. Innovation metrics, incentives of all kinds, and employee performance evaluation systems and other tools associated with metrics can backfire. Unless you are tuned to the voice of the innovator and understand the impact of unintended consequences, you can be like the company we treat in Chapter 8 of our book that felt like it was a rock star of innovation while they were actually squelching it. Don’t let the unintended consequences of well-intended policies and metrics crush your innovation success.
The recently published Berkeley Patent Survey is one of the most comprehensive studies to date on the use of patents by startups and entrepreneurs. PatentlyO discusses the study and offers some helpful insights. The study shows that startups are using patents more than was previously recognized, for past analysis based was limited by incomplete USPTO data on patent assignments. Search results for patents owned by a particular startup may miss the patents owned by founders and others that are being used by the startup but may not yet be listed in the USPTO database as being assigned to the company. By interviewing entrepreneurs, the authors were able to determine that:
[A]bout 40% of our respondents hold patents or applications, with the figure rising to about 80% for startups funded by venture capital firms.
As expected, this figure varies widely by industry—for example, 97% of venture-backed biotechnology companies hold patents or applications, while only 67% of venture-backed software startups do. And among the general population of software startups responding, the rate was only about 25%.
–From Robert Merges and Pamela Samuelson, UC Berkeley School of Law and Ted Sichelman, University of San Diego School of Law, in “Patenting by Entrepreneurs: The Berkeley Patent Survey (Part I of III),” PatentlyO.com, July 19, 2010.
In our experience, many of the best startups take IP seriously and seek to file patents when they have something potentially patentable. In our experience, Venture Capitalists look for patents as a way to increase the chances of meaningful returns. Patents are an important part of the recipe for success and long-term profits for a startup. Don’t neglect them!
Thinking Beyond Ethanol
By · CommentsEthanol as a biofuel may soon reach practical limits in the US and frankly is clouded with questions about its economic and environmental utility. However, the fermentation systems for producing ethanol can be adapted to produce much more valuable products using special microbes developed at some of the most promising green energy and biotech companies. The result is enticing, as we read in “Brazil: The Bossa Nova of Biofuels” from Biofuels Digest:
Another wave of next-generation renewable drop-in fuel companies, Amyris, LS9, Gevo and Dupont, are also investing in and partnering with Brazil’s sugarcane fermentation biorefineries. Why? Because their emerging technologies from cellulosic microbes (yeast, algae, fungus and bacteria) can use the same ethanol fermentation facilities in the US corn belt and in Brazil’s sugarcane belt to produce bio-crude, green diesel, petrol and biojet.
The simplicity is astounding. Here’s the big idea. Take an existing, stranded ethanol factory or conglomerate. Buy it for a substantial discount. Start with cheap sugar. Drop in a new Amyris, LS9, Gevo, or Cobalt microbe/ bug in the same fermentation vat and what do you get? An integrated biorefinery that can use cheap, sustainable sugars to produce renewable diesel, aviation fuel, and biobutanol – fuels that are compatible with existing petroleum pipelines, storage, petrol stations, and vehicle engines today.
In the near future, these fermentation-based biorefineries will be able to convert multiple inputs from cellulosic sugars–bagasse, switchgrass, wood chips, municipal solid waste, and glycerin–into a diverse set Of outputs, including renewable diesel, aviation fuel, bio-crude oil, biochemicals and biopolymers with significant GHG reductions and carbon emissions compared to petrochemical hydrocarbons.
This is an important lesson in innovation. Don’t live with current assumptions. Look at existing technologies, processes, and products as simply a stepping stone to something more valuable, and then ask what is next. If I have raw materials and processing stations that can use microbes to convert sugars into a biofuel, why be satisfied with the least valuable biofuel around? Why not look at the higher-value products that similar technology could produce? That’s the genius behind some of these rising bioproducts companies.
Speaking about bioproducts, let me encourage any chemical engineers out there to join me at the AIChE Annual Meeting, where the Division that I chair, the Forest Bioproducts Division, is hosting numerous sessions dealing with the exciting developments in biorefineries and value-added products from cellulosic biomass. That’s where some of the best potential is: energy and chemical products from something besides the food that people need to eat.
In my ongoing work on analyzing the intellectual property landscape in biofuels, one of the most impressive companies I’ve run across is Amyris, a renewable products company whose clever use of synthetic biology goes far beyond biofuels. Amyris was founded by Kinkead Reiling, Neil Renninger, and Jack D. Newman who met at Berkeley and founded Amyris in 2003, headquartered in Emeryville, California. With a grant from the Bill & Melinda Gates Foundation, they first developed their technology under a non-profit initiative to provide a reliable and affordable source of artemisinin, an anti-malarial therapeutic. It was viewed as a long-shot, but they found success that paved the way for the growth of the company into other areas. They are now developing new microbial strains that can produce other useful molecules from renewable feedstocks. This industrial synthetic biology platform is providing alternatives to a broad range of petroleum-sourced products. he extremely useful molecule farnesene is an important part of their business. It provides a compound that can be used to produce flavors, perfumes, detergents, cosmetics, biodiesel, and other products.
This week Amyris created a stir by announcing a record number of deals and partnerships for a single week (a record among bioenergy companies, according to Biofuels Digest). These partnerships include P&G, Total, Soliance, Cosan, M&G Finanziaria, and Shell:
Amyris has taken it up a notch with a series of stunners surrounding its synthetic farsenene, which it has named Biofene – the first product that Amyris is seeking to produce at commercial scale.
Beyond its success this week with Biofene announcements, which are the basis for the P&G, M&G and Soliance partnerships — there are the broader arrangements with Cosan to develop a platform in renewable chemicals, and the equity agreement with Total that will provide needed capital as well as a broader platform for Amyris’s expansion into hydrocarbon fuels.
The mysterious agreement with Shell, regarding diesel, is one to watch. The decidedly vague disclosure was buried in Amyris’ amended S-1A registration statement, but not otherwise mentioned in a flurry of press releases from the company as it promotes its expansion in this pre-IPO environment. Shell Western Trading & Supply is one of 17 Shell trading companies that buy and sell to customers within and outside of Shell.
This news shows an interesting example of companies forming partnerships with an innovative start-up with great technology and apparently highly valuable IP. According to my Patbase search, Amyris has 21 patent families, quite a large number for such a young company. They clearly have been active and aggressive in pursuing patent protection, and those patents are critical for the meaningful partnerships they are now forming. It’s a great unfolding story of open innovation and technology transfer.
The story extends beyond the US. They have operations in Brazil, for example, which is one of the world’s hotbeds for bioenergy, bioproducts, and collaborative innovation.
Further information comes from today’s article, “Amyris: farnesene and the pursuit of value, valuations, validation and vroom,” also from Biofuels Digest.
Innovation on the Tip of Your Tongue: Sweet Serendipity
By · CommentsLucky breaks are often behind some of the surprises in science that lead to successful innovation. This is especially true when chemical compounds are being studied. The stories of how new beneficial uses are discovered sometimes seem like pure luck. Take the discovery of sucralose, for example. This potent artificial sweetener, now used in hundreds of products, owes its market success to a potentially dangerous misunderstanding. As the Wikipedia article on sucralose reports:
Sucralose was discovered in 1976 by scientists from Tate & Lyle, working with researchers Leslie Hough and Shashikant Phadnis at Queen Elizabeth College (now part of King’s College London). On a late-summer day, Phadnis was told to test the powder. Phadnis thought that Hough asked him to taste it, so he did. He found the compound to be exceptionally sweet, as sucralose is 600 times as sweet as sucrose.
One scientist said “test” but the other heard “taste.” That’s the kind of communication gap that can get you killed quickly in a chemical lab, but the taster survived and recognized a powerful artificial sweetener was at hand.
The story is a reminder that there may be unexpected beneficial applications of many materials around us, and that it’s good to always be wondering about overlooked properties and applications that could open new product opportunities. With a little luck, sometimes innovation is as close as the tip of our tongue–but don’t go around tasting unknown chemicals.
Spill Cam View
The problem in large organizations, and the US federal government is pretty much the world’s largest, is that numerous entities have their own turf and their own advancement in mind, and without special efforts being taken will naturally work in ways that cause conflict and delay. Leaders must carefully work to align these interests and incentives toward organizational objectives, but this can be almost impossible when an organization gets out of control. Adding a new committee or bureaucracy in addition to everything else will rarely be the most effective path forward. Meanwhile, those who may have the answer and want to bring their expertise to the table find themselves discouraged, worn down, ignored, and ultimately punished for their passion to innovate and help. Welcome to organizational innovation fatigue, and welcome to the Gulf Coast disaster.
Several voices have discussed the need for innovation in dealing with the disastrous oil leak in the Gulf Coast. There are so many intriguing opportunities for technology–oil absorbent materials, new chemistries for dispersing or attacking the oil, controlled burnoffs, skimming and oil collection systems, barrier technologies to keep the oil away, materials that coagulate oil, and a host of proposed technical solutions for addressing the root cause and stopping the leak. Many of the proposals should be considered and tried. This is not the time for bureaucracy. This is not the time for the government to be shutting down efforts with its bureaucracy. If the Coast Guard is worried about inadequate fire extinguishers, round up a batch and take them over to the relief effort to help, not hinder the State of Louisiana as it tries to protect itself. But what the Coast Guard did in this case is akin to what happens thousands of times each day in companies and government around the world, contributing to the innovation fatigue that stymies much needed efforts at innovation and progress.
The V16 Separator of Ocean Therapy Solutions
Kudos to Kevin and his team! He certainly has an advantage with his name recognition and extensive networks–without that, he may have been viewed as just another voice in the wind claiming to have something. There are others with technologies and potential solutions. May they also find their way to make a difference. May all the innovation fatigue factors remain far from Kevin Costner and all others seeking to bring something new to help us fix the Gulf Coast disaster.
Today I’m pleased to share a guest column from a friend, Brian Argo of Brian Argo & Associates LLC. Brian specializes in technical scouting, intellectual property searches, and formulation of cleaners and personal care products. He has a wide variety of experience in innovation and offers an interesting perspective that I thought would be useful for readers of Conquering Innovation Fatigue and this blog. –Jeff Lindsay
Brian Argo
Our idea was simply to form a microscopic mold as a template, fill it with metal, and remove part of the template leaving individual metal hairs surrounded by an insulator. Then, we could use any number of methods to coat the hairs and form solar cells. At the end of the day, its not too far technically removed from fabricating a micro scale Popsicle using a semiconductor foundry.
When our technical work started in earnest, we thought we might have been a bit deluded to think we scooped the big boys of the world (GE, BP, Sharpe). Off to my basement I went. I worked through the physics. I looked through hundreds of journal articles. I read through over 3000 patent abstracts. All the while, simply using Google, the US PTO, and the WIPO search engines. While I prefer using search engines like Aureka, it really isn’t to bad doing a search manually either. As long as you are short on money and don’t mind working like a mad man, it’s not a problem. I was worried that I must have missed something so I double-checked my search against an IP search using artificial intelligence. No significant prior art came up.
It become evident that geometry of the nano scale hairs was perfect to create a super solar cell. The solar cells are probably coated with what are referred to as nano dots or at least coatings so thin that phenomena that cause electrical losses due to excessive thickness disappeared. The cells are also super light absorbent and conserve rare materials. This was not lost on the theoreticians. However, their further belief was that semiconductor equipment is cost prohibitive for the use in solar cells, which is correct for machines found in state-of-the-art foundries. What they missed was that older, more primitive equipment was sufficient to make the nano-wire solar cell cost effectively. General George Patton once said, “If we’re all thinking the same thing, someone isn’t thinking.” In retrospect, groupthink in the solar industry left us a brief crack of time, which we used to patent and develop the technology. In the years that followed, we learned a lot of work had started a short time after ours.
The intellectual property needed to be done flawlessly. In my mind, that meant that I should draft the applications myself. However, the group voted to go with a big name national legal firm. Since we were bootstrapping the enterprise, we were starting with a provisional patent application. To save on legal fees, I drafted the application. Next, I spent the two weeks bringing an entry-level patent attorney up to speed on our technology, and then she let us know that the application was excellent and she supported filing it. No added claims. No significant improvements to the specification. Only a big “atta boy” and an invoice for $15,000. I think that when you work with a large legal firm and you are a fledgling startup, it is very unlikely that you will get the “A” level support. In the end, I suppose I did what I set out to do; we were just poorer for the experience. My only other qualm with our process is that our team viewed IP development as an ancillary activity. Some people just don’t get the value of IP until it is too late. Eventually excellent counsel was located through a recommendation of a former colleague, and the final application was done well.
Now all we needed was money. We chose two avenues, grants for academic research and angel money. Neither path is easy, but we managed to get several grants. The grants were nice to keep members of the team solvent, but they can also be a trap where too much focus is on writing papers. We found this to be the case, and eventually refocused fund raising on angel investors. That is not easy either. To get angel money, you need to have a good idea, and you need to have someone they know on your team. People who are trusted by angel investors or venture capitalists are not necessarily people that can be trusted. I cannot over emphasize how difficult it is to find a good person that meets that criterion. Mark Twain once said “A man who carries a cat by the tail learns something he can learn in no other way.” You cannot do too much background work. Fund raising last year was not fun. A Nobel Prize winner, a Stanford electrical engineer who graduated top his class in two and a half years, and few dozen other technical leaders, vetted us out. It was our experience that the complexity of the idea got lukewarm responses or ridicule from VC’s with little technical depth, but fantastic responses from investors with high levels of technical skill.
As grants and angel money trickled in, I frantically yet frugally raced to develop a prototype always working to stay one step ahead of the money. One problem was that there was no other technical support. Another problem was that manually performing operations that are normally automated around the clock is challenging. After many months of grueling work, it was gratifying to find that everything worked as I thought it would. Finally, individual investors gave us the money we needed to enter into long-term process development. The project has been moving forward according to plan. However, my personal and business priorities were not a match with the new management of the company, and the company no longer employs me. I am back in the consumer products business enjoying a brisk consulting business. This type of venture is not for anyone with a weak stomach for long hours, high risk, or high stress. However, if you are willing to pay the price and can work with trustworthy people, it can be the most satisfying and financially rewarding adventure in your career.
My recent visit to three beautiful regions of Brazil included opportunities to learn more about the economic climate and the future of innovation. Entrepreneurial opportunities are tremendous for innovative and bold Brazilians, in spite of the challenges that come with extremely expensive capital, high taxation, and occasional bureaucratic barriers. Brazil continues rising rapidly, on its way to be one of the world’s great superpowers. The spirit of Brazil was contagious!
The opportunities from the agricultural potential of Brazil are mind-boggling. The biodiversity of the few parts I saw was overwhelming, and that was only a minute sampling. By strengthening the airport system in Brazil, there are many opportunities to move away from supplying bulk commodities like fiber and coffee to providing value-added consumer products shipped directly to consumer markets. A nationwide effort to enhance transportation is needed (and is underway). One product area where I eagerly await further progress is in the field of beverages. For example, all over Brazil there are drinks based on the guarana berry from the Amazon, including the wildly popular Antarctica brand carbonated beverage. These are more popular than cola beverages and frankly, they taste much better. This one of many Brazilian flavors waiting to emerge into the US market.
Brazilian businesses have also evolved a variety of interesting business models, including efficient methods for managing buffets where you pay by the kilo. I would welcome that approach here.
The business area that most impressed me for its innovation was in the field of education, and distance education is particular. I had the privilege of meeting with the CEO of POSEAD, a remarkable company offering distance learning service to Spanish and Portuguese speakers. They have drawn upon 40 years of experience in a non-profit educational organization, CETEB, along with many years of commercial experience, to create a rapidly growing business that solves some of the real problems of education and training in emerging nations, where the cost of commuting to a school or training center may exceed monthly incomes. They have developed advanced diagnostics and delivery systems to really understand what a student is doing, what they need, and how to get them to move forward. There are so many mistakes that can be made by newcomers in this area, especially in meeting the needs of Spanish and Portuguese speakers, but they’ve figured out how to avoid them and have created a remarkable efficiency in their systems that results in extremely low cost.
Some of the innovation in education goes back to a remarkable woman, Rosa Pessina, who long ago recognized that the pressure to build more schools to accommodate burgeoning classes in the earlier grades was treating a symptom, not the cause of the problem. Her analysis showed that class sizes were suffering because too many students were failing to advance in school, resulting in low graduation rates and high class sizes as kids went back through the same grade more than once. She then developed programs for accelerated learning to help these kids quickly get back to the right grade for their age, making the students feel better about the class they were in and enhancing motivation. This was the beginning of the non-profit organization CETEB, and those who participate in its accelerated learning programs have a 94% success rate, if I remember correctly–an extremely high percentage that go on to graduate. CETEB’s services include distance learning tools to help Portuguese and Spanish speakers. There is a huge opportunity here for the United States, where we have the children of many Spanish-speaking immigrants doing poorly in the schools. If they do not gain an education, the risk for ongoing poverty and crime is much higher. By accelerating their progress and helping them gain education at low cost, remarkable social good could be achieved here in the U.S. Governors, CETEB awaits your call!
There are layers of innovation in other areas in both CETEB and POSEAD, including how they quality and prepare content, how they form alliances, how they manage the challenges of certification and regulatory burdens, and in general how they identify and meet the needs of students and communities. There are brilliant minds at work here, and I feel that it’s time for US schools, companies, and governments to explore collaborative efforts. I’d be happy to help make a connection.
Swinging at the Innovation Pinata
Appleton Papers invented carbonless copy paper about 50 years ago. Their chemists found a way to place a clear liquid inside tiny fragile spheres that could be coated onto one side of a paper. When the spheres were broken by the force of a pen or pencil pressing down on the paper, the liquid would be released and could then react with a chemical in an adjacent layer of paper to form a dye. The newly formed dye in a lower layer of paper creates a copy of what was written on a top layer. Over the years Appleton Papers developed many improvements in the microencapsulation process, but remained focused on creating paper products such as many variations of carbonless paper or thermal paper that develops images when exposed to heat. Their encapsulation systems were brilliant but huge potential was being missed. Only when a team of outside consultants came in to review the opportunities of Appleton’s technology did the company begin to realize just how many new product opportunities might be possible. Outside eyes were needed because those inside the company had grown up with blinders in place that governed the assumptions they brought to the innovation table. Opportunities were framed in terms of what improvements could be made to their paper business, not what new products in other industries could be enabled or enriched with microencapsulation technology. The outside eyes helped Appleton know where to swing, and goodies were soon falling from the innovation piñata after swinging in the direction of Procter and Gamble.
Procter, of course, is famous for its laundry products such as Tide® detergent and Downy® fabric softener. There was a need for controlled release of fragrance from fabric softener that Appleton Papers was able to meet for P&G. By encapsulating fragrance and delivering those microcapsules to clothing, the fragrance could be protected and released gradually as capsules are broken while the clothing is being worn. Sustained released of the aroma made clothes smell fresher longer. Now Appleton encapsulated huge tankloads of aroma for the Downy business, showing the power of open innovation as technologies are applied across disciplines and shared between corporations. Steve said that Appleton had that technology for 50 years, but only recently realized its innovation potential in areas outside of paper, thanks to a secret weapon for those swinging at the innovation piñata: outside eyes.
Gene Quinn’s article, “ Proposal: Unlocking Job Growth with Patent Acceleration” over at IP Watchdog, reminds us of the powerful link between IP rights and economic growth. It’s an issue we take up in Conquering Innovation Fatigue when we discuss Hernando de Soto’s findings (countries with respect for property rights have much better economic growth than those that don’t respect property rights). It’s an issue that Congress needs to take up if they really want to stimulate economic recovery and growth. As Thomas Jefferson said, innovation needs encouragement, and a strong, efficient patent system is one of the best encouragements.
Gene offers some specific suggestions that could help stimulate innovation, entrepreneurship, and job growth through a more efficient patent system. Change is needed. The years of waiting to get a patent and the other inefficiencies of the US system in recent years need addressing immediately. Strengthening our system and making it more manageable for start-ups and lone inventors would be an important step forward in mitigating innovation fatigue.