Fostering innovation-led clusters

Excellent research and findings from the Economist Intelligence Unit, "Fostering innovation-led clusters; A review of leading global practices" here.  The research and approach are documented here.  Some of the key findings are:

• Government has a crucial role to play; so does the market.
• Clusters are about collaboration, not just locating firms in the same place.
• Talent is the single most important factor in developing successful clusters.
• Governments need to work to promote a culture of innovation and entrepreneurship.
• Clusters work best when they are focused and can compete.
• Governments can do much to create an attractive business environment—and a good place to live.
• A strong local market will help attract R&D investment, but is not crucial for global success.

(Note: non-subscribers will have to purchase the report)

GE Energy Innovation Summit - Multidisciplinary and Accelerated

I had the opportunity to design, convene and execute a two day, first one of its kind, multidisciplinary GE Energy Innovation Summit with an elite team of GE Energy engineers. I have been impressed with the fact that GE Energy chose to lead such a transformational activity, yet more so, I have been working with some of the best engineering minds in the industry here.

The Summit brought together ten external world leaders in areas from government policy and oil and gas to data analytics, top tier academia and successful entrepreneurs. They were joined by ten GE Energy leaders from Marketing, Systems Engineering, and Advanced Technology Operations. Our goal was to create two energy concepts for GE Energy products and services that are 3 to 5 years out and can be taken forward to conduct proof-of-concepts.

Not only did the Summit deliver the concepts, it created two solutions with clear value to the company and its customer for the future as well as business models to take the solutions forward. Most importantly, during the summit senior leadership committed funding for these solutions on the spot.

Innovation through Corporate and Academic Engagement

Measuring innovation ROI when corporations work with academia can sometimes be difficult. While one is driven to provide revenue generating results measured on a quarter to quarter basis, the other has goals of pedagogy and scholarship.

Here is an example of a success between Boeing and University of Washington on the 787:

"The key innovation that the UW center supported was a way to make “compression molded” parts from carbon fiber composites for small parts. The method was far cheaper than the regular process of layering long carbon fibers used for air frame components such as hull and wing."

Details here.

Black gold holds a charge for green cars

From the New Scientist here, new invention may double the charge in a battery:

"In a standard battery, ions shuttle from one solid electrode to the other through a liquid or powder electrolyte. This in turhttp://www.blogger.com/img/blank.gifn forces electrons to flow in an external wire linking the electrodes, creating a current. In Chiang's battery, the electrodes take the form of tiny particles of a lithium compound mixed with liquid electrolyte to make a slurry. The battery uses two streams of slurry, one positively charged and the other negatively charged. Both are pumped across aluminium and copper current collectors with a permeable membrane in between. As they flow the streams exchange lithium ions across the membrane, causing a current to flow externally. To recharge the battery, you apply a voltage to push the ions back across the membrane."

Stepping "around" constraints to "create" anew

An example of leveraging tools combined with unconstrained approaches to innovation.

From Popular Science "Students' Innovative 3-D Vision System Wins Prize" here. Jacob Ward writes:

"In the end, however, we chose the entry from Tsinghua University, China. Five students there built an entirely new 3-D imaging system. They conquered the classic glasses-or-no-glasses problem by simply stepping around it: instead of a conventional flat screen, they built a four-sided glass enclosure which displays the four sides of a simulated object. The system scans an object on a turntable, acquires the image data, and reproduces it by projecting the image with four projectors onto four panes of glass. Walk around the simulated object on display, and it’s like walking around it in real life. In addition, the system recognizes gestures, allowing you to rotate and zoom in on an object with your hands. You can imagine the implications for medical analysis, enhanced teaching, point-of-sale displays, and telecommunication.

The thing that blew my mind, however, was the sheer discipline of these kids in dealing with costs. They had developed several alternative systems, they told me, including one that used a rotating mirror and a high-speed projector. But they had given themselves the goal of keeping the thing cheap, and this was the cheapest workable solution."

B2B vs. B2C Innovation Growth

More funding is going to consumer (soft) applications versus (hard) technology products. Who is making the product technologies today? Multi-Nationals like GE are taking the lead, see "GE Makes India a Lab for Global Markets" here from Wharton.

Are the breakthroughs like the printer and the personal computer no longer the domain of Silicon Valley?

From the Wall Street Journal "For Silicon Valley Start-Ups, Funding Boom Is Lopsided" here.

US Patent Changes!

Having written about patents in general, see here, here and here, the new changes USPO are creating excitement!

From Yahoo News, details here:

"The most substantial change brought about by the bill would be to switch the United States to a "first-inventor-to-file" system for patent applications used by all other industrialized countries rather than the current "first-to-invent" system. Supporters say the first-to-file system would put American innovators on the same page as their overseas competitors, making the process simpler, more certain and less expensive."

From The Hill, details here, the reader comments are enjoyable.

From The Wall Street Journal, details here:

"The Patent Office would also gain power to set its own funding, a move that is likely to mean higher application fees but also greater resources to process an application backlog that exceeds 700,000."

From The New York Time, details here:

"... the House is unlikely to take up a patent bill anytime soon, and people with an interest in the patent system say they expect its bill to be significantly different."

"Many smaller companies and inventors opposed the change, however, arguing that it favored companies that could hire legions of lawyers to quickly file applications for new permutations in manufacturing or product design."

"A consortium of technology and computer companies are already lobbying House members to resist addressing procedures to re-examine patents in their bill. The Information Technology Industry Council, whose members include Dell, Google, I.B.M. and Microsoft, said in a letter to Mr. Leahy earlier this month that it opposed the bill’s provisions to alter how patents could be re-examined, asserting that this would increase litigation rather than reduce it."

US's competitive edge being lost

Paul Otellini, Intel CEO: "You see us investing in good times and in bad times when other people don't." Otellini, added NBC, "fears the country is losing its competitive edge to Asia. He blames high corporate taxes and an education system that's falling behind the rest of the world in math and science."

Most Innovative?!?!

MIT's Technology Review has declared 2011's 50 most innovative companies., see them all here.

Gaming - Xbox vs. Wii

Natural motion without invasive hardware helping Xbox grow:

China & IP

From John Gapper's blog on China and IP

"[In China] a pattern is developing. One company cedes its intellectual property to a Chinese SOE and then all of them are then squeezed to the margins of China's domestic market, and face a new competitor. None of this is accidental, or a case of over-eager SOEs crossing the line. China wants to transform from being the factory of the world to an advanced economy and is using its market power to take a short-cut by "digesting" others' intellectual property. One State Council report called for the "absorption, assimilation and re-innovation of imported technologies.""

Innovation & Entrepreneurism in the West

I serve as the President of TIE Carolinas, see details on TIE here. Innovation and entrepreneurism, whether in-market, through corporations, within non-profits or government driven remains important to our membership.

Good entrepreneurs are known for one quality above all... they act on their belief. John Gapper's blog in the Financial Times "Educate or Import the New Entrepreneurs" here is a good read to highlight the current pitfalls that are only deepening for the aspirational mind who wants to create in the West.

Here is an interesting insight from the article:

"“The great American investment in the wellsprings of science and technology was justified to the public by the cold war,” says Bill Janeway, a managing director of Warburg Pincus, the private equity firm. Mr Janeway would like the US to try again on the basis that the private sector, left to itself, will not invest in such fundamental technologies."

Mr. Gordon Moore (Intel Co-Founder) was awarded the lifetime achievement award by The Marconi Society in 2006. He voiced his concern then that corporate R&D is moving away from the kind of fundamental research that wins Nobel Prizes and toward a narrow focus on business goals. "That's great for the company," he said, "but somebody has to fill the gap."

The article puts forth the key to success in the 21st century:

"The biggest innovation challenge for the US in relation to Asia is not financial but human. China enrols 15 per cent of the world’s university students and 40 per cent of new degrees there are in science and engineering, compared with only 15 per cent in the US. Meanwhile, 68 per cent of US engineering doctorates are now awarded to non-US citizens."

The reality is, it will not be like it was in the 20th century for us in the West. We have to invent a new now to turn it into a successful innovation for the future.

Pricing

I previously blogged about pricing here regarding behaviors and pricing, and academic studies providing insights to develop strategies from.  Recently from McKinsey Quarterly on "Building a Better Pricing Structure" here, average review though:

"A pricing infrastructure can be difficult and costly to create. It requires investing appropriately, empowering the right people, articulating clear targets and goals, and managing risk. Yet the benefits of realizing true pricing excellence are worthwhile: a one-percentage-point improvement in average price of goods and services leads to an 8.7 percent increase in operating profits for the typical Global 1200 company.1 Since a well-executed pricing-improvement program often yields price increases of two to four percentage points or more, sustaining a long-term price advantage may represent roughly 15 to 25 percent of a typical company’s total profits."

Lateral Innovation - Network Problem Solution from Nature

I analyze "adjacencies" and "lateralities" in innovation to discover solutions from industries a sector specific or vertical expert perhaps may not choose to.  Here is an excellent example of engineering solutions for network problems validated in natural organisms through the research of Atsushi Tero at PRESTO, Japan Science and Technology Agency in his recently published paper in the Science, "Rules for Biologically Inspired Adaptive Network Design".  The abstract:

"Transport networks are ubiquitous in both social and biological systems. Robust network performance involves a complex trade-off involving cost, transport efficiency, and fault tolerance. Biological networks have been honed by many cycles of evolutionary selection pressure and are likely to yield reasonable solutions to such combinatorial optimization problems. Furthermore, they develop without centralized control and may represent a readily scalable solution for growing networks in general. We show that the slime mold Physarum polycephalum forms networks with comparable efficiency, fault tolerance, and cost to those of real-world infrastructure networks—in this case, the Tokyo rail system. The core mechanisms needed for adaptive network formation can be captured in a biologically inspired mathematical model that may be useful to guide network construction in other domains."

The researchers grew the slime mold using 36 oat flake template representing cities around Tokyo, while they placed the mold itself on Tokyo.  The paper states:

"Overall, we conclude that the Physarum networks showed characteristics similar to those of the rail network in terms of cost, transport efficiency, and fault tolerance.  However, the Physarum networks self-organized without centralized control or explicit global information by a process of selective reinforcement of preferred routes and simultaneous removal of redundant connections."

Open publication - Free publishing - More network

Publishing and Piracy

From the Financial Times article "Publishers fear threat of digital piracy as sales of e-books grow" here:

"Tom Weldon, deputy chief executive of Penguin (part of Pearson, which owns the Financial Times), said: “The only way to fight piracy is to publish digital content across as many formats as possible, through as many channels, at a fair price. If we go for exclusive or proprietary formats, we’re completely screwed.”

At the same event, Shriti Vadera, who helped negotiate the UK government’s last anti-piracy deal with record companies and internet service providers, said the book industry was way ahead of the record companies, which “didn’t see [the piracy threat] because they weren’t listening to their consumer”."

Consumer Behavior and Pricing

I was first educated on the art of pricing by a good friend Mr. Dennis J. Crane of the Business Navigation Group, details here.  Thanks Dennis!

A recent and an excellent report from UK's Office of Fair Trading, "The impact of price frames on consumer decision making" here, defines the various pricing strategies of retailers into price frames.  These are:

"A baseline treatment in which consumers see straight per-unit prices.

Drip pricing where the consumers see only part of the full price up front and price increments are dripped through the buying process.

Sales in which a sale price is given and a pre-sale price is also given as a reference to the consumer, 'was £2 is now £1' (actual pricesare identical to the baseline treatment).

Complex pricing where the unit price requires some computations, '3 for the price of 2'.

Baiting in which sellers may promote a special price but there is only a limited number of goods actually available at that price.

Time limited offers where the special price is only available for a pre-defined short period of time."

The report is extensive in its details on the process used.  Tabular formats break down the complexity of the analysis and the results.  Couple of key conclusions from the report are:

"The evidence from the controlled experiment shows that, in contrast to the predictions of standard economic theory, price frames do matter for consumer decision making and welfare. Consumers make more mistakes and achieve lower consumer welfare under the price frames we investigate as compared to straight unit pricing (the baseline)."

"The ranking of the price frames, starting with the worst – that which causes the greatest welfare loss - is as follows:
(1) drip pricing
(2) time limited offers
(3) baiting
(4) sales, and
(5) complex pricing."

If you are interested in a quick review of the report, please see the Economist article "You've been framed" here.  The Economist concludes that:

"Although consumers clearly lost out there were no corresponding overall gains for retailers. Sales volumes were virtually the same whichever way prices were presented. The main effect was on the distribution of sales. The first shop to lure shoppers sold many more goods, as consumers grabbed at poor deals. That made some firms better off but others (which would have offered better deals) were worse off. Most price frames made for lousy matches between shoppers and retailers, a bad result all around."

Do the manufacturers become the winners in the end?  Should manufacturers remain with the business they know?  Is a combination of an organization that is a manufacturer and a retailer work best?  That is, WalMart, Tesco, etc. with private labels or P&G with its eStore.  Questions abound, experiments continue...

Innovation in Emerging Market: Consumer Spending

"To flourish in this atmosphere, it helps to have the spirit of a frontier settler, not a corporate bureaucrat." states the article "Grow, grow, grow" in Economist's recent report on innovation in emerging markets here.

Innovation in Emerging Market: Universal and Apsirational Brands

From the Economist's recent report on innovation in emerging markets here, the article "Easier said than done" showcases pyramid-straddling - the concept where a brand is able to win across all socio-economic market segments.

"... the masters of pyramid-straddling are mobile-handset makers. Nokia produces phones for every market, from rural models designed to cope with monsoons to fashion accessories that will look cool in a Shanghai nightclub. The cheap phones are sold through a vast network of local outlets, such as mom-and-pop stores and rural markets, and the upmarket models through shops in fashionable city centres. The aim is to create a brand that is at once universal and aspirational."

Innovation in Emerging Market: Data Points

"The engineering gap" in the January Economist states:

"According to the [Aspiring Minds, India], only 4.2% of India’s engineers are fit to work in a software product firm, and just 17.8% are employable by an IT services company, even with up to six months’ training. A larger share could cope in business-process outsourcing (call centres and the like). These findings are even gloomier than the 25% figure for employability that has been bandied about since 2005, when McKinsey released the results of a survey of international companies."

Download the complete report here.

The article "Grow, grow, grow", in Economist's recent report on innovation in emerging markets here, states: "McKinsey reckons that only 25% of India’s engineering graduates, 15% of its finance and accounting professionals and 10% of those with degrees of any kind are qualified to work for a multinational company."

The emerging market growth is fantastic, yet reviewing the thorough report from the Aspiring Minds raises or should raise questions for the multinationals. Also, curious if this level of employability applies to the Indian scientists as well?

In the report on innovation in emerging markets, the following statistics provide food for thought:

"The number of companies from Brazil, India, China or Russia on the Financial Times 500 list more than quadrupled in 2006-08, from 15 to 62. Brazilian top 20 multinationals more than doubled their foreign assets in a single year, 2006...

Multinationals expect about 70% of the world’s growth over the next few years to come from emerging markets, with 40% coming from just two countries, China and India...

Fortune 500 [companies] have 98 R&D facilities in China and 63 in India. ... General Electric’s health-care arm has spent more than $50m in the past few years to build a vast R&D centre in India’s Bangalore... Cisco is splashing out more than $1 billion on a second global headquarters—Cisco East—in Bangalore... Microsoft’s R&D centre in Beijing is its largest outside its American headquarters in Redmond... a quarter of Accenture’s workforce is in India."

Canon: Approach to Innovation

This is in contrast to Samsung in my previous posting, from the Financial Times regarding Canon:

"Technology has become too complex for Canon to develop everything in-house and it is expected to make more acquisitions... the company’s chief financial officer said in an interview with the Financial Times.

“We can no longer cover everything with our own technology so we need alliances and tie-ups,” said Toshizo Tanaka.

His comments highlight how the traditional model for Japanese electronics companies of relying solely on internal research and development has broken down.

Canon is likely to make acquisitions rather than license technology, however, in order to differentiate its products.

“If [technology] is not closed then others can make similar devices,” Mr Tanaka said."

This is still a traditional model.  Opportunities remain in the areas of customer/consumer driven innovation, driving supplier/partners to invest in R&D and/or introduce new invention into existing products, academic research tie-ups, etc.