Andrew Hargadon

Reid Hoffman on social networks

Reid Hoffman, Founder of LinkedIn wrote a wonderful article on The real way to build a social network that is a must read for anyone who recognizes the value of networks for innovation.

Facebook friends...

As the NYT reported, scientists at Facebook and the University of Milan (report posted here) have found that the average number of links connecting one arbitrarily selected person to another was 4.74 (in the U.S., it was just 4.37).  So what's news? 

Entrepreneurs and Society: Kauffman Foundation's "3 Things" video

The Kauffman Foundation just posted a nice sketchbook talk by CEO Carl Schramm (embedded below), summarizing the good and vital research the company has supported that looks at the role of entrepreneurs in society.  These numbers should guide both policy and personal decisions.  

Steve Jobs and Thomas Edison

Last week, Bob Sutton asked me to add my two bits to the dog-pile surrounding the “Steve-Jobs-is-the-modern-Thomas-Edison” analogy. I initially balked. There were plenty of folks who’d already made this connection. Then I balked because Bob’s own brilliant post on Apple took the discussion in a much more productive direction.  Over the weekend, however, I bit. Not because of how the analogy fit, but because of how it didn’t.

Biomedical Engineering Entrepreneurship Academy 2011

This morning our 2011 Biomedical Engineering Entrepreneurship Academy comes to close.  45 university research scientists from across the country, full professors to first year grad students, arrived on Monday morning with their research and the desire to see it become a reality. After an intensive week of work, they're pitching their proposed businesses for the first time and to a jury of potential investors.

Finding new problems

What if innovation was not about solving problems?  This thought nags me whenever I'm forced to read about the grave responsibility of "innovation" to solve such persistent problems as climate change, healthcare, poverty, and education.  Or listening to how innovation might solve all of Acme, Incorporated's problems but especially that gaping hole in Q3 revenues for 2012, their obsolete technology platform, or declining share values.

What is innovation

I’ve never met anyone who was against innovation. Why is that? 

My hunch is because we are too lax with our words. Innovation, creativity, invention, and entrepreneurship are one-sided terms—they refer, typically, only to those successful outcomes we read about, enjoy in our daily lives, or look to for solving major problems like healthcare or global warming. Before talking any more about innovation and entrepreneurship, then, let’s make sure we’re talking about the right thing.

Addendum to Forks in the Road

I posted earlier about the different ways that valuable ideas may come out of university research labs.  But this series of posts is as interested in how ideas, born inside large and established companies, can also emerge to have significant impacts on broader society. This may seem like an unnecessary charity—like helping corporate executives cross the street—but it’s not.  Large companies are arguably the most infertile ground in which to grow an idea into a new business. 

In Facebook, who's got your back?

Networks play two very different roles in innovation. Broad-ranging social networks are great for moving knowledge about ideas, technologies, and people from where they're known to where they're not. And those with broad-ranging networks tend to be in a better position to see these ideas. But ideas are not so valuable in the innovation process, as I and others have argued.

This past week's New Yorker features a terrific article by Malcolm Gladwell, "Small Change: Why the revolution will not be tweeted," that illustrates this difference—between social networking as our kids know it and social networking as our parents' generation did.

Into the Valley of Death

Everybody is talking about how new breakthroughs—in energy and elsewhere—requires helping startups through the Valley of Death.  This is a well-intentioned but dangerous policy.

The valley of death refers to financial risks that start-ups face as they struggle to grow from small teams to going ventures. The dip of the valley refers to the debt—the negative balance sheets—that companies experience as they invest money now in hopes of making it back upon success (the accompanying figure provides a general description).

Nowhere is this valley of death more evident than in clean technology, where startups face a difficult combination of challenges. On the one hand, the challenge of teams seeking $50k to $5M or more in funding to begin translating their advanced science into industrial processes (moving thin-film solar or fuels from algae out of the lab and into commercial production) and, on the other hand, the challenge of funded startups trying to raise investments for the industrial-sized plants and equipment needed to utilize those emerging processes. If we want to bring these emerging ventures to market quickly and at a scale that impacts energy security and climate change, policy wonks and private investors alike are arguing, we must provide the financial support these entrepreneurs need to make it through the valley of death.

Now might be a good time to reconsider.

Saying that most startups perish in the valley of death is like saying that most patients die of cardiac or respiratory failure—the moment when the heart stops pumping or the lungs stops breathing. Indeed, doctors now take great care in noting not just the immediate cause of death but also the antecedent causes: patient died of [blank] due [antecedent cause] due to [antecedent cause].  Without looking past the obvious, few lessons can be learned.

Innovation policy must similarly take great care not to confuse the ultimate with the antecedent causes of failure. Running out of money is the ultimate cause of death for most all ventures. Without considering the antecedent causes, it's also a dangerous basis for policy decisions.

In addition to financial capital, there are three other forms that at different times can be significantly more valuable: physical capital (the physical resources someone has already acquired and organized), intellectual capital (the knowledge and skills someone has acquired and organized), and social capital (someone's social network, or access to the capital "stocks" of others).

While a startup's balance sheet might clearly show where they stand with respect to their financial and physical capital, it does little to reveal their intellectual and social capital. And yet for companies to avoid their own untimely demise, they depend as much or more on knowledge, experience, and ability to manage their company's fortunes—and on their social networks to discover, guide, and acquire the critical resources they will need to succeed.

Supporting the success of small companies advancing clean technologies requires more than financial or physical capital—it requires ensuring these companies have access to the best knowledge and experience, and the right social networks, as they get started.

The energy sector is extremely large, bureaucratic, and entrenched. The competitive landscape in which new companies hope to thrive is a product of regulatory policies and industrial coordination that takes place in places and ways that are difficult for entrepreneurs to see let alone access. Yet this is a large portion of the knowledge and networks that new companies must acquire if they are to survive and make a difference.

Institutions are emerging to provide new startups in clean technology with these resources. At UC Davis, for example, the Green Technology Entrepreneurship Academy, in coordination with the Graduate School of Management and with support from the Kauffman Foundation, brings scientists and engineers from across the country to explore the commercial potential of their research with instruction and mentorship from leading entrepreneurs, investors, and corporations. The emphasis is on combining entrepreneurial knowledge and networks—the critical intellectual and social capital that new ventures need before the financial capital can be put to best use.

Similarly, the Energy Efficiency Center supports promising new ventures advancing energy efficiency by providing access to their established network of university researchers, manufacturers, venture and corporate investors, electric utilities, energy service companies, and major energy customers such as the state of California and Walmart.

As the Department of Energy begins funding it's new Energy Hubs with an eye toward commercializing new research breakthroughs, it should seriously consider how it will provide these emerging ventures with the right capital to succeed.

Indeed, the valley of death may be an apt description for other, less valiant reasons. The term came from Lord Alfred Tennyson's famous poem, "The Charge of the Light Brigade," describing the tragic british cavalry charge over open terrain in the Battle of Balaclava, in the Crimean War, in which 278 of 607 were killed or wounded within moments.

To those who witnessed it, the charge of the light brigade demonstrated both the courage of the British soldier and the incompetence of their command. The soldiers died because they rode directly into withering crossfire from three sides. Wrote the war correspondent William Russell:

"At 11:00 our Light Cavalry Brigade rushed to the front... The Russians opened on them with guns from the redoubts on the right, with volleys of musketry and rifles.
They swept proudly past, glittering in the morning sun in all the pride and splendor of war. We could hardly believe the evidence of our senses. Surely that handful of men were not going to charge an army in position? Alas! It was but too true -- their desperate valor knew no bounds, and far indeed was it removed from its so-called better part -- discretion. They advanced in two lines, quickening the pace as they closed towards the enemy. A more fearful spectacle was never witnessed than by those who, without the power to aid, beheld their heroic countrymen rushing to the arms of sudden death."

Poor intelligence, miscommunication, and unthinking obedience on the part of their commanders were the antecedent causes of the Light Brigade's valley of death. Companies run out of money for all sorts of reasons—including perfectly good ones: the market wasn't ready, the technology couldn't scale, or the economy tanked.  But some of those reasons might have been avoided.

Public financing of new ventures can prolong a company's life, but it won't fix poor planning, miscommunication, or blind faith. Money hides more bad decisions than it cures. To ensure companies make the transition from small venture to a sustaining business, financial capital may be the last form of capital startups need.

Public finance is an attractive tool for federal policy makers—it is easily wielded and often well-publicized. But it alone will not save clean tech entrepreneurs from riding bravely into their own valleys of death. Investing in the infrastructures that invest intellectual and social capital in these emerging ventures may be a more valuable and more critical intervention.