Andrew Hargadon

The Low tech, high stakes world of innovation

A few recent and distantly related events have strong implications for our thinking about fostering revolutions in energy.  In particular, the challenge of pushing old and large industries to adopt new technologies in hopes of making widespread change.

The first incident was PayPal's recent global service outage.  It lasted only about an hour:

"About an hour ago, PayPal started experiencing site issues that affected the ability to send and receive money. We have all hands on deck to get this fixed," said PayPal spokesman Anuj Nayar in a blog post about noon PDT. "We're really sorry for the inconvenience."(CNET)

According to PayPal executives, the company processes $2,000 in transactions every second, so an hour outage cost vendors who rely on PayPal about $7.2 million. PayPal's Total Payment Volume in 2008, according to the company, was $60 billion—"nearly 9 percent of global e-commerce and 15 percent of US e-commerce."

The second incident came in a distinctly different field.  This May, Lennar Homes, acknowledged its use of a new and defective Chinese-made drywall.

Lennar Corp. has identified 400 homes in Florida that have confirmed problems with defective Chinese drywall, and it has set aside $39.8 million to repair the homes, the Miami-based home builder said in a securities filing Friday. (WSJ, 5/31/09)

The drywall problem has affected more than just Lennar Homes, estimates of 100,000 houses built in 2006 and 2007 with the suspected Chinese drywall.  According to the Wall St Journal (WSJ, 8/06/09):

Experts estimate it costs about $100,000 to pull out bad drywall and replace corroded electrical wiring and appliances in an average-sized home, and the problem is shaping up as a costly disaster for homeowners and the battered housing industry. Many homeowners are hoping the federal government will step in with some sort of aid similar to that provided for victims of hurricanes and tornados, as well as a moratorium on mortgage payments.

If proven a health hazard, the total cost to the construction industry for removing the tainted drywall adds up to approximately $10 billion in repairs.

For the small business owners relying on PayPal, an hour of lost revenue is costly.  But to the small contractors and drywall subs who may have to replace existing drywall, this kind of problem can put many of them out of business altogether.

Really sorry for the inconvenience

The two incidents together highlight a particular problem when thinking about the stakes of innovation.  High technology generally has an aura of high risk, of bold visions and big leaps.  And yet the real risks—the stakes—may have less to do with the innovation and more to do with where it's going.

As central as PayPal and other recent computing and internet innovations have become in our lives (think iPhones, Blackberries, Apples, Google, and Amazon), they're no match for the ubiquity and taken-for-grantedness of so many technologies that have become invisible and embedded in our lives. Think drywall, and then insulation, lighting, electricity, gasoline, internal combustion engines, tires, and on and on.

The risks of adopting a new product or technology are very different when it's a new behavior and relatively distinct from so many other aspects of life. While it seems as though they have become central to our lives, we're actually quite resilient when our computers crash, our internet access goes down, our cellphones drop calls.  We can manage. And anyway, why worry?  A few years down the road and we'll have moved on. Our biggest concern is whether we can keep our email address of cell number.

So a small business adopting Paypal is very different, in other words, from a small business adopting a new brand of drywall, putting it up, and then putting over that drywall the household electrical outlets and light fixtures, the trim, the paint, the finished flooring, the furniture, and a real live family. The low-tech product requires a larger commitment because the contractor (and home-owner) have to live with it for decades and, should it fail, has considerably more costs than simply replacing it. 

And that's just drywall.

Consider today's headlines around the energy revolution. Utility-scale solar and wind sound like technological breakthroughs, as does the smart grid.  But the utilities adopting them take the same risks as the contractor: they have to live with their choices for decades, indeed they are liable for those choices. 

At 34 years old, Microsoft is long past a start-up. It's operating systems are running approximately 90% of all personal computers, and yet the public has been relatively tolerant of the bugs, incompatibilities, and poor performance of its latest version, Vista (which to date has over 360 million users).  Imagine waking to find that your utility has installed an upgraded version of your power meter, and half of your appliances are no longer compatible. Or worse, imagine that your new Microsoft CE power meter has a virus (questions about the security of the smart grid are finally starting to surface).

Now imagine you're the utility. Would you bet your company on someone's high tech product when mistakes in low tech choices carry high stakes?  The moonshot and Manhattan project were high-tech, but these projects never faced the challenge of adoption by a reluctant market.  Investing in the next energy revolution requires accounting for the market: those who would commit their businesses to adopting, installing, and standing behind the new technology for decades. 

Are we designing solutions low-tech enough for them?

Modeling the costs of greenhouse gas reduction

Taking measures to reduce greenhouse gas emissions over the next decades raises fears among some that  our economy would be adversely impacted.  Of course, not taking measures, as the UK's Stern Report argues, could be worse. 

Nonetheless, some nice researchers at Yale conducted a meta-analysis of the current models for estimating the economic impacts of GGH reduction measures, identified the seven major assumptions that control 80% of the differences in estimates, and created a tool to allow anyone to plug in their own version of these assumptions.

You, too, can play economic advisor: http://www.climate.yale.edu/seeforyourself

Racing down the hydrogen highway...

Today's WSJ charts the recent decline of ethanol's prospects and suggests the business press, and mass media, has removed from the bio-fuel its most-favored-panacea status (Ethanol Craze Cools
As Doubts Multiply). 

Gone are the in-depth articles charting the return of the family farm and the fall of the house of Saud.  The nay-sayers (who have been saying nay all along) now get the attention:

A recent study by the Organization for Economic Cooperation and Development concluded that biofuels "offer a cure [for oil dependence] that is worse than the disease." A National Academy of Sciences study said corn-based ethanol could strain water supplies. The American Lung Association expressed concern about a form of air pollution from burning ethanol in gasoline. Political cartoonists have taken to skewering the fuel for raising the price of food to the world's poor.

From over here on the science side of the debate, there has been little doubt that corn-based ethanol was not ready for prime-time: it's energy balance (the energy needed to produce ethanol relative to energy gained from its production) was within debating distance of zero. The only advantages of corn-based ethanol were a $0.51 tax credit for every gallon of used and a $0.54 tariff on every gallon imported.

The hope for scientists, though, was that enough investments in corn-based solutions would spill over and advance the (more promising but still immature) cellulosic ethanol. While this has been true recently, it comes at a potentially serious cost in the long run.

Should corn-based ethanol lose its status as the technological cure for our energy and climate change woes, it could fall pretty hard.  Heard much from hydrogen lately?  In 2003, Bush proposed spending $1.2 billion to fund research in Hydrogen. In 2004, California's Governor Schwarzenegger announced:

I am going to encourage the building of a hydrogen highway to take us to the environmental future... I intend to show the world that economic growth and the environment can coexist. And if you want to see it, then come to California....

And senate bill 1505, signed in early 2007, turned this vision into a statute.  Hydrogen has since lost much of its luster, along with much of its research funding...perhaps when politicians realized that ethanol promised to cure the same woes while also appealing to the Iowa primary voters. But that's another story.

What interests me is the question of what happens when good technologies go bad--when promising technologies are brought to market prematurely, with too many promises made and too few kept. It happens in countless start-ups, when emerging technologies turn out to need twice (or more) the development time than their business plans promised and in large organizations, when the demands of Wall Street made it too tempting to accelerate the next generation technology.

When the inevitable disappointment comes, the technology becomes a  pariah--outcast and shunned. Unfortunately, the scientists and engineers who worked their tails off trying to deliver on the unrealistic promises, usually get hit the hardest: "There goes ol' Burt--he worked on the Newton project. Hasn't been the same since." And another promising technology is set back decades (and the generation who pioneered it is lost) for no other reason that that very promise.

Perhaps the biggest tragedies happen on the national stage--when new technologies move from the spotlight to the scrap heap because they failed to live up to the unrealistic promises of a few scientists, investors, or politicians. Worse when so many others, urging caution, were ignored.   

In defense of ethanol

While I had to turn comments off (another victim of spam), I received this post from Brian Glassman via email and feel compelled to post it:

Dr. Hargadon illustrates an important point which has been downplayed in promotions for Ethanol, E10, and E85 fuels, that they are not equivalent in their mile per gallon to gasoline. The Ethanol industry in general has been pushing away from this fact, by promoting ethanol’s greener side and hoping that while they publicize its’ eco-friendliness, researchers and producers will drive the manufacturing costs down to the point were it can compete on a cost bases with gasoline. Fortunately, the recent research push has done just this. Researchers like Michael Raab, and others are coming up with new innovative ways to reduce ethanol manufacturing cost. I was recently part of a group who were among the few to attack the low fuel mileage aspects of E85 and E10, by creating a bio-based fuel additive to boost mpg, with the goal of making it comparable in mpg to gasoline (first link below). However, this doesn’t escape the final point that Dr. Hargadon makes and that I agree with: “the less glamorous solutions like energy efficiency through improved mileage, better public transportation, smarter commuting” are just practical and definitely attainable and should not be ignored.
Thank you
Brian Glassman

http://www.pratt.duke.edu/pratt_press/web.php?sid=333&iid=38
http://www.technologyreview.com/read_article.aspx?id=16408&ch=biztech
http://www.technologyreview.com/TR35/Profile.aspx?Cand=T&TRID=436
http://www.agrivida.com/news.html

Not one to squelch debate, me. Though I remain skeptical that we can successfully coincide the development of low-cost cellulosic ethanols (made from stalks and other ag by-products) with their boosting, their distribution and their broad adoption and resulting engine optimization. All of this in the face of new eco-diesels from Mercedes and Honda that show both reduced emissions and tremendous efficiencies.

Many technologies make their greatest performance improvements only when competing technologies arrive on the scene--witness the Welsbach mantle increasing the performance of gas lamps by 6-fold when the light bulb first reached the market, and the steam engine doubling in efficiency in the years after the internal combustion engine. What is in store for the ICE when alternatives truly become a threat?

All of which is to say--innovation means progress. Whether the alternative fuels win or traditional gas and diesel wins, we will be better off than if these challengers weren't around.

Greenwashing, or racing the organic train, part II

Good article in the NYT (A Milk War...) today about the entrance of Walmart's private label organic milk, Great Value. Walmart gets this milk from Aurora Farms:

Activist groups, as well as some organic food retailers and dairies, contend that the company where Wal-Mart and the other big retailers get their milk operates large factory farms that are diluting the principles of organic agriculture and delivering customers a substandard product. They argue that Aurora’s cows do not spend any significant time roaming pastures and eating fresh grass; instead they live on a diet high in grains.

I wrote about this briefly when I found a box of Kellog's Organic Rice Krispies in our cupboard (Racing the organic train). As promised, Walmart has indeed brought out low-cost organics. The race is between organic going mainstream and organic getting so watered-down as to become nothing but a marketing term.

As Melanie Warner writes,

The controversy turns on how closely Aurora adheres to the principles behind the organic food movement. Many organic farmers say grass feeding is essential for organic dairy production because it is part of a cow’s natural behavior. Milk from grass-fed cows, they say, is also higher in beneficial fatty acids than milk from cows fed grain, making it more nutritious.

At Aurora’s Platteville operation, about 40 miles north of downtown Denver, 4,000 cows are put on grass only when not being milked or when they are nearing the end of a lactation cycle. That totals about two to three months a year. The rest of the time they stay in dirt-lined outdoor pens where they eat from an ample trough filled with a mixture of hay, silage, corn and soybeans.

It's still early in the race, but right now "greenwashing" is in the lead.

McDonalds with a purpose.

Govindappa Venkataswamy, an opthalmologist, passed away July 7th. He's not an American icon, but could (and should) be for his entrepreneurial ways. The WSJ just began a weekly column honoring the passing of prominent business figures, and Dr. V's passing is an especially nice way to inaugurate the column.

Dr. V Started the Aravind Eye Care System with an 11-bed clinic in 1976, and has since grew it into a five-hospital system. The Aravind system provides affordable surgery for the masses--quite literally--and now impoverished cataract patients can have their eyesight restored for about $40--and if that's too much, for free. It also proved that there was a way to make money at the bottom of the pyramid; the free are paid out of the profits of paying patients.

What makes the Aravind system interesting to innovation is the origin of its success:

He was inspired, Aravind says, by the assembly-line model of McDonald's founder Roy Kroc -- learned during a visit to Hamburger University in Oak Brook, Ill. ... "Can't we do what McDonald's and Burger King have done in the United States?"

Sound familiar? In 1910, when Ford's engineers came back from studying the assembly lines of the Chicago meatpacking plants (first publicized in Upton Sinclair's 1906 book, The Jungle), one of his chief engineers said "If they can kill pigs that way, we can build cars that way." From food to cars to food to the operating rooms of Tamil Nadu:

The assembly-line approach is most evident in the operating room, where each surgeon works two tables, one for the patient having surgery, the other for a patient being prepped. In the OR, doctors use state-of-the-art equipment such as operating microscopes that can swivel between tables. Surgeons typically work 12-hour days, and the fastest can perform up to 100 surgeries in a day. The average is 2,000 surgeries annually per surgeon -- nearly 10 times the Indian national average. Despite the crowding and speed, complication rates are vanishingly low, the system says.

What if the best ideas of modern economies were, with care, put to better use? As Dr V said, " Intelligence and capability are not enough. There must be the joy of doing something beautiful."

A great cause, a great speaker

The TED conference has been making its speakers available for viewing by the masses (e.g., me), and this talk by Majorca Carter about greening the South Bronx is worth forwarding on. Guy Kawasaki posts about her first, so apologies to anyone who reads Guy before me (and a questioning look for anyone who doesn't...).

Majorca's talk is riveting for her passion, commitment, and perfect mix of polish and promise. This is must-see TV for anyone with a cause. Study it, mimic it, channel its spirit into your own projects.

Guy's comments on her speaking style were also informative--about both her and Guy. Great speakers like Guy are clearly great students of speeches, but it's not easy to see them in action. Now TED's collection offers a great set of training tapes for the rest of us.

The ethanol mousetrap (and moonshot)

As Ethanol, the solution du jour for our energy needs, comes into the spotlight, it reveals itself to be as realistic a near-term solution (and long-term panacea) as its predecessor, hydrogen. Ethanol will not now, nor may it ever, provide the energy independence people seek. As Julia Olmstead writes in Counterpunch:

Improving fuel efficiency in cars by just 1 mile per gallon -- a gain possible with proper tire inflation -- would cut fuel consumption equal to the total amount of ethanol federally mandated for production in 2012.

Many others have made this same point before. What's interesting, to this innovation-obsessed blogger, is the underlying impact that the concept of ethanol and other innovations has on the innovation process itself--especially when that process requires public effort and political will. What does the thought of a simple, clean solution just around the corner do to our ability to act with the solutions we hold in our hands (like raising mileage standards by 1 mpg)?

If a bird in hand is worth two in the bush, why is a technological solution in hand worth less than one around the corner? Is it the promise that this next one will take less effort and will to implement than the ones we have available today?

That promise of the better mousetrap that sells itself undermines more than just green technologies. It undermines innovation in organizations big and small. The possibility that tomorrow's idea will be easier to implement than todays keeps us tolerating the status quo. It's just like Annie sings: "The sun will come out, tomorrow. You can bet your bottom dollar." Or was she pushing solar?

7 things every environmental entrepreneur should know

A lot is happening at the intersection of environmentalism and entrepreneurship these days, and it's creating a hybrid form: the environmental entrepreneur. Some are coming from the entrepreneurial community. Many more are environmentally driven and, realizing that "commerce is the engine of change," are starting new ventures. Here's some quick advice based on having a front row seat at the intersection for the past few years.

1. Solve the right problem first.
   That problem has to be the customer's. Your project will, by definition, benefit the environment and coming generations (you're an environmental entrepreneur, right?). But if it doesn't also benefit the people who have to pay for it in the first place, it will die. If the first slide in your presentation doesn't clearly describe a living customer and a real pain they are feeling now (and you could solve), then you're not ready. Don't lead with global warming, greenhouse gas emissions, or wetland protection unless you're talking to the people who feel this pain directly (like foundations and policy makers). Instead, talk about how your solution will help the customer--help grow market share, reduce costs, improve quality, increase margins, reduce weight, grow hair, or get their kids into Princeton. Solving the customer's problem first focuses you on the here and now, forcing you to be the one person who understands better than even your customers, what they need.


2. Always solve more than 1 problem.
   Good ideas solve someone's problem. Great ideas solve more than one problem. Don't waste your time pushing one-dimensional solutions, the successful ventures, green or otherwise, that you hear about solve multiple problems at once. That means solving the problems of suppliers, distributors, retailers, and regulators, and investors. Powerlight developed a solar panel system that clicks together, has a layer of insulation underneath, doesn't require penetrating the existing roof, and is durable enough to walk on. This reduces the efficiency of their panels (as they don't tilt toward the sun) but it makes installation easy, and installers recommend them. Whose cooperation do you need? What do they get out of the deal? Run the numbers. If everyone doesn't win, go back to the drawing board until you find a solution where everyone does.


3. Embrace style.
   Somewhere along the way, style became the antithesis of substance. Nearly 100 years of Madison Avenue advertising has made style a cheap substitute for substance (just look at the US auto industry). But you can't blame them. Consumption is as much about identity as it is about performance. Nike, Coca-Cola, Apple, and Chevy all sell identity as much as the products their names are on. The Prius was helped by images of celebrities filling the gas tank; Willy Nelson's name scored style points for biodeisel among truckers; even Gore is revamping his style to great effect. Think about your new venture: Style has a substance all its own. What's yours? What's your company's identity and who wants to share it with you?


4. Don't make leaps.
   Most environmental entrepreneurs have visions of fixing entire systems--after all, that's what's broken--and design solutions that promise wholly new technologies enabling (and requiring) wholly new behaviors. Think hydrogen fuel cell vehicles, which require innovations in fuel cells, fuel, fueling stations, fuel companies, and fuel distributors, to mention just a few. But that's where most promising ideas fail. Innovations succeed when they offer evolutionary, not revolutionary, changes in behavior. Create a design that provides small steps, easy changes, for your customers. Edison designed his electric light to look and act just like the gas lighting existing customers were used to. Only later did people start using electricity for other uses. Natura non facit saltum: Nature does not make leaps. Neither will customers.


5. Know when good enough is good enough.
   You will always have two choices: keep working on the product or get it into the hands of customers and see what happens. Hundreds of millions have been poured into perfecting the Hydrogen fuel cell vehicle, all based on what people think the automobile industry will want in 15-20 years. Jadoo Power Systems, on the other hand, found a way to put hydrogen fuel cells into the hands of customers today. How? By taking the technology that exists today and designing products that people need now. Jadoo sells power solutions to video crews, rescue workers, and the military--all of whom will pay right now for something than provides the same power for less weight. And by doing so, they are learning dramatically (doubling performance while halfing costs). Get to the market as soon as you can--there is no substitute for learning what people will pay for, and how they'll actually use it.


6. Forget the better mousetrap.
   Emerson had it wrong. Build a better mousetrap and the world will not beat a path to your door. The better mousetrap--or whatever your solution--is the beginning, not the end. Once you have that, you need to market it. You need to get the word out to your customers quickly and effectively by building a website, sending out a press release, writing an editorial (or better yet, an article describing the problem, the market, and the opportunity better than anyone else has yet). Who needs to know about your product? How are they going to hear about it? How can they reach you? The light bulb was 40 years old by the time Edison started marketing his version. The steam engine was over 100 years old before James Watt found the investors, distribution channels, and manufacturing partners to bring it to the mass market. We remember Edison and Watt because they built successful business around existing mousetraps.


7. Remember, success makes you the new problem.
   Careful what you wish for--you just might get it. Any company that succeeds grows, and any company that grows needs to worry about managing cash-flow, making payroll, paying creditors, and staying around in the long-term. Compromises start to creep in, waste starts to add up, and pretty soon you're part of the problem. For environmental companies, this is especially challenging. A world filled with electric cars would be a world littered with lead-acid batteries and darkened by coal-burning power plants. Look to companies who, like Patagonia in the last decade or Hewlett-Packard in the 1950s, turned away from growth in order to remain the companies they wanted to be in the first place. Just remember, when you succeed, why you started in the first place.

Launching the Energy Efficiency Center

Yesterday, we launched the first academic Center focused on the commercialization of energy efficient technologies. The Energy Efficiency Center (EEC) was created with a $1M grant from the California Clean Energy Fund (CalCEF) represents a rather unique and interdisciplinary collaboration across the colleges of Engineering and Agriculture and the Graduate School of Management. California's Governor Arnold Schwarzenegger gave the opening remarks (for related articles, I've provided links below).

The Center represents a new direction in the development of energy efficiency and, I hope, other sustainable technologies, as it brings the perspectives and resources of the entrepreneurial community into the conversation--the voices not only of the end-user, but also of investors, suppliers, resellers, and countless others.

As the founding Director of the Center, I gave these brief remarks:

In 1882, Thomas Edison threw the switch at his Pearl Street Station and created an energy revolution. But history can be deceiving. Edison neither invented the light bulb nor perfected its performance. That technology was 40 years old by the time Edison got to it.

Edison’s impact came not from inventing a new technology but, instead, from finding the right business model that would bring this emerging technology into the marketplace--a business model that would be embraced by customers, yes, but also investors, suppliers, regulators, and a host of other eventual stakeholders.

Thanks to the vision and support of the California Clean Energy Fund, the Energy Efficiency Center at UC Davis represents the first effort solely focused on bringing the emerging technologies of energy efficiency into the marketplace.

With the support of CalCEF and in partnerships such as we have now with PG&E, this center will be a catalyst for raising energy efficiency and reducing energy costs in California transportation, building, and agriculture—by bringing rigorous science and practical solutions together with sustainable business models.

Researchers at UC Davis and partner institutions already lead the nation in much of the science and technology of energy efficiency. This work can be seen, for eample, in the Institute for Transportation Studies where innovations are bringing the power of information technology and the internet to problem of traffic congestion and trucking logistics.

Other similar innovations are coming from the California Lighting Technology Center, where they are working in partnership with utilities, manufacturers, and customers to develop new technologies and standards for lighting—some of which can be seen in this building. And from research in Agriculture and Food Processing, where new sensors can improve the efficiency of irrigation pumps and reduce water consumption.

Dan Sperling, in particular, has been a driving force behind the formation of this center and his work has made UC Davis a national and international leader in energy-related research. He will play a key role in this center as its Associate Director.

This center will change the way we study energy efficiency, the way we teach it, and the ways in which we work together with the public and private sector to develop real and lasting innovations in energy. Keep an eye on us.

Here is some of the initial press reporting on the launch:

• Sacramento Business Journal article


• UC Davis News article