Dorrian Porter is founder of Northern Imagination.

On January 1, 1999, I immigrated to Silicon Valley from Canada to work as a corporate attorney for Wilson Sonsini Goodrich & Rosati. I watched in amazement as 400 companies went public that year (about a quarter of them through my law firm), and in March 2000 I felt compelled to leave the firm and start a company called HigherMarkets. It was around the same day that the Nasdaq peaked at 5132.52.

The experience and timing of my departure — and the name of my first company — sadly signified a tight connection for me between money and entrepreneurship.

Money has a nasty habit of invading the definition of entrepreneurship in Silicon Valley, where we tend to measure success by funding rounds, valuations, and liquidity events. I often run with a definition of an entrepreneur defined by money: People who don’t know your financial situation think you’re rich, and people who do think you’re crazy. An entrepreneur can be a person spending $10,000 to open a shop or $100 million to build a new kind of car.

Long before the car company, there was an inventor named Nikola Tesla who navigated choices of money and entrepreneurship as we all do in the Silicon Valley. Tesla immigrated to the east coast of the United States in 1884, initially to work alongside Thomas Edison. That relationship didn’t last, but Tesla is credited with the inventions that fueled the rise of electric company Westinghouse and made alternating current the standard of electricity we rely on today.

Larry Page of Google, who mentioned Nikola Tesla on a recent earnings call and describes him as one of the greatest inventors ever, has said you might want to be more like Edison than Tesla. In fact that comparison may only be true in textbooks.

A closer study of the events of the 1890s, for example, reveals that Edison faced similar entrepreneurial challenges to Tesla: Edison was kicked aside from General Electric, the successor company to his own, leading him to swear off the same financial backers for the next 30 years. Tesla, on the other hand, generously allowed Westinghouse to renegotiate a patent deal that enabled the financially strapped company to establish the electricity standard we rely on today.

Tesla made it clear that being a great entrepreneur — one who commercialized a critical standard that powers innovation 125 years later — isn’t necessarily about the money.

Despite the fact that I couldn’t live without two famous early inventions of Edison’s — photography and film — Tesla’s contributions are the ones that can spark Silicon Valley’s imagination on an even bigger scale now. Tesla made a commitment to the study of wireless energy and wireless information transmission beginning in the 1880s that led him to explore communication with other planets, to evaluate ways to transmit energy wirelessly around earth, and to care about taking advantage of the sun’s radiation and earth’s vibrations to prevent the squandering of natural resources that was occurring rapidly around him.

Sound useful today?

I love Instagram as much as anyone, but my nine-year-old daughter points out that less time on my iPhone can equal more time on things that really matter. Tesla focused on discovery in areas that really mattered, and he faced a great deal of ridicule — and no doubt financial impact — for it.

As the need to invite more immigrants to the Silicon Valley only increases, we need to send the message more than ever that our love for creative invention and a focus on the biggest challenges are more valued than money. There are some outstanding financial backers in the Silicon Valley, but the majority of venture capitalists face their own short-term problems that don’t always allow them to live up to the long-term horizons mentioned on their websites.

Whether you’ve just helped fund a startup or raised money for one, or whether you’re running a big company or working at one, we all need to be looking for ways to hail the inventors around us regardless of financial outcome. We don’t necessarily need to shift our models of capital allocation or stock grants to do it, but we do need to change where we spend our time celebrating. I’ve heard a lot of lip service paid to words like innovation and creativity in the Silicon Valley. It’s up to each of us to defend those words in a way that means something more than the next acquisition.

The free exchange of information and affordable access to sustainable energy — both issues worked on by Nikola Tesla in his time — have the potential to solve critical issues of poverty and education, and inspire peace, around the world. Wireless information transmission and energy remain two of the Silicon Valley’s biggest opportunities.

Hail to the inventors who are working on those challenges today without regard to financial outcomes. Hail to Nikola Tesla.

Dorrian Porter organized Northern Imagination in 2013, a company that seeks to positively impact the wellbeing and happiness of people via creative projects, ideas, and inventions.  He just launched a Kickstarter campaign to build a statue of Nikola Tesla in the Silicon Valley to fuel creativity on the big issues of energy and wireless. You can watch a short video and participate in the campaign here:  http://kck.st/ZWLzgG.

photo credit: Recuerdos de Pandora via photopin cc

Interested in learning more about opportunities in digital health? HealthBeat, VentureBeat’s health conference takes place on May 20 and 21.

The Iron Yard has launched the Southeast’s first digital health accelerator, proving that innovation shouldn’t be confined to Silicon Valley.

The Iron Yard’s tech collective was formed by a group of locals in the small city of Greenville, South Carolina. The original idea was to inspire networking among like-minded folk, but the Iron Yard quickly spiralled into a tech accelerator, a coding academy for kids, and a coworking space.

And now, the founders are asking entrepreneurs to fix some of the biggest flaws with our current health system.

Entrepreneurs enrolled in the accelerator will receive $20,000 in seed capital funding, three months of mentorship and training, a full year of free coworking space in Spartanburg, S.C., and the opportunity to demo their product at the Health 2.0 conference in San Francisco.

Given the complexities of the space (founders will need to ensure their product is HIPPA compliant, for instance), the accelerator will provide free legal consultations.

The accelerator is looking for a wide range of ideas — fitness apps, web-based electronic medical records, “big data” analysis tools to name a few — but the program does not support medical devices at this stage, Iron Yard managing director Peter Barth said in an interview.

In the last five years, health accelerators have popped up around the country, and venture funding has drastically increased. In order to compete with established programs like HealthBox and RockHealth, the accelerator has signed up brand-name partners and mentors from JM Smith, Mayo Clinic, AbbVie (Abbott Labs), Zebra Technologies, and BMW.

For entrepreneurs who crave small town living and a break from Silicon Valley, The Iron Yard may be the best bet. “We want everyone to have the opportunity and ability to have an effect on the digital world and an effect on society,” said cofounder Eric Dodds in a recent interview.

The three-month digital health program begins on July 15. Click here to apply and learn more.

Images courtesy of the Iron Yard

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HealthBeat 2013 is a new conference showcasing how technology is transforming health care. We'll explore how IT is driving out inefficiencies on the hospital, practice, and patient levels. Check out full event details here, and register here.

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Chandra Duggirala, maker of an experimental device for type two diabetes, is on the verge of giving up.

Duggirala’s company, Novobionics, raised a small amount of funding for a noninvasive technology that mimics the effects of gastric bypass surgery. The device tricks the gastro-intestinal tract into thinking it is full, which slows the rate of nutrient absorption, thereby easing suffering for diabetes patients.

Despite promising early results, the entrepreneur and physician at San Mateo Medical Center has struggled to procure a second funding round that would bring it to market.

“We’re living in a time of total uncertainty,” Duggirala explained. “When it comes to medical innovation, investors essentially have to pay the government to invest in tech, which is scaring them off.”

Is the FDA killing medical innovation?

“Uncertainty” is not a word that Silicon Valley’s investors — or their limited partners — like to hear, so Duggirala’s story is far from unique.

Medical device entrepreneurs and entrepreneurs have complained vociferously for years that funding is drying up. And a confluence of factors have made the situation steadily worse.

A 2.3 percent excise tax on medical devices enacted as part of the Affordable Care Act, the rising cost to get a device to market, and a lack of regulatory clarity from the Food and Drug Administration (FDA) are cause for concern.

The tax may not seem like much, but it’s on revenues, not profits — and since most medical device companies are far from profitability, that takes an especially deep bite. It’s still unclear which entrepreneurs will be required to pay the tax. For instance, will the government levy it on mobile medical devices — or smartphone apps — that are sometimes used in clinical settings, like this urine analysis app?

Other health-tech experts point to the current patent system that, as Practice Fusion’s senior policy strategist Lauren Fifield puts it, is “confusing and a real mess.” Because the Patent Office is slow to approve applications, inventors must work in secrecy to protect their ideas, sometimes for years. One entrepreneur might have a tremendously good idea for a device and be unaware that four other groups are working on a similar model.

A spokesperson from the FDA said the agency is aware of these concerns.

“We’re reaching out to venture capitalists and entrepreneurs to include them in our discussions and have used the feedback to develop smart regulations that balance patient safety and innovation,” an FDA spokesperson noted in an email interview, and provided a link to a new program where entrepreneurs work in concert with FDA employees.

(Note: It took the FDA took two weeks to assign a spokesperson, and cancelled interviews on multiple occasions, after VentureBeat requested comments — indirectly confirming criticisms about its glacial pace.)

The FDA may be partially responsible, but it points out that it’s not the only organization that has a role to play in bringing a new medical device to market. Entrepreneurs will also have to contend with institutional review boards, third party payers, and they have to front the cost of a clinical trial.

Venture funding is dwindling

Malay Gandhi, the chief strategy officer for digital health incubator Rock Health, estimates that medical device funding is down 13 percent year over year. He noted that class 3 medical devices are the most affected, as it’s taking longer than ever before to get these high-risk (and potentially high-reward) products to market.

Further research from PricewaterhouseCoopers and the National Venture Capital Association found that the $700 million in 84 deals that went to medical device companies in 2012 represented a 17 percent drop in dollars and an 11 percent decrease in the number of deals year over year.

Mike Carusi, medical device investor at ATV Capital

“We have been pushing the FDA on how difficult it is to get products approved,” said Michael Carusi, a general partner at ATV Capital who specializes in life sciences and medical devices.

Alongside many venture investors, Carusi believes that the uncertain approval process for new medical devices is stunting innovation and killing jobs. In 2011, the New York Times reported that Carusi donated $1,000 to a Minnesota congressman who lobbied Washington D.C. to support a bill that would make it easier to bring new medical products to market.

Carusi’s relationship with the FDA has fractured over the years. His firm has grown all too familiar with abrupt regulatory changes midway through an investment.

Most recently, a spate of new mitral repair devices hit the FDA speed bump, prompting Carusi to question the high bar for efficacy of early-stage devices that are far less invasive than the alternatives.

This follows one of his most high-profile investments, XTENT, which went public in 2007 during the glory days for medical devices. But the Sun Valley medical device manufacturer saw its path to market prolonged by two or three years due to new regulation. The company was later sold at a “massively discounted value,” Carusi recalled, and was eventually shut down.

Worse still, portfolio companies have been stunted by regulation from Washington D.C., only to see success elsewhere. Just a few months after the FDA voted against approving Emphasys Medical’s lead device to treat emphysema, the company’s assets were put up for sale. Silicon Valley-based Pulmonx would later acquire the technology and begin marketing it in Europe.

Carusi expects to see this potentially life-saving (or prolonging) device return to the U.S. market in five or six years.

The FDA is currently under pressure to determine which mobile medical applications fall under its purview — and will face higher taxes. The agency has yet to issue the final guidance it promised in 2011, and so many entrepreneurs are waiting on the sidelines.

“Developers are mystified by the rules in this highly regulated industry,” said Ben Chodor, the chief executive of mobile health app store Happtique, who we spoke with after he testified alongside a handful of medical experts in Congress.

”The gap between D.C. and Silicon Valley is 3,000 miles, but it feels like 20 years in terms of understanding,” said Fifield, echoing the sentiment felt by scores of health entrepreneurs.

Our pets have better access to new medical treatments

Class II medical devices, indicating only a mid-level risk, are the most common. Among the latest batch, a company known as Alivecor has punctuated the popular imagination.

Imagine being able to press your iPhone against your chest to measure a heart rate. This is the vision for Alivecor, which raised significant venture funding and secured FDA approval. In August 2011, Alivecor succeeded in closing an $13.5 million funding round led by Burrill & Company, along with Qualcomm, acting through its investment arm Qualcomm Ventures.

But Alivecor is beset by challenges in selling to U.S.-based physicians, which raises another potential hurdle. Distribution channels are saturated by large and established players, so getting behind the doors of hospital decision-makers can be difficult.

Rumors are flying in the industry that the company has had far better luck selling to veterinarians than cardiologists. One source joked that our pets are getting better treatment options and access to the most innovative medical devices.

Source: Businesswire

Vets are the early adopters of Alivecor’s low-budget heart-monitoring device.

“We didn’t expect to see so much success in the veterinary space,” Joel Light, Alivecor’s business development lead admitted. “But there is far less regulation, so we could get to market quickly.”

Alivecor is launching its low-cost electrocardiogram in the U.K. this month.

“Uncertainty has been a big challenge, and in the medical industry — we see a big gulf between a great idea and a profitable business,” said Light.

Likewise, the executive team behind Visualant, a company with a spectral matching technology, considered the health care industry, decided to take their technology elsewhere.

CEO Ron Erickson said it could potentially be used as an inexpensive medical diagnostic device, but the regulation and “time and money involved” caused them to focus on “more immediate market opportunities.” Visualant’s ChromaID product can “see” what the human eye cannot by discerning minute variations in color.

The innovative technology will not be used by doctors to treat disease. Instead, Visualant will be selling it to defense agencies and jewelers to certify gemstones.

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The founders of Silicon Valley-based accelerator Imagine K12 believe we are amid a radical transformation in education.

Rather than teaching in batches, educators are looking for ways to help individual students learn. Imagine K12 believes one of its startups will produce the next great innovation in instruction.

And if the opportunity to resolve some of the U.S. educational system’s biggest problems isn’t enough, startups in the upcoming class will receive $100,000 in initial funding (up from $20,000).

I caught up with ImagineK12′s founders Tim Brady and Geoff Ralstan in the hours prior to the announcement of the accelerator’s funding boost and the establishment of a new “Start Fund” backed by big shots like LinkedIn CEO Jeff Weiner and Y Combinator founder Paul Graham.

Here’s what they had to say about the challenges of bringing disruptive new tech to American kindergartens and high schools — and how they answered one pretty big claim.

Imagine K12 founder Tim Brady

VentureBeat: Why did you decide to increase the initial investment? 

Tim Brady: We need more great hackers and entrepreneurs in the space. Now we can give them more runway so they can get the traction they need to really be attractive to seed capital investors. The funds will give entrepreneurs enough time to get the right market fit so it can take root in the educational system.

VentureBeat: The media has accused ed-tech accelerators of failing to communicate with their real customers: teachers. Do you agree? 

Brady: We take that kind of criticism extremely seriously. We haven’t heard it that often from our about our companies. We have a teacher in residence position and an educator day event. If teachers don’t like the product, they won’t download it from the Internet. We have products that are used in hundreds of thousands of classrooms, which is replacing bad software sold by big sales forces to a superintendents’ office.

VentureBeat: Charter schools have a reputation for being early adopters for tech. Is this still the case?

Imagine K12′s Geoff Ralstan is the former chief product officer for Yahoo.

Geoff Ralston: The charter schools have been great partners to sit down and talk to us. But they aren’t the only folk we are talking to, and not the only ones using our products. Even a few years ago, it was much more likely that a charter school would be more interested. But there has been a shift. Public schools are highly motivated to try new things — at least in the Bay Area.

VentureBeat: Are teachers increasingly the early adopters? 

Ralston: In the past it’s been top-down — teachers haven’t had a say in what’s being developed. But the educators are increasingly adopting these products first. So we’ve gone to great lengths to educate them on what that means. And now, 10 percent of teachers are using our startups’ products.

VentureBeat: But what these startups fail? The fallout must be far worse when it comes to ed-tech. Are teachers going to be disillusioned when startups like Alleyoop don’t deliver?

Brady: It happens — even to the larger players. Houghton Mifflin Harcourt declared bankruptcy. Of course, continuity is an issue. But we are very upfront with our teachers and our companies. We are also careful with the startups we select so we can avoid the big flameouts.

VentureBeat: And now you claim the Imagine K12 graduates have developed tech used by 10 percent of U.S. teachers. That number seems shockingly high. 

Brady: The really cool thing about our space is that teachers talk to each other. They’ll say, “This is awesome, you should try it!” The same goes with parents, and kids who view these new tools as a key part of their academic success.

VentureBeat: Yes, many of us can attest to the flaws with the current education system. We’ve all been students at some point.

Brady: Absolutely, but that doesn’t necessary make you an expert. If you understand a pain-point, it’s just the starting point. Entrepreneurs shouldn’t fall into the trap of using personal experience as a guide to evolving the product. For this reason, we’re looking for unique backgrounds — a teacher who is also a coder, for instance. That’s one of our big recent changes; we are trying to bring the hackers into the space.

VentureBeat: Is the resurgence of interest in ed-tech bringing in the “wantreprenerus”? Or is it a good thing? 

Ralston: There is a lot more capital available, that’s for sure. And capital is a natural incentive to convince more great entrepreneurs to get into the space. But we are not creating throwaway consumer internet tools here — the end goal is to create better outcomes for children around the world.

VentureBeat: How about the competition? Are there too many ed-tech accelerators?

Brady: Whether there are too few or two many accelerators, the long-term goal remains unchanged. Technology can help us with some of the biggest problems in the current system. We designed our school system in the age of the industrial revolution; we need to move to more individualized instruction.

VentureBeat: On that note, what’s the big goal? What gets you up in the morning? 

Brady: We are at the beginning of a 20-year transformational period in education. Sixty-five percent of our kids only graduate from high school and don’t get the education they ought to get. The world is going to change radically — and we get to invent the great innovation that will make that happen.

Read the full news story on Imagine K12′s new fund.

Imagine K12 meetup image via @Photo.

Analysts expect earnings of $10.12 a share on revenue of $42.6 billion, which sounds great for almost any company on the planet but Apple, it seems. Apple’s own guidance was a rather more modest $9.23 to $10.23 per share on earnings of $41 to $43 billion.

The question is whether those results — or better — will push Apple’s brutalized stock up … or down.

I talked to Pace University’s Darren Hayes about Apple, technology, and the stock market. Hayes is a professor at Pace’s Seidenberg School of Computer Science and Information Systems.

VentureBeat: What has driven Apple stock down over the past six months?

Hayes: iPhone 5 sales have failed to impress. There’s been a lack of innovation over the past few years to come up with the next great device, and consumers have failed to see any differentiation. Samsung has captured the market.

VentureBeat: Isn’t the stock undervalued?

Hayes: It’s possible. The short sellers have had a field day, but once the stock starts to rebound, they’ll have to cover.

With the amount of short selling that has been going on, it has been oversold. So with any kind of bump, the short sellers will have to cover, and there’s likely to be some rebound.

Short sellers are happy when the stock is going down … they may even increase their short position. But if there’s a couple of days of increase, short sellers may need to cash in on their profits and buy it back, so instead of it moving $2 it may move $12.

VentureBeat: So if Apple reports good news, the stock could jump significantly?

Hayes: It’s possible it could bump up $50 or $75.

VentureBeat: What does Apple need to do to make that happen?

Hayes: The company needs to look at business alliances. We’ve all heard about BlackBerry’s difficulties maintaining market share. Apple has failed to grasp that opportunity … failed to capture a tremendous business opportunity.

For example, even with servers — Apple had tremendous servers, but never looked to expand their market. They need to talk more about how they’re going expand their reach in corporate markets.

Google and Android have had a very effective strategy — it’s easy for developers to develop for Android, it’s open source, integrated in the auto industry, into appliances — and its adoption rate is far great than Apple’s.

In terms of of security, Apple does have better security, but businesses are going with the cheaper option.

VentureBeat: What is Apple’s biggest challenge?

Hayes: Apple has the market share in terms of tablets and they’ve been able to compete in computers, but what people are really interested in is the smartphone market. Smartphones are the most important thing people are looking at right now. For example, look at HP and Dell — it’s clear people are buying smart devices and not investing in traditional computers.

There’s about one billion smartphones in use, and that’s likely to double by 2014 according to Gartner.

The problem is that the iPhone has really failed to impress – demand has been very soft for iPhone 5.

VentureBeat: What about a cheaper iPhone?

Hayes: That’s definitely a good move, but what’s really important is the incentives they offer to carriers. Apple has already incensed a lot of carriers by offering very, very small incentives, so many carriers feel they’ve been squeezed by Apple and now would rather promote Samsung and Android.

So it’s not just about improved features and better pricing … it’s about carriers.

VentureBeat: Can Apple ever get back to $700 stock price territory?

Hayes: They need to get more hype about their products. And they need to think about the next big device that would really create some interest and buzz. Apple TV is probably not it … there’s not many details about it — they need to come out with something new.

We’ve been spoiled for years by Steve Jobs unveiling some new device year after year.

Image credit: Marco aka MenfiS/Flickr

Should human genes be patented? The Supreme Court is weighing in today in a landmark case,  Association for Molecular Pathology v. Myriad Genetics, Inc., 12-398., that will have an enormous impact on the future of science, technology, and medicine.

At the center of the debate is Utah-based Myriad Genetics. Scientists at the biotech company discovered two genes — BRCA 1 and BRCA2 — that are associated with hereditary breast and ovarian cancer. Since then, it claims its tests have been used by more than one million women to determine if they have an increased risk of developing these cancers.

The company patented these discoveries — the “synthetic molecules we isolated and created in the lab to provide life-saving tests,” the company’s CEO explained in an op-ed in USAToday.

But Nobel Prize-winning geneticists argue that the patent will stifle research and medical diagnostic testing. Because of its patents, Myriad can prevent other researchers from testing, studying, or even looking at these genes, and it also holds the exclusive rights to any mutations along those genes, according to the American Civil Liberties Union (ACLU).

The U.S. patent system’s rules stipulate that you can’t patent a product of nature or a law of nature, even if research took years and proved costly. For this reason, Albert Einstein did not patent the law of relativity.

A parallel can be made with a rare East African plant, which has a variety of medicinal uses. It might be plausible to patent a drug that comes from the plant, but it would be unreasonable to patent the plant.

“Over the past 20 years, at least 41 percent of our genes have become the intellectual property of corporations,” genomics professors Christopher E. Mason and Jeffrey Rosenfeld argue on the ACLU’s blog. “These patent claims contradict an intuitive sense that our DNA is no less ours than our lungs or kidneys,” they continue. The ACLU also claims that the patent has allowed Myriad to charge patients exorbitant rates for its test.

Until recently, the medical profession largely shunned patents. A favorite quote that has been liberally used by Myriad’s opponents is from Dr. Jonas Salk, who invented the polio vaccine. Rather than file a patent on the vaccine, he reportedly said, “There is no patent … could you patent the sun?”

Dietrich Stephan led a research team that identify the genetic causes for Autism, ALS, Alzheimer’s disease, and more.

Human geneticist Dietrich Stephan says he’s been following this debate closely since 2006. Stephan is the cofounder of Navigenics, a genetics diagnostics company acquired by Life Technologies Corp. in 2012. Stephan agrees with the ACLU, and is concerned that patenting genes will be detrimental to patients.

“You should be able to give patients gene sequencing information that will benefit their health,” he said in an interview. “Patents may prevent that.”

According to Stephan, the likelihood of the Supreme Court siding with Myriad Genetics is low. Myriad will still own the brand and have the highest-precision test in the market. So even if three competitors emerged tomorrow, Myriad will still out-perform in sales.

“Even so — competition is a good thing,” he asid. Collaboration is another issue as many of these genes will be used together to form the basis of a test — “more and more it’s not a single gene that is diagnostic,” said Stephan.

Efrat Kasznik, an intellectual property lecturer at Stanford University, said the patent system offers inventors a limited monopoly (20 years from filing) in return for public disclosure for their innovation. But not every finding can be patented. Similarly to a mathematical equation, the Supreme Court may rule that our human genes can never be owned.

Dietrich Stephan will speak at HealthBeat, VentureBeat’s upcoming healthcare and innovation conference in San Francisco on May 20-21. 

Top image via Shutterstock 

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HealthBeat 2013 is a new conference showcasing how technology is transforming health care. We'll explore how IT is driving out inefficiencies on the hospital, practice, and patient levels. Check out full event details here, and register here.

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Greg Gretsch is a partner at early-stage VC firm Sigma West.

Once a year at Sigma we bring together our portfolio CEOs to discuss current trends in technology, business models, Silicon Valley, and the markets and to share war-stories. After each event we hear from the participants how valuable it was for them to learn from their peers.

The life of a startup is about maximizing the number of good decisions and minimizing the number of bad ones. If you can learn what worked and what didn’t from someone else who has recently traveled the same road as you, you can save critical time and increase your venture’s chance of success.

At our most recent conclave one of the main topics covered was the strategies companies use to successfully grow while maintaining a culture of innovation. What emerged from the discussion was a clear understanding of two key characteristics of successful “innovation cultures.” The job of innovation belongs to everyone in the company and it requires taking risks.

First, innovation is everyone’s job! To paraphrase Ratatouille food critic Anton Ego, not everyone can be a great innovator, but great innovations can come from anywhere. One classic mistake larger companies fall victim to is creating “innovation teams.” This is a great way to demoralize everyone not on the team.

Another big mistake, often made by technology companies, is that innovation is an engineering problem. When I think about the successes in Silicon Valley, many of the most enduring were business model innovations – think AdWords from Google or SaaS as a way to deliver and sell enterprise software. Yes, there were technologies involved in those successes, but I would argue that the disruption they caused and their durability has as much to do with the business model innovation as with any particular technology innovation.

Second, innovation involves risk. It reminds me of the disclaimer at the end of almost every commercial for a financial or investment service: “Investment involves risk including the risk of loss…” The same is most certainly true of innovation. Don’t innovate and you are sure to die, but as you innovate you will make mistakes. As Brad Garlinghouse, CEO of YouSendIt so eloquently put it, “Innovation is the result of a culture that encourages risk and is tolerant of failure.”

The companies that are the most successful at maintaining cultures of innovation understand that sometimes – nay, many times – innovations fail. Those companies accept the risk of that failure and have a culture that allows for failures and encourages risk taking.

Jon Carder, CEO of MOGL, shared an interesting approach that MOGL uses to foster a culture of innovation.  (Disclosure: YouSendIt and MOGL are Sigma portfolio companies.) Not surprisingly, MOGL’s approach strongly embraces the two stated characteristics of successful cultures of innovation.

MOGL has three top goals that are well beaten into everyone at the company on a regular basis: more users, more restaurants, and more kiosks. Once a month the company holds a “Growth Hacker” meeting that is open to any employee that wants to participate. At the meeting anyone who has an idea for an initiative to drive one of the key goals gets to present his or her idea. They must present in PowerPoint: hypothesis, execution plan, and dollars needed. Everyone in the meeting votes via smartphone and the winner gets the dollars they need. They report back results at the next monthly meeting.

At one meeting a product recommendation based on feedback a sales rep had received from a restaurant was pitched, won, and then tested. That product, known as “2 cents”, allows a MOGL member to send private feedback to a restaurant owner after the member makes a purchase at the restaurant. It’s now the most liked feature of the entire MOGL product suite for restaurants.

The number of ideas/products from these meetings that fail is around 80 percent, but many times those failures eventually lead to a breakthrough. The key is to continue to “pivot” the idea until it sticks and keep the innovative ideas coming.

What I see in YouSendIt and MOGL is that innovation comes from everyone and in every area of the business.  For that to happen the culture must encourage taking risks.

Greg joined Sigma in 2000 after 20 years in the tech industry, where he was the founder of three successful companies: Connectify, GiftONE, and Vicarious. Early in his career, Greg was in product marketing at Apple.

Top photo credit: Michael Cardus/Flickr

[Update: This story did indeed turn out to be a hoax, which duped a number of publications as the blog posts were published three days prior to April Fools. Parrot declined to comment on requests for clarification.]

Residents of Auvergne, a province in south central France, may soon receive their daily paper by drone.

According to a blog post published yesterday, local postal service La Poste Groupe has been working for several years to modernize its delivery processes. A plan has been hatched to implement paper delivery by drone in early May with the help of local volunteers, and tests are already underway.

The drone is a quadricopter, which can be controlled by iPod touch, iPhone, iPad and Android devices, and costs over $300. It is manufactured by Parrot.com, a French wireless devices maker that also announced a partnership with La Poste this morning.

We have not heard back from Parrot.com after reaching out for comment. It’s not quite April Fools — but there are legal issues to consider with this insane (but awesome) idea.

French Internet personalities say they will national attention to the crazy experiment, including Olivier Bernasson, founder and CEO of online store Pecheur.com.

Unmanned aerial vehicles (UAVs) are increasingly used in private markets — not just in covert government operations. In 2010, the Wall Street Journal reported that drones would prove useful for nonmilitary tasks, such as wildlife-tracking or emergency rescue efforts.

The primary impediments were a short battery life and flight time — often 30 minutes or less.

Today, thousands of amateur drone hobbyists are sharing ideas on websites like DIYdrones.com. And as the technology evolves, the FAA is working with private industry to relax guidelines for personal drones by the end of this year.

So someday soon you might receive your daily paper from a silent, miniature object from above. Let’s just hope it doesn’t drop on an unsuspecting person’s head!

Images via La Poste / Parrot.com 

Something came over me after I read about Doritos’ newest snack “food,” Doritos Locos Taco Doritos. Suddenly I had to have a Taco Bell Doritos Locos taco. No — that wasn’t good enough. Like Doritos, I had to take a Doritos Locos taco and make it better.

Innovation is the heart of Silicon Valley, after all. Egged on by copy editor Jason Wilson, whose personal beliefs endorse all invention as holy, I went for it.

So today, for lunch, I placed an online order for a Mission grilled cheese sandwich at The Melt (whose online ordering system rocks, by the way). Then I walked down to Taco Bell, ordered a pair of Tacos Locos, and then took them over to The Melt. I picked up my grilled cheese (pepper jack on sourdough) and took it back to the office.

And then I merged the two: I opened up the Mission, placed one Taco Loco inside, and replaced the grilled, cheesy lid. Voilá: The Locomission was born.

Verdict: It’s not bad. The flavor of the two foods, despite coming from almost diametrically opposite ends of the foodie spectrum, complement one another quite well. The semicircular taco shape is almost perfectly fitted to the semicircular shape of one half of a grilled cheese made with sourdough — as if they were made for one another. Taco Bell’s spiced ground meat is an excellent addition to the Melt’s spicy cheese. The nacho cheese-flavored Doritos shell was a delicious complement to the Melt’s sourdough. And there was even some lettuce and salsa inside the taco to offset the guilt of eating all that grease and meat.

As a bonus, this makes the sandwich quite filling. If I have one complaint about The Melt, it’s that one sandwich is never enough to satisfy me for lunch. But a sandwich plus a Taco Loco — now you’re talking. In fact, while I got two Locos Tacos, and only one fits on each half of a grilled cheese sandwich, I decided to skip the second taco and just eat the rest of the grilled cheese by itself.

The only real downside is that the Doritos Locos’ shell was rather soggy. I don’t think that’s the fault of the grilled cheese, as the shell was already a bit soggy when I took it out of its wrapper. Maybe I waited too long to consume it after ordering from Taco Bell. Next time I might pick up the sandwich at the Melt first.

The Locomission

$4.75 at The Melt + $2.78 (two tacos) at Taco Bell = $7.53

860 calories (for both tacos plus a whole sandwich)

Photo credit: Jason Wilson/VentureBeat

This is a guest post by entrepreneur Roman Stanek.

I love Silicon Valley. I love the venture and social infrastructure that nurtures startups. I love its drama as companies create innovative products, become attractive acquisition targets, and then decide whether to sell or go it alone. But most of all, I’m fascinated by Silicon Valley’s unique dynamics that produce a constant stream of innovation — which my good friend John Seely Brown defines as “invention implemented.”

That implementation of innovation is key because it’s what makes Silicon Valley special. It’s the fuel that creates value, drives M&A, and builds companies. It’s also the fuel that creates whole new markets and, by extension, jobs.

Honest.

I realize Silicon Valley might not exactly appear like a jobs-making machine. Even last year’s 3.6 percent employment growth rate, returning the area to job levels last seen in the dot-com era, seems sluggish to the thousands of people still looking for good jobs. I believe we’re on the threshold of far greater growth — growth that will impact more people, in more age groups, and across more industries than ever before.

Over the years, I’ve watched this area produce more jobs than elsewhere in the country — even amid our downturn — and I believe we are once again on the upward curve of a five-year cycle. That’s because Silicon Valley’s innovation generates new markets, even as old ones decline. We saw that clearly with Facebook, and the rise of the social media market. And we witnessed a similar jobs surge about 10 years, when VMware gave birth to the virtualization market.

Now I believe the entire Silicon Valley community is poised to benefit from new innovations aimed at business customers. Already, we’re seeing enormous funding rounds for companies that help businesses sift through and make sense of mountains of data, set up software-based networks, manage help desks via the Web, and communicate more easily with suppliers, partners and customers over the Internet.

Some of these startups will become successful in their own right. Some will go public. Some probably won’t make it. And a portion will be acquired by larger companies eager to deliver important innovations faster than they could with their own research and development.

I believe that, regardless of the outcome, it’s all good news for people who live and work here. Here’s why: New markets form around disruptive technologies and services that, in turn, give rise to more companies catering to these new markets. And with over 2 billion people around the world using broadband Internet (up from approximately 50 million a decade ago) many of those markets are global — creating even more demand for new employees. It’s a virtuous cycle if ever there was one.

What’s more, venture funding for business-focused startups is on the rise. Andreessen Horowitz, which manages $2.7 billion in funds, has made enterprise a big part of its investment strategy. Kleiner Perkins has said it will invest at least $200 million this year in companies targeting business customers. In fact, just about every major VC firm is now investing in the so-called enterprise space.

Related: Read analyst predictions for enterprise companies that are set to IPO in 2013.

And the best part? Long before a company can even dream of customers, it has to hire an army of highly expert developers who understand business needs and are proficient at building modern, enterprise-hardened systems that meet stringent corporate demands.  But it doesn’t stop with engineers.

Business-focused companies also need to hire experienced sales people who understand how new services work with current products. Good salespeople also have a deep understanding of customers’ industries, the problems they need to solve to better compete, and their biggest concerns. This is not the job description of someone just out of college.

All this new enterprise activity is translating into a real boom for the area — increasing local restaurant business, driving companies’ marketing efforts (have you noticed all the new billboards along 101 lately?), and spurring retail sales. The 280 and 101 highways are now populated by brand new BMWs, Mercedes-Benz and Teslas.

And maybe the best news of all?

In an area that is known for valuing youth over experience, we’ve entered a cycle of enterprise-focused innovation that holds the promise of creating jobs for everyone, regardless of age. If that promise proves true, then Silicon Valley’s economic contribution will be immeasurable.

Roman Stanek is the founder and CEO of GoodData, a company that offers a range of business intelligence software and reporting tools to help companies monetize big data. Prior to this, he was the founder of NetBeans.org, sold to Sun Microsystems, and Systinet, which was acquired by HP. Follow him on Twitter @RomanStanek.

Photo credit: Not Quite a Photographr via photopin cc

Georges van Hoegaerden is an entrepreneur, venture catalyst, serial CEO, and venture capitalist-turned-innovation economist.

As a 20-year Apple user who has infected almost everyone close to me with convincing reasons to abandon subprime computing platforms, it hurts me to have to group and introduce the reasons why I think Apple’s once-infinite loop is turning gradually finite.

Toss the pageantry of false positivity

Now, one could take this message as a negative or a positive depending on which side of the technology world you are on. Yet I am neither a fair-weather friend nor a weapons-trader in this competitive war. I am an independent thinker more worried about the only thing that matters: value to customers. I still admire Apple for its unique — if not perfect — desire and pursuit of authentic innovative value.

I’ve written this editorial as an honest appraisal of the business of innovation and to ensure innovation’s role in delivering authentic social economic value is one the public can trust. Apple is the spiritual and commercial leader in innovation, so it should expect to not only be held to the highest of standards by the public, but also be intrigued by someone who, when they had a lot less wind in their sails, was already rooting for the company.

The latest price reduction in the MacBook Pro line forced my hand to collect and share the many finite patterns I see developing at Apple. The trigger was the pageantry of false positivity applauding the recent price reduction of the MacBook Pro sold to customers. Even though the MacBook Pro 13″ Retina is truly a product worth buying (I have reviewed it personally), the underlying economics of the $200 price reduction are a bit startling.

Act different

Apple is a producer of premium technology with a unique proprietary blend of hardware and software that can demand premium pricing for its products when that innovation delivers consumers a more compelling computing experience and evolution.

But one who connects the dots and sets their own standards of excellence has to wonder.

Why does Apple deploy the equivalent of modern-day slavery in China to save cost — arguably at the expense of American manufacturing — if the consumer value and margin can withstand no less than a $200 price reduction?

Apple succeeds because it is macro-economically different from any of its competitors today. It is the most profitable technology company on our planet not because it competes on price (downside) but because it competes on value (upside). And Apple’s future is secured when it continues to drive the value over market share.

But the pattern I see developing at Apple now is a dangerous one that trades the infinite evolution of upstream innovation for the finite development of operational efficiency.

The pattern

Here are the signals that contribute to the pattern I detect:

• Since Steve’s passing Apple has not delivered any upstream innovation of significance to top-line growth, but an abundance of downstream optimizations derived from Steve’s long lasting upstream vision, perhaps to comfort a nervous Wall Street.
• Tim Cook spends too much time publicly discussing details of operational capabilities without the balanced exposure to and invention of upstream product deliverables that pay the bills. Managing Apple for a long-term strategy means aligning prime resources to vision and upstream innovation. Apple’s execution today is a mediocre extrapolation of what current managers think Steve Jobs would have done, rather than a diligent execution of leadership that knows how to take control.
• All of Apple’s operating systems are in dire need of re-invention. iOS, OSX and server software need fundamental change: upstream innovation that makes them come to life in serving the digital media hubs we as people otherwise need to manually manage. The improvements that we do see seem discombobulated and the misaligned.
• Some of Apple’s products are turning mediocre. An address book that holds six thousand contacts freezes up on every device it is synced to, and sends mail, calendar and other applications in a 40 minute tailspin when you add a single contact. Features prevalent in the distribution of internet content (RSS) disappear from one Safari release to the other, making its users flee to competitive browsers. Shell wakeup and Power Nap differ depending on what MacBook you own. iPhone5 material is sub-quality, scratching easily. Product Management has sunken into the dark catacombs of subordinates. Apple is failing exactly on the basis of the premium computing experience that made it beloved.
• Apple, despite many proclamations to want to do the right thing, is actually in blatant violation of free-market principles in the distribution of music, books, movies and other digital media, perhaps because many technologists do not understand the finite nature of greater-fool economics. Those violations — in addition to fixed pricing mechanisms and collusion — are artificially restricting supply and demand for media, and reducing the viability of creative freedom.
• Price erosion continues. Less than two days after Steve Jobs died I was offered a business discount on Apple products. Not because I wanted it or desired it: The reason for me to buy Apple has always been value, not price. For the first time since Steve Jobs’ passing Apple put previous products and next generation products in the same keynote slide, to catch the buyers who can’t afford current generation products. A slap in the face of renewable value.

There are many more signals I could list that contribute to the pattern I see. But for the sake of time I will now stop here. A complete log of the finite loop signals of Apple can now be found here. All my articles on Apple, including positive, are here.

I gain nothing by criticising Apple. I do not get paid to write this article, and I don’t advertise. I have friends at Apple who will frown on me, and I have a book to finish (on renewable economics) that will get delayed by this distraction.

The only thing I want is for Apple to grow up, to become the responsible adult it needs to be to appease new customers with incredible and renewable innovation. In fact, all of us in the technology business need to learn a hard lesson that to encircle the world, we better learn how to embrace it. The lesson Apple gets to face first.

And if that requires me to be the tough daddy to get us there, so be it.

This article was originally published at The Venture Company.

Georges is an entrepreneur, venture catalyst, serial CEO, venture capitalist turned innovation economist (by fate) and the inventor of renewable economics that will re-authenticate and re-inspire the world, the subject of his first book. Georges’ insights have been generously lauded and covered in major online publications and trade media, such as The Wallstreet Journal, The New York Times, Forbes, Business Week, Fortune, NPR, San Francisco Chronicle, Reuters PEHub, AltAssets, Pensions & Investments, Investors’ Business Daily, Portfolio and hundreds of distributions across the globe.

photo credit: boogah via photopin cc

To paraphrase investor Peter Thiel, we were promised flying cars, and what we got were 140 characters.

But while I’ve often felt that way myself, I think that complaint is a little too facile.

Thiel’s quip echoes a common lament among those, like me, who were drawn to Silicon Valley because of its legendary achievements: the transistor, the integrated circuit, the Internet, and the personal computer. (Well, the PC actually came from Florida, but it got out of that state ASAP, and it’s fair to say that Silicon Valley companies like HP and Apple had an enormous amount to do with the PC’s success.)

These were life-changing, even world-changing, inventions. So it’s a bit disappointing to survey the landscape of innovation today and see the brightest minds of a generation chasing comparison-shopping solutions, social media aggregators, and subscription commerce schemes for selling razors, condoms, and underwear.

In fact, it’s easy to overlook the tremendous chain of invention that made those 140 characters possible. Twitter couldn’t exist without cellular data networks, smartphones, widely accepted browser standards, and widespread Internet service. If Twitter solves a relatively simple problem, it can only do so because it rests on the shoulders of giants who were solving incredibly difficult problems.

Ditto for the companies that we love to mock because it seems their hardest thinking has gone into deciding what kind of swag they should send to tech bloggers. You shouldn’t overlook that these companies are possible only because they stand at the end of an incredibly long line of inventions that have made it cheaper and easier to start a company than ever before.

Aaron Emigh, the founder and chief executive of Shopkick and a serial entrepreneur, drove this point home for me recently.

A couple years ago, he compared the costs of building an e-commerce company to scale (the point at which it can support millions of customers) in 1999 versus the costs for building a similar company in 2009. He helped build one such company in 1999, CommerceFlow, so he had real data on which to base his analysis.

What Emigh found is that bandwidth costs declined an average of 40 percent per year from 1999 to 2009. Internet capacity that would have cost a startup $180,000 per month in 1999 would only cost $6,000 per month in 2009. That’s a huge difference.

Bandwidth, of course, is cheaper because of all the fiber that got laid during the dot-com days. People used to scratch their heads about the “dark fiber” that had been built by companies like Qwest and Global Crossing. But the truth is, that dark fiber (unused optical cables for Internet data) is now cheap fiber, and it’s in use. So maybe the dot-com boom was good for something after all.

Bandwidth is only part of the story, though. Cloud services mean that fledgling companies can get started on little more than a founder’s credit card and can grow to a pretty respectable size without incurring significant capital expenditures (capex) at all.

In 1999, Emigh spent about $10 million buying expensive Sun servers and other hardware necessary for hosting a high-volume e-commerce site.

“These were really expensive machines and you needed a bunch of them,” Emigh said.

In 2009? Total capex dropped to just $27,000. It could probably be close to zero today, as all you’d need to buy would be desks and chairs for your few employees and maybe a few laptops.

Overall, the total monthly expenditures needed in Emigh’s model dropped from $479,000 to $162,000, amounting to a 66 percent discount.

We’ve seen other changes besides costs. Distribution is easier thanks to wide-reaching search engines like Google, and advertising is cheaper and more effective.

For mobile startups, Apple’s and Google’s app stores give developers access to tens if not hundreds of millions of potential customer phones, a feat that was next to impossible to achieve 10 years ago.

Engineering productivity has gone up, too, Emigh told me, thanks to the maturity of open-source tools. A development project that would have required 20 engineers in 1999 might only need seven engineers now.

And we know much more about how to start a company. I started a company myself in 1999 and, it is fair to say, I had almost no clue what I was doing. Today, incubators and seed funds like 500 Startups, Y Combinator, and TechStars provide systematic coaching and guidance. The “lean startup” philosophy has become widespread through books, websites, and even giant robot dinosaurs so that even outside of an incubator, a would-be entrepreneur can learn a lot about what it takes to get started.

So, yes, we still don’t have flying cars. What we got were 140 characters and a host of Pinterest clones. But let’s not forget that those Pinterest clones depend on the engineering and business equivalent of a flying car: a cheap, ubiquitous, and robust infrastructure for building companies more easily than ever before.

Photo credit: x-ray delta one via photopin cc

Analysts have been concerned about the pace of innovation at Apple. After the iPhone and iPad, what’s next? An actual Apple TV seems stalled, and no other category-creating breakthrough products seem to be on the horizon, which made the question inevitable: How is Apple doing with innovation?

Pretty good, according to Cook.

“Innovation is so deeply embedded in Apple’s culture,” Apple’s CEO said. “Boldness, ambition … and making the very best products in the world — it’s in the DNA of the company.”

Get all the details here: Apple CEO Tim Cook at Goldman Sachs conference

But there’s no formula for innovation, Cook added, saying that some of the essentials include the right skills and the right leadership.

The skills he chose to highlight are Apple’s trifecta: software, hardware, and services.

“Consumers want this elegant experience where the technology kind of floats in the background and the customer is the center of the experience,” Cook said. “You can innovate in hardware, software, and services. The magic happens at the intersection of all three.”

This isn’t something you can just go buy, Cook added, saying that it takes decades to grow.

“I think Apple is unique in that,” he said.

And in terms of leadership?

“When I look at executive table, I see superstars,” Cook added, naming Apple design guru Jony Ive, among others.

One wag on Twitter has questioned Cook’s use of the word “center,” saying that clearly, if anything, Apple is the core:

RT @johnkoetsier: Apple CEO Tim Cook: ‘Apple is the center of innovation’ wp.me/p1re2-2Bvi v/ @dylan20 < Surely he means the core

— Rose Ross (@Rose_at_O) February 12, 2013

 photo credits: billaday via photopin cc, Dean Takahashi

Innovation at Dell is dead, says HP, a company that buried its own innovation alongside its sense of irony.

HP has released a statement in response to Dell’s proposed buyout plan, and unsurprisingly, it’s not optimistic about Dell’s prospects.

“Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell’s ability to invest in new products and services will be extremely limited,” HP said.

As Dell’s chief rival, HP has a lot to gain if Dell’s buyout plans result in failure. From HP’s vantage, going private may give Dell time to figure out and execute a long-term strategy, but it could also drive customers away. And HP says it will be there to scoop them up.

“We believe Dell’s customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity,” HP says.

The irony here is palpable, seeing as how HP itself has been knee-deep in disaster recently. With big layoffs, a nonexistent smartphone strategy, and that $8.8 billion autonomy fiasco, HP is in no position to point a finger at any other PC maker, no matter how tempting it is.

Not that we can fault them for doing so anyway, of course. It does make for good comedy.

I’ve done extensive research on the company revealing its ‘Quantum Strategy’ in a paper for Organizational Dynamics, and though Apple’s results saw $50 billion wiped off its market value I don’t feel it is the first sign of strategic weakness as some analysts are suggesting.

Apple reported no rise in profits for the final quarter of 2012 and slightly missed revenue estimates, prompting speculation that its period of hyper-growth is coming to an end.

The company sold 47.8m iPhones over the Christmas quarter, missing a forecast average of around 50m and revenue growth of 18 per cent year on year to $54.5bn was below the $54.9bn forecast, while profits were flat on the previous year at $13.1bn.

But before we write Apple off with premature assessments, we need to appreciate that its so-called disappointing performance is still extraordinary by many measures, and that it has the capabilities to keep winning in its markets, which it may yet redefine with more blockbuster products.

Apple is thought by many to have posted poor results, but this would be a rushed assessment. Apple’s revenues continued growing at a fast pace, with an 18 per cent rise over the previous year and 25 per cent more when adjusting for the fact that this quarter was for a 13-week period while the previous year was for 14 weeks.

Profits were $13.1 billion, same as the previous year, but actually seven per cent higher if the 13 week vs 14 week issue is taken into consideration. Gross margin fell to 38.6 per cent compared to 44.7 per cent year-on-year, but Apple had prepared the market about the lower margin and actually delivered above its own guidance.

Lower margins would be expected given Apple’s rising sales in emerging economies, introduction of iPad mini and appearance of more competing products that are much cheaper. The 38.6 per cent margins in the markets where Apple operates are still extraordinary.

Speaking of emerging markets, Apple’s higher transparency in reporting sales by geography shows that its revenues in China went up 67 per cent in this quarter compared to last year, with a huge potential upside. Further, its products are on different stages of the product life cycle, a pretty robust risk management strategy.

Even if in the long term Apple has lost some of its innovative edge, its substantial liquid assets still give it an advantage in the technology market.

The main issue for the medium and long term is whether Apple has sustained its innovative capabilities, which seems likely given that it’s part of the company’s DNA. But the proof will be in the pudding, and we’ll know over the next 12 to 18 months.

What many forget though is Apple’s safety net of $137 billion in cash and liquid assets. Apple could easily buy any new technologies that appear to pose a threat to it, that offer synergies to its own offerings, or that can open up new markets for it.

Stock markets react, and sometimes overreact, immediately, but what matters is the big picture and Apple seems to be on a solid footing by that measure. Even though its shares fell based on the earnings announcement, this could be a useful correction.

Loizos Heracleous has authored six books and over 50 articles published in leading journals including the Harvard Business Review and MIT Sloan Management Review. His research has been honored by three noted Best Paper awards from the Academy of Management and received an Emerald Literati Award for 2007 for his research on the role of biometric technologies in service excellence, a second Emerald Award in 2009 for the Paper with the Best Practical Implications for his work on human resource strategy at Singapore Airlines, and a third award for the Paper with Best Practical Implications in 2010 for his article entitled “Can business learn from the public sector?” Loizos has trained or advised executives from several leading corporations including IBM, Total, Rolls-Royce, KPMG, Standard Chartered, O2, and Bank of China. He has been listed in the Marquis Who’s Who in the World since 2003. Before joining Warwick Business School, Loizos was Reader in Strategy at the Said Business School and Official Fellow of Templeton College at Oxford University, and Associate Professor of Business Policy at the National University of Singapore.

Stanford professor Shai Bernstein tracked almost 2,000 technology companies that went public. After the IPO, companies became more “incremental,” less ambitious … and lost their top inventors and innovators. Mediocre performers, however, stayed behind.

The result? Companies turned to acquisitions to bring in new technologies and get fresh talent.

Bernstein tracked the companies between 1985 and 2003, recording how many patents each earned both before and after the IPO. He paired the hard analysis with an estimate of how important each patent was by checking how often it was cited in other patent applications. And then he went one step deeper by looking at companies that almost went public — planned to go public but changed their mind — and compared them to the companies that actually did conclude their IPOs.

While companies that stayed private continued innovating at the same pace, the ones that went public saw the average value of their patents decline by about 40 percent over the next five years.

In an sense, it’s obvious: The key leaders of a company benefit most from an IPO, cash out, and go elsewhere to pursue another dream. And those who fit well into the ungreased cogs of a startup don’t mesh with the bureaucracy of a public company with public responsibilities. In fact, inventors were 18 percent more likely to leave than other employees after an IPO.

But something odd happens to the ones that stay, too. Inventors that stay seem to become less innovative, as the quality and value of their patents dropped almost 50 percent after the IPO.

The lesson might seem to be: Don’t go public.

But that’s not exactly the case. In situations where the CEO and chairman of the board are the same person, innovation stayed relatively high. Bernstein attributes this to how a small leadership group with closely held authority is more able to stand firm against the quarter-by-quarter pressures from the market.

photo credit: Tony Fischer Photography via photopin cc

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Goldy Bardin is a creative director at Organic, Inc.

CES 2013 was full of innovators—all the big names in technology you would expect, plus a host of surprising startups. Their bright minds and smart designs didn’t disappoint, for the most part.

But as I walked the floors, two brands stood out to me: Fujifilm and Polaroid. Both are once-great analog brands that have have had to make the leap to digital. Over the years, both have expanded their core product lines with various consumer electronics, but both brands have declined substantially since their glory days.

So I took a closer look to see how these tried and true brands are keeping pace with the amazing innovation that’s happening in 2013.

Polaroid

I started with Polaroid. As a marketer, I was curious about how they were differentiating themselves from innovative brands like Sony and LG. As I explored their booth, I was intrigued by the archival displays from their past. They truly are a nostalgia brand. I still remember my first Polaroid camera and how fun it was to instantly see the photo I had taken. Edwin Land, Polaroid’s founder and inventor of the instant camera, really understood the value of instant gratification.

At first I was impressed by their new iM1836 Interchangeable Lens connected camera with Android 4.1 “Jelly Bean.” A great idea. But as soon as I picked up the camera it felt, well, cheap. It took a while to start up and getting from screen to screen was glitchy and slow. There was no “instant” anything. And it wasn’t gratifying.

Granted, this was a display model that had been handled by thousands of attendees, but it was a far cry from the Samsung Galaxy Android-enabled camera, which was pleasing to the eye, incredibly fast, and also featured great apps like Best Face. That said, why would I pay for an extra data plan for any connected camera when I could just deck out my phone with the sleek i.am.plus foto.socho?

I also checked out another new device—the Polaroid Kids Tablet. I used to market Leapfrog products, which are really kid-friendly and intuitive, so I was excited to check it out. The design was cute, but definitely skewed toward younger pre-school aged children. It runs on Android Ice Cream Sandwich, so the interface is somewhat intuitive, with icons that kids who can’t read yet can most likely interpret. However, the navigation buttons were small and butted up next to the beveled chassis, so they were hard to reach, even for smaller fingers.  The main features seemed to be indestructability and parental controls. A pretty good idea, but the overall design was a disappointment.

Polaroid has been making quite a few announcements lately, including a new retail strategy that includes Fotobar storefronts where you can print your digital photos. However, as a Creative Director, and someone with affinity for their brand, I wish they would innovate products and develop a marketing strategy that embraced the notion of instant gratification. The iM1836 camera and Kids Tablet seemed like attempts to fill perceived gaps in the market, but didn’t really deliver on the strength of the brand heritage. Success of the Fotobar storefronts remains to be seen.

Fujifilm

As I wandered in the Fujifilm booth, I immediately raised an eyebrow at their Instax line of instant cameras. Super cute, Hello Kitty-like cameras that print instant photos in multi-colored Polaroid-esque frames. I would love to have seen a product like this from Polaroid, but they’ve only recently (and timidly) re-embraced instant cameras with prompting from enthusiasts like The Impossible Project.

I was really interested in how Fujifilm was faring in the transition from film to digital, especially given the recent demise of Kodak. I thought back to my first digital camera—the Fujifilm FinePix 6800Zoom, designed by F.A. Porsche. It’s gorgeous. In fact, although it stopped working many years ago, I’ve still held onto it as a piece of art.

What I found was that Fujifilm really understands their customer and is savvy enough to deliver innovative products that satisfy photography enthusiasts and brand loyalists. Their X100S camera design is reminiscent of a 1960s-era Pentax and when I picked it up, it had some heft to it. But within the retro exterior is some really cool innovation in digital photography, including settings that allow the user to simulate the color of their favorite traditional Fujifilm (e.g., Velvia, Astia, Monochrome, etc.).

Fujifilm knows their customers love the quality of color they get from using their traditional film, so year after year they innovate to capture that Fujifilm-like color in their digital products.

(Random sidenote: Even though I don’t use traditional film cameras anymore, I still save the canisters. Fujifilm canisters are the best for making Alkaseltzer rockets.)

To quote Peter Drucker, “Marketing and innovation produce results; all the rest are costs.” Polaroid is doing some interesting marketing, but is falling short on innovation. Fujifilm, meanwhile, is quietly innovating but hasn’t done anything noteworthy in terms of consumer marketing (at least in the US).

It will be interesting to follow these two iconic brands in 2013 and see how they navigate the waters of the digital era.

Goldy Bardin is a Creative Director specializing in consumer goods and technology at Organic, Inc.

Vivek Wadhwa is a vice president at Singularity University and a Washington Post columnist.

Last year I predicted that social media would lose its sizzle. Since then, the bubble has burst for companies such as Facebook, Zynga and Groupon. The tablet computer market, on the other hand, is booming, voice recognition is becoming a standard feature in new computing devices, and there have been, as I alluded to in 2012, notable cloud-computing failures andsecurity breaches in the past year.

I am glad to have been wrong about LinkedIn. It is a great company with a stellar management team. Also, tablet prices haven’t quite hit the $100 mark in the U.S., as I predicted they would. But I still anticipate they will, and likely very soon.

So, what else lies ahead for 2013? There is nothing as spectacular as the Facebook IPO, at least at this point, but expect gradual technology progressions of greater significance than have been seen in years past. The Post’s Hayley Tsukayama has outlined the trends in tech for the coming year — a year I believe will be one of transition for the sector.This year, expect tech innovators to set the stage to solve global problems, since technologies in fields such as medicine, robotics, artificial intelligence, synthetic biology, 3D printing, and nanomaterials are advancing exponentially. Like the processors in our computers, they are becoming increasingly powerful while their price drops precipitously. This will enable startups to take on problems in fields such as energy, health, education, and security that only government and big research labs previously could.

Most recently, the big rewards have gone to startups developing relatively simple social media platforms and applications. In the upcoming era of exponential technologies, expect the rewards to go to players that solve big, global problems.

Here are the big innovation trends that I believe will gain traction in 2013.

Tablet explosion to computing revolution

The entry price of tablet computers will almost surely drop to under $100 in 2013 — especially if the rumored $99 Acer tablet gains traction this year, as I believe it will, or if theIndia Aakash tablet finally lives up to its potential. I also anticipate that the tablet price tag will keep dropping until it reaches close to zero over a 2-to-3 year period. We will reach the point where it makes sense for companies to give tablets away just as mobile carriers give phones away in exchange for plan subscriptions. More broadly, we can expect to see tablet computers almost everywhere in this decade—our kitchens, bathrooms, cars, supermarkets, schools and elevators.

Apple currently owns the high end of the market, of course, and I don’t expect cheap tablets to put any dent in the company’s sales this year. But, if Apple fails to keep innovating, the company will surely feel the pain in 2014 and beyond as Samsung continues to nip at its heels. The PC laptop vendors — Dell, HP and Lenovo, among others — should worry since tablets will continue to cannibalize their higher-priced products.

The biggest winner in this revolution will likely be Google, with its free Android operating system. Unsurprisingly, the loser will probably be Microsoft, which licenses its mobile operating system, Windows RT, for around $80 — more than the hardware will eventually cost. In the long term, expect the billions of new users that come online over the next few years to be doing Google searches and using Google’s applications.

The ‘quantified self’ goes mainstream and creates a new regulatory battlefield

We saw a trickle of sensor-based medical devices in 2012, but these were just the start of the “quantified self” movement. As sensors become smaller, more powerful, and cheaper, we will see many new types of devices that help us monitor our health. These will be embedded in our iPhone cases, bathroom scales, toothbrushes, and even in our jewelry.

In 2013, expect to be able to purchase sophisticated new devices like the AliveCor Heart Monitor, which I have been testing and the FDA has approved for use by licensed U.S. medical professionals. If I had a device like this 10 years ago, I may have been able to avoid the heart attack that I had.The device will cost $199 when prescribed by a physician. Today, we need physicians to analyze the data the device provides. But, given the rate at which technology is advancing, computers may be able to do a better job. Witness the way IBM’s Watson defeated Jeopardy champions. It had far more data available to it.

Eventually, I foresee cloud-based systems that have access to the latest medical knowledge and to data from hundreds of millions of people analyzing medical data. I would trust these systems more than I trust my cardiologist, and the app to access these will be available anytime and as often as I need it.Even before we reach this stage, consumers should be allowed to purchase these devices off the shelf to see and analyze their own medical data. This is where the battle lines will increasingly be drawn between technologists and regulators.

Users will begin to demand greater control of their own data and more ways to monitor it in order to improve their lives. That means, in the coming year, one should expect to see the regulatory battles over these types of technologies become more frequent and heated.

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In the aftermath of the announcement, Zipcar came under a firestorm of flak from Silicon Valley’s commentators. The primary criticisms are that the company is under-valued, and that the acquisition will stunt the unstable and nascent car-sharing economy.

However, the acquisition adds legitimacy to the car-sharing space, and will propel younger rivals into the spotlight.

“It’s a big day for car sharing and a proof-point for the industry,” said Jessica Scorpio, cofounder of Getaround, on hearing the news. In an interview, Scorpio said it was a “good deal,” primarily because the car-sharing market is still in its infancy. “Zipcar’s value hasn’t been realized yet,” she explained.

Massachusetts-based Zipcar is the undisputed leader in the car-sharing market. It was one of the first to experiment with the sharing business model when it’s founder Robin Chase, a mother of three, saw evidence of car-sharing’s success in Berlin in the late 1990s and promptly received financing. This model would later be dubbed the ‘The Sharing Economy’ by its Bay Area advocates, including Zipcar early investor and former AOL chief executive Steve Case, and would later be adopted by services like Airbnb.

Zipcar manages a fleet of more than 10,000 for-rent vehicles spread across 19 metropolitan markets and over 300 college campuses. The 12-year-old car-sharing network has more than 730,000 members and about 1 million customers. The company booked 4 million total reservations in 2011.

At first look, this may seem impressive, but Zipcar has never been able to turn an annual profit, losing about $55 million since 2007. This prompted the Wall Street Journal to recently call it a “pretty awful” company.

Still, the new generation of startups view Zipcar as the pioneer in the space, paving the way for more feasible business models. The company was one of the first to experiment with hourly rentals, which allowed it to break into markets and demographics that traditional car-rental services like Hertz and Avis could not. The service found its niche with busy urbanites who rent nearby vehicles for weekend use, and often opt out of owning a car altogether.

Is $500 million a fair price?

From a purely financial perspective, it’s a fair deal.

Zipcar has struggled to grow its membership base and turn a profit. As entrepreneur Mark Rogowsky rightly points out in Forbes, there is a fundamental “structural issue” — users typically rent a Zipcar over the weekend. But Zipcar owns a fleet of roughly 10,000 for-rent vehicles and must pay for their upkeep and maintenance on a consistent basis.

An acquisition is also motivated by a company’s efforts to market to new customers. In a phone call with analysts, Avis CEO Ronald L. Nelson revealed that he was skeptical of car-sharing services in the past but viewed this acquisition as an opportunity to reach a younger demographic and increase weekend availability.

Avis hopes this will translate into revenue — it said it expects “to generate $50 to $70 million in annual synergies” in relation to the deal. The company also said it expects its full-year 2012 revenue to be about $7.3 billion, a 24 percent increase over 2011.

“What’s unique about Zipcar is the brand,” said Scorpio. “In terms of car-sharing, Zipcar is the top-notch experience.” She told me that traditional car-rental services have been sniffing at the heels of Silicon Valley startups for years, but that Getaround isn’t in the market for an acquisition.

“We have pretty frequent conversations with car rental [companies] and car automakers,” she said. “[But] I think the quick win is Zipcar if you can get it.”

Zipcar owns cars — it’s not peer-to-peer

Zipcar’s younger rivals will often tell you that its business model is broken, as the company is encumbered by its inventory. In its life span, it has needed to borrow $97 million to finance its fleet of cars.

“Thank God we don’t have that model,” said RelayRides‘ CEO Andre Haddad in an interview. “Their economics are different.”

The “peer-to-peer” model has numerous business advantages. It taps into the installed base of cars that people already own. For one thing, Getaround has developed some unique IP in the form of its hardware, its CarKit, which allows users to unlock a stranger’s car via a smartphone.

Both RelayRides and Getaround have seen faster adoption and have expanded to more cities than Zipcar. Getaround claims to have signed up over 10,000 car owners in a year and a half, while Zipcar took 12 years to build up its fleet of 10,000 cars.

While Zipcars often sit idle, Getaround has been able to capitalize and plans on “leveraging the 250 million cars that sit idle 22 hours per day,” according to Scorpio. Likewise, Relayrides, a service that lets you rent cars from anyone in your community, expanded last year from 2 cities in 2 states to 1,200 cities in 49 states.

With peer-to-peer, there are no parking or logistics issues, and scaling is more seamless. As Scorpio often says, “It’s about car access over ownership.”

Meanwhile, Zipcar couldn’t find a cost-effective way to increase its membership, and its growth rate hit the skids in the past three years. As the Wall Street Journal points out, Zipcar was a “prodigious money-loser” and consistently had to halt plans to move into Europe, which would take more resources than the company had at its disposal.

This deal won’t halt innovation

The news seems to have offended some commentators, who hit back with claims that such a move would stunt disruptive innovation, perhaps even knocking the confidence of younger players in the space.

Sarah Lacy of PandoDaily wrote about her many reasons for hating the deal, arguing that Zipcar has made “inroads into this oligopoly” and that with the “biggest disruptor gone … all the others are still fledgling.” She said that Avis is not a tech company and would be unlikely to push the envelope.

The deal may not be considered cool from Silicon Valley’s (somewhat insular) perspective, but it doesn’t appear to have affected morale.

As a whole, the ride-sharing space has experienced its ups and downs, most recently with lawsuits levied against services like Uber, Sidecar, and Lyft, but yesterday’s acquisition isn’t one of them.

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Jack Gold is the founder and principal analyst at J.Gold Associates, based in Northborough, Mass. He covers the many aspects of business and consumer computing and emerging technologies.

Innovation. It’s what makes new markets. It’s what creates new opportunities for companies to grow dramatically. And it’s what creates demand when consumers don’t even know they want something.

We’ve seen innovation in the computer industry many times. And we recently saw it again when Apple created a market for its smartphones and tablets and took a commanding lead from the previous kings of the hill (e.g., RIM, Nokia, Microsoft).

Microsoft has been particularly hard hit as tablets have eaten into its core PC market. And its smartphone efforts have faltered for several years. Now Microsoft is fighting back with its latest innovation, Windows 8.

But Windows 8 has a legacy curve “trap” to deal with that, as a brand new platform, iOS didn’t. However, I believe iOS now is moving down the same legacy curve that is hampering Microsoft (and RIM, for that matter) and falling into the same trap. How radically can you change things without turning off your existing customer base? Your ecosystem? Your app selection and developers?

The fact is, the farther you move down the innovation curve, the more likely you are to have challenges. When you start from a green field position (as iPad/iPhone/iOS did), the innovation curve is just at it’s beginning, both because you have no base to work from and because there are no predetermined expectations.

But when you have an existing product, its much harder to innovate – both because you are primarily making fine tuning adjustments on next generation products, and because you don’t want to alienate your base by changing too radically from what they already know and like so they will continue to buy new products and/or upgrade.

So, getting back to Apple and Microsoft — it’s the best of times and the worst of times, in a Tale of Two OSes (OK, three if you add Android, and perhaps 4 if you add BlackBerry).

Which brings us to the recently launched iPad Mini and Microsoft Surface tablets. Both now have to satisfy the legacy needs of their partners. Arguably, Microsoft’s legacy baggage is more severe than Apple’s. But when many people asked recently why the Mini was relatively non-innovative, the innovation curve is the answer.

Unless Apple wants to completely reinvent the iPad and iOS, they have some real world restrictions (e.g., app compatibility, user interface, form factor). For its part, Microsoft knows it needs to maintain Windows compatibility to keep its ecosystem happy while at the same time appealing to new users. That’s why some describe Windows 8 as Windows 7 with a touch interface wrapper.

But the legacy effect in the mobile market doesn’t apply only to Apple and Microsoft. Now that Android is beginning to mature, it too will fall into the legacy trap. Google will continue to make enhancements/improvements, but new versions of Android can no longer be a radical departure from the previous ones, without requiring a restart of the ecosystem that has been built to date.

Further, this is exactly what RIM faces with BlackBerry 10. On the one hand, it needs to totally reinvent the experience to modernize its image. On the other hand, it has an existing ecosystem, albeit shrinking, that it doesn’t want to alienate. It will do its best to make both happy, but in the end, it has to go much higher on the innovation curve than a typical legacy calculation would allow simply to regain its shrinking market share. This is a much bigger gamble for RIM but it really has no choice.

So what does this mean for the market? All of the major vendors are now bound by a Legacy Trap that limits their overall ability to innovate (including Apple). This means you should expect refinements, rather than revolution. This is typical of mature markets, and although the tablet and smartphone markets are still fairly young, the maturity curve for new tech is now months or a few years at best, rather than the decades it used to take for older tech like PCs.

It also means that buyer characteristics will change. It’s not as much the mass crowds seeking the newest, latest gadget going forward. It’s more likely customers that will upgrade more slowly than before (more traditionally like other tech products). The amount of innovation will directly effect how soon/quickly the upgrades take place.

New product categories have a huge surge, while upgrade categories generally don’t. This may be one of the reasons for the relatively slow sales of the iPad Mini at launch (although it still had decent sales overall). It also means that the pace of new product introduction may actually slow somewhat as fewer feature upgrades make it less attractive for customers to buy every 9-12 months. And customers often will skip a generation (or two) before upgrading. Again, this may have had an effect on the Mini, as many “gotta have one” customers bought the iPad 3 earlier (and how many consumers really need/will buy one of each?).

This has been a factor with Windows PCs for several years, and it’s why Microsoft is still in the process of converting Windows XP users who skipped a generation (now potentially 2 generations). RIM had a similar problem getting users onto BlackBerry 7. And Palm’s demise came about partially from requiring the loyal PalmOS user base to move up to WebOS (although Palm had several other problems that condemned it). You could probably include Symbian and some others in this discussion as well.

So, what’s the bottom line? The innovation curve is real and affects all products. But the hyper-inflation of new products categories seems to make people forget this. We will see a slowing in the amount of innovation of products over time as they fall into the legacy trap. And this will include the most popular products that seem to have unlimited potential.

Of course, this will only hold until the next new innovation cycle begins, and no one really knows what, or when, that might be.

iPad Mini, Surface photos: Devindra Hardawar/VentureBeat

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Carrier subsidies are increasingly standing in the way of innovation.

“We’re drunk off the subsidy model,” IDC analyst Ramon Llamas told VentureBeat last week.

The lure of cheap, subsidized phones underwritten by massively long two-year contracts stands in the way of competition and innovation. The big carriers use their contracts to lock in profits and help limit the customer “churn” that would otherwise make their revenues too unpredictable. But those two-year contracts keep people from upgrading as quickly as they would otherwise, stifling handset makers’ ability to get the latest models in our hands.

Carriers also stifle OS upgrades, keeping you from upgrading to the latest version of Android because they don’t want to invest the time to make it work with a string of older phones: They’ve already got you locked in to a contract, so why would they want to make your phone any better than it already is?

The U.S. is not unique in its dependence on carrier subsidies, but it’s not the only way: In many European countries, for instance, people buy their phones and SIM cards separately, without long, onerous contracts.

Some carriers are starting to see this as a wedge issue. T-Mobile, for instance, promises to do away with contracts and subsidies altogether. The carrier sees it as a more honest, direct model, and I agree: I’m done with contracts. I recently paid $245 to get out of my contract with a large carrier after I had endless problems with its service and its phones.

In an earlier column, I blamed Microsoft for not being able to solve these problems. It was an unfair criticism, but it does reveal an opportunity for the Redmond, Wash.-based software company.

We need someone to break the logjam. Could it be Microsoft?

Instead of standing by and playing the same ballgame as every other mobile phone maker, Microsoft should take a page from Apple’s book and rewrite the game. It’s got the leverage, it’s got the installed base, and it’s got a powerful weapon: cash.

In short, Microsoft should subsidize its own phones. Google currently offers the Nexus 4 for $299, unlocked and off contract. That’s a subsidized price, although the actual amount of the subsidy is probably far less than you might think. When you buy an unsubsidized iPhone for $650, only about $200 of that goes to the iPhone’s  component parts. Let’s be generous and assume that another $200 goes to manufacturing, shipping, and the manufacturer’s profit. That subsidized price is still higher by $250 than the actual cost to the carrier.

In other words, assuming that it, too, can get phones made for $400 apiece, it would cost Microsoft $100 to $200 each to subsidize unlocked, off-contract Windows phones to a sales price of $200 or $300.

That’s a small price to drive its currently anemic Windows Phone OS deeper into the mobile ecosystem.

It would cut out the carriers — those that depend on subsidies, anyway. A small benefit might be helping out the carriers like T-Mobile and Virgin Mobile that have a big incentive to take on the incumbents, and they’d in turn help Microsoft with aggressive, edgy advertising campaigns.

Now, Google can afford to subsidize Nexus 4s because it knows it will eventually make money from advertising and location services for Android users. Microsoft might make some small amount of money from Bing, but that’s not its real payoff.

The real benefit would be enabling Microsoft to sell directly to the large companies that make up the backbone of its revenues. It wants to tie Windows 8 closely together with Windows Phone 8, and this is one way to do it: With volume sales of corporate phones that are off-contract, work seamlessly with your corporate Windows 8 laptop or tablet — and, by the way, which are far more useful and hipper than anything Research in Motion is likely to produce.

Why I keep harping on Microsoft

I’ve been writing about Microsoft a lot this year because it’s one of the most interesting companies in tech right now.

With a market cap around $225 billion, annual revenues of $73 billion as of the fiscal year that ended in June, and net income around $17 billion, it remains a mighty company, one to be reckoned with.

Microsoft still outstrips IBM, Cisco, Intel, and many other giants of the tech world in size and revenues.

Microsoft’s research and development arms are unparalleled, with armies of Ph.D.s that few other companies can match. Even a long-time startup guy like Rahul Sood, who joined Microsoft over a year ago, can’t stop raving about how much talent the company has.

Microsoft’s financial power pales next to Apple, which still has a market cap of about $500 billion despite sudden (and rather inexplicable) losses last week, on about twice the revenue and more than twice the profits — over $41 billion for the last fiscal year.

It stands eye-to-eye with Google, which has almost exactly the same market cap on half the revenues and profits. Google is worth more on a P/E basis because its star is still rising, while Microsoft is a mature sun, and no one knows if it will keep burning for another billion years or if it’s going to blow up next year and obliterate its entire solar system.

Make no mistake, Google is Microsoft’s biggest threat. One glance at this slide from KPCB partner Mary Meeker’s annual Internet trends report, and you’ll see that mobile devices — led by Google’s Android OS — have rapidly blown away Microsoft’s dominance of the computing market in the past few years. (See that green triangle in the right corner: That’s Android.)

That’s why Microsoft’s mobile strategy is so critical. It’s going to do everything it can to regain control over the computing world. It may already be too late. But it’s certainly been interesting to watch.

I’d love to see Microsoft start tackling that by mining one of the areas most ripe for disruption today: our broken carrier subsidy model.

Google is no stranger to giving through its philanthropic arm Google.org — but that’s not stopping the company from doing more.

Google today announced the “Global Impact Awards” to provide funding to nonprofits who are using technology and innovation to solve big problems. While there’s certainly a publicity angle to the awards, it’s still nice to see Google making a concerted effort to support worthy causes. And through the Global Impact Awards, Google will raise awareness for nonprofits and their issues.

In its first round of awards, Google is donating $23 million to seven nonprofits:

• Charity: Water: Monitors water quality with remote sensors to ensure better access to clean water. Its $5 million reward will be put towards installing sensors at 4,000 water points across Africa by 2015.
• Consortium for the Barcode of Life: With $3 million from the award, the Consortium will work with researchers in six developing countries to implement DNA barcoding techniques to protect endangered species.
• DonorsChoose.org: One of the most prominent education nonprofits. It will use $5 million from the award to create 500 new AP science and math courses in public schools for girls and disadvantaged students, together with the College Board.
• Equal Opportunity Schools: Will use $1.8 million to find 6,000 high-performing, but underrepresented, students and move them to advanced courses.
• Geena Davis Institute on Gender in Media: Will use $1.2 million from the award on technology that will automatically analyze the portrayal of women in children’s media.
• GiveDirectly: Uses mobile tech to power direct cash transfers to the poor. It will use $2.4 million from the award to increase the scale of its current cash transfer plan.
• World Wildlife Fund: Will use $5 million from the award ot adapt and implement sensors to tag wildlife.

“We look for nimble, entrepreneurial organizations that have a specific project that tests a big idea and a brilliant team with a healthy disregard for the impossible,” Google writes on the awards’ website.

Jacquelline Fuller, Google’s director of giving, notes that the company has offered quite a bit of philanthropic aid in the past, including more than $100 million in grants, $1 billion in tech, and 50,000 hours of volunteering from Google employees.

This post comes to us from startup guru Steve Blank. 

Almost every large company understands it needs to build an organization that deals with the ever-increasing external forces of continuous disruption, the need for continuous innovation, globalization, and regulation.

But the problem is here is no standard strategy and structure for creating corporate innovation. In this post, we’ll outline this strategy problem and propose some specific organizational suggestions.

I’m sitting at the ranch with Alexander Osterwalder, Henry Chesbrough and Andre Marquis listening to them recount their lessons-learned consulting for some of the world’s largest corporations. I offered what I just learned from spending a day at the ranch with the R&D group of a $100 billion corporation along with the insights my Startup Owners Manual co-author Bob Dorf, who has several Fortune 100 clients.

(Full disclosure. I’m recovering from a reading spree of Chandlers Strategy and Structure, Gary Hamel’s The Future of Management and The Other Side of Innovation by Trimble and Govindarajan, Henry Chesbrough’s Open Innovation, as well as The Innovator’s DNA from Dyer, Gregersen and Christensen. So some or most of this post might be that I’ve overdosed on business books for the month.)

Collectively we’re beginning to see a pattern and we want to offer some concrete suggestions about Corporate Management and Innovation strategy and the structural (i.e. organizational) changes corporations need to make.

If we’re right, it will give 21^st companies a way to deal with innovation – both sustaining and disruptive – as a normal course of business rather than by exception or crisis. Companies will be organized around Continuous Innovation.

Strategy and Structure in the 20^st Century

While companies have existed for the last 400 years, their modern form is less than 150 years old. In the U.S. the growth of railroads, the telegraph, meat packers, and steel and industrial equipment forced companies to deal with the strategies of how to organize a complex organization. In turn, these new strategies drove the need for companies to be structured around functions (manufacturing, purchasing, sales, etc).

General Motors organizational chart. 1925

90 years ago companies faced new strategic pressures as physical distances in the United States limited the reach of day-to-day hands-on management. In addition, firms found themselves now managing diverse product lines. In response, another structural shift in corporate organization occurred. In the 1920’s companies restructured from monolithic functional organizations (sales, marketing, manufacturing, purchasing, etc.) and reorganized into operating divisions (by product, territory, brand, etc.) each with its own profit and loss responsibility. This strategy-to-structure shift from functional organizations to operating divisions was led by DuPont and popularized by General Motors and quickly followed by Standard Oil and Sears.

In each case, whether it was organizing by functions or organizing by operating divisions, the diagram we drew for management was an organization chart. Invented in 1854 by Daniel McCallum, superintendent of the New York and Erie railroad, the chart became the organizing tool for how to think about strategy and structure.

For one, ut allowed companies to visually show command and control hierarchies – who’s responsible, what they are responsible for and who they manage underneath them, and report to above them. (The irony is that while the chart may have been new for companies, the hierarchies it described paralleled military organization and had been around since the Roman Legion.)

While organizational charts provided the “who” of a business, companies were missing a way to visualize the “how” of a business. In the 1990’s Strategy Maps provided the “How.” Evolved from Balanced Scorecards by Kaplan and Norton, Strategy Maps are a visual representation of an organization’s strategy. Strategy Maps are a tool to translate the strategy into specific actions and objectives to measure the progress of how the strategy gets implemented (but offer no help on how to create new strategies.).

By the 21^st century, organizations still lacked a tool to create and formulate new strategies. Enter the Business Model Canvas. The canvas describes the rationale for how an organization creates, delivers, and captures value (economic, social, or other forms of value). The canvas ties together the “who and how” and provides the “why”. External to the canvas are the environmental influences (industry forces, market forces, key trends and macro-economic forces). With the business model canvas in hand, we can now approach rethinking corporate innovation strategy and structure.

Management Innovation in the 20th Century

Existing companies and their operating divisions implement known business models. Using the business model canvas, they can draw how their organization is creating, delivering, and capturing value. A business model for an existing company or division is not filled with hypotheses; it’s filled with a series of facts. Operating divisions execute the known business model. Plans and processes are in place, and rules, job specifications, revenue, profit and margin goals have been set. Forecasts can be based on a series of known conditions.

Inside existing companies and divisions, the business model canvas is used as a tool to implement and continuously improve existing business models incrementally. This might include new products, markets or acquisitions.

A New Strategy for Entrepreneurship in the 21^st Century

Yet, simply focusing on improving existing business models is not enough anymore. To assure their survival and produce satisfying growth, corporations need to invent new business models. This challenge requires entirely new organizational structures and skills.

This is not unlike the challenges corporations were facing in the 1920′s, when companies found that their existing strategies and structures were inadequate to respond to a changing world. We believe that the solution for companies today is to realize that what they are facing is a strategy and structure problem, common to all companies.

The video below (from Strategyzer.com) emphasizes that companies will need to have an organization that can do two things at the same time: Execute and improve existing models and invent new and disruptive business models.

1. For companies to survive in the 21^st century they need to continually create a new set of businesses, by inventing new business models.
2. Most of these new businesses need to be created outside of the existing business units.
3. The exact form of the new business models is not known at the beginning. It only emerges after an intense business model design and search activity based on the customer development process.
4. Companies will have to maintain a portfolio of new business model initiatives — not unlike a venture capital firm — and will have to accept that maybe only one out  of 10 initiatives might succeed.
5. To develop this new portfolio, companies need to provide a stable innovation funding mechanism for new business creation, one that is simply thought of as a cost of doing business
6. Many of the operating divisions can and should provide resources to the new businesses inside the company
7. We need a new organizational structure to manage the creation of new businesses and to coordinate the sharing of business model resources.
8. Some of these new businesses might become new resources to the existing operating units in the company or they could grow into becoming the new profit-generating business units of the company’s future.

This post initially appeared on Steve Blank’s blog. Blank is a retired serial entrepreneur now teaching entrepreneurship at UC Berkeley, Stanford, and Columbia.

Sept. 9 - 10, 2013
San Francisco, CA

Early Bird Tickets on Sale

LOS ANGELES — For Yammer‘s cofounder, user-experience design may be a solution for large companies getting their “asses handed to them” by scrappy startups.

Today, Yammer’s Adam Pisoni and Box‘s Aaron Levie took to the stage at Connected Enterprise, Constellation Research’s annual conference.

This year’s underlying theme is bringing design thinking to the enterprise. IDEO‘s general manger, Tom Kelley, kicked off the conference with a keynote on how large companies can build a niche in their organization to test new ideas. IDEO is the firm that famously designed Apple’s first mouse.

Young founders like Pisoni and Levie have long preached that enterprise software is sexy again. In recent months, investors and the media have caught up. Silicon Valley’s venture capitalists are pouring millions of dollars into young companies that are taking aim at legacy vendors like SAP, Oracle, and IBM.

According to Pisoni and Levie, the interest in cloud and “big data” startups won’t die down anytime soon.

“The enterprise is so ripe for more disruption,” said Pisoni, CTO and cofounder of Yammer, the enterprise social network acquired by Microsoft. “The consumer space is pretty played out at the moment.” Read more about under-30 enterprise founders at companies like Box and Huddle here.

How to test those “crazy ideas”

From its early days, Yammer threw out traditional engineering methods in favor of a new software development process. The company does not demarcate its engineers by product type or specialty. No person or group owns a product area; there are no search engineers, for instance. Instead, each team spends between two and 10 weeks on a project and then moves on.  ”It’s about being data driven, humble, and very iterative,” said Pisoni.

This process allows them to test “every crazy idea,” he explained. Before implementing a new feature, the company will closely monitor how users react to it. “The data keeps us intellectually honest,” he said.

Likewise, Levie revealed how Box, the cloud storage startup founded in 2005, has kept its competitive edge through A/B testing, customer feedback, and continuous product updates. “Most people are surprised that we have some updates to the site every day,” he said. “It’s a train that is always moving.”

According to Levie, who took to the stage minutes after Pisoni (pictured above in his trademark neon sneakers), the remaining challenge to growth is the dearth of technical talent. “If you’re a wicked PHP engineer, we’ll hire you right now, sight unseen,” he joked.

User experience design: let’s take it seriously

“The software you’ll see in the enterprise needs to be far easier to use,” said Levie. In terms of user experience, he said that Pinterest (the addictive technology that lets you share your virtual pin-board) is 10 times better than the current suite of enterprise software tools.

Yammer may find it even more challenging to improve its user experience post-acquisition (Yammer was picked up by Microsoft for $1.2 billion). When asked how the company will keep up the pace of innovation, Pisoni stressed that it will not be stalled. “We don’t have to go out and build all the stuff that they already have,” he said.

Yammer has been heads down for several months on-boarding 65,000 Microsoft executives to the system and bringing new methods to the software giant. “We are bringing a greater sense of connection to Microsoft,” he said. “It’s a way to break down those organizational silos.”

For these founders, the best way enterprise startups can be disruptive (and large enterprises can compete with them) is by experimenting with “freemium” models. “The future of work is changing,” said Pisoni. “Companies should prove value and sell customers on their vision — and make money later.”

To continue the conversation about design thinking and the enterprise, join us at CloudBeat.

Images // Sarah Seegal 

Today we had one of the biggest Apple events I can remember. Between hardware and software, Apple announced at least six new products today, seven if you include Apple Fusion Drive, and a whopping 23 new products if you include different models and build configurations.

Here’s the full list:

• New iBooks software
• New retina 13″ Macbook Pro (two build configurations)
• Mac Mini (three build configurations)
• iMac (at least two sizes, each probably with at least two build configurations)
• Apple Fusion Drive (not a standalone product, but very cool, and an orderable option)
• 4th-generation iPad (six main models)
• iPad mini (six models)

Tim Cook spoke to the huge number of new products — and his team’s effort — at the end of the event.

“We told you we’d deliver amazing innovation this year,” Cook said, “and I hope you’ll agree we did.”

Added to the list announced today, Cook mentioned iOS 6 with hundreds of new features, OS X Mountain Lion, which works with iOS like hand and glove — which is one of iOS’s great advantages over Android — the new iPods recently announced, the new iPhone 5, and the previously announced retina-screen MacBook 15″.

“It’s been an incredible year … a truly prolific year of innovation for Apple,” he said. “We hope you love these products as much as we’ve loved creating them.”

It is a staggering list.

When you look at Apple as a product company, it doesn’t have a huge number of SKUs … four main product families (Mac, iPod, iPhone, and iPad), perhaps 15 total products within those, and then some 50 or so versions of those products.

Any way you slice it, Apple has refreshed a massive proportion of its product line today. In addition, Apple has done something that it rarely does: Osborn a product. The announced new iMac product line won’t be available until November — the 21.5″ model — and December, for the 27″ version.

It’s impressive chutzpah, based on the capabilities of possibly the most sophisticated supply chain in the business. And it’s an impressive line-up for the holiday shopping season.

At the end, Cook thanked the teams at Apple, “the most talented and innovative people I know.” They’ve done their job. Now it’s time to see how the other titans of the industry — Microsoft and Google — will answer.

We won’t have to wait for long.

That’s the line coming from Scott Stanford, the co-head Internet banker of Goldman Sachs, in three videos that apparently have just been posted today. The videos express the bank’s positioning on innovation and where investors should put their money.

Goldman Sachs is one of two or three big investment banks vying for thought-leadership in the technology industry; indeed it’s in cut-throat competition with Morgan Stanley. While Goldman has led deals such as the Yahoo-Alibaba sell-down, the Zillow follow-on, and the Yelp IPO, and was in on the big Facebook IPO, Morgan Stanley scooped Goldman to be lead bank on Facebook’s IPO and has scored other big IPOs, such as LinkedIn.

So it’s always interesting to take note of Goldman’s public stances on the industry, because it has no doubt spent considerable time thinking about it. Stanford, for one, has networked hard in Silicon Valley; I invited him to speak at DEMO two years ago. He’s  also been very active managing the firm’s investments in Facebook, Uber, and Linkedin.

Here are the cliff notes on Stanford’s position:

First, and foremost, it’s about Data.

• The scale of data created daily is multiples the size of the Library of Congress and it’s very difficult for companies to harness this opportunity. This will create stark bifurcation between the haves and have nots.
• In order for a company to harness the data, they need three things: (1) access to proprietary data, (2) wherewithal/knowledge of what to do with it/how to process it, and (3) the right relationship with the consumer in order to apply the data. Some companies have some of these. Few have all.
• (Stanford doesn’t mention the Apple maps disaster, but the company’s fumble is a good example. The problem stems from a major disadvantage on the data side, where Google is winning.)

Second, it’s about efficiences or capacity utilization.

• Efficiencies/utilization is being applied universally to lots of sectors — not just transportation but education, labor, retail, etc. The Internet is disruptive because it’s wringing out huge amounts of inefficiency in each of these areas. (Stanford doesn’t mention the company here, but Uber is one of his investments; that company is helping create efficiencies in transportation.)

Third, the rate of innovation is unprecedented.

• The well-known websites today took ~80 months to reach 15-20mm users. The latest batch of startups took 10 months to reach same scale.
• New platforms that didn’t exist a few years ago gives entrepreneurs access to consumers, data, capital, global markets previously unheard of/inaccessible.

Here are Stanford’s views on what investors are looking  for:

• First, size of “total addressable market.”
• Path to profitability. Not necessary to have profits today. It’s often better to invest in top-line growth with confidence in durable margins than eek out marginal profit today.  Must be able to defend margin potential at the unit economic level. It’s ok to pro forma for future realistic assumptions.
• Scalability – ideally through network effects.
• Defensibility – not so much about barriers to entry any longer. Now the barriers are to scale and ability to develop moats as model/business matures.
• Data – per above, critical component of any company, large and small. Do you pass the three tests?
• Team – passion and ability to pivot as change will happen.

Stanford also summarizes entrepreneurship and the funding landscape.

We’ll update on whether these thoughts get translated by Goldman into new deals over the next year.

The hottest question circulating at the TechCrunch Disrupt conference this week is whether a startup is capable of unseating major technology companies, and whether innovation is still possible in the current tech climate.

The debate really began three weeks ago when Yammer CEO David Sacks posted a thought on his Facebook wall that said, “I think Silicon Valley as we know it may be coming to an end.” What ensued was a heated discussion, with major Silicon Valley players throwing in their opinions, and the story spread from a private Facebook wall to TechCrunch to the New York Times.

This morning during an interview, TechCrunch founder Michael Arrington accused Sacks of claiming that innovation is dead and that everything that can be invented, has been invented. Sacks denied that this is what he meant. Rather, his argument is that large incumbent companies like Facebook, Google, and Microsoft are difficult to unseat.

“I am not saying innovation is coming to an end,” Sacks said onstage. “But the Internet ecosystem is different now than it was in the late ’90s. It is not an early growth forest anymore. Giant redwoods have since entered, companies with tremendous assets and resources, and they have large canopies. Nothing grows under the canopy, so I suggest entrepreneurs go to the outskirts of the forest.”

His initial Facebook post laid out three obstacles that startups face when operating on the same turf as the incumbents: finding a genuinely new idea, developing it on a significantly smaller budget, and protecting the idea from the big guys who will attempt to replicate it, squash it, or acquire it.

Sacks’ point is that powerful incumbents have an distinct advantage. He encourages entrepreneurs to look to untapped markets instead of adding noise to an already saturated field.

“I still think innovation is going on and there are good ideas out there,” he said in an interview with VentureBeat. “The thing I keep telling entrepreneurs is, don’t develop something that is so clearly a feature of something else. Try to build products the whole world can use. There are still plenty of opportunities; try to find new industries to disrupt and change industries that were never seen as tech industries.”

Sacks cites the example of Uber, which used technology to take on the taxi industry and transportation regulatory agencies. However, in the Facebook dialogue, venture capitalist Marc Andreessen brings up that what is truly innovative is not always obvious at first.

“I think it is hard to tell ahead of time which companies are nibbling at the edges of existing categories vs. creating new categories,” he said. “The transformative things often don’t look transformative at the start.”

Multiple participants in this debate raised the point that disruption comes in waves. Empires are built, empires are felled, and then new empires are built. Andreessen posed this on the Facebook thread, stating that established companies are less likely to precipitate change, which means that startups are responsible for being disruptive.

“As the incumbents become more powerful, they increasingly prioritize stability over change,” he said. “Betting on incumbents over time equals betting against technological change. Incumbents tend not to cannibalize themselves through disruptive innovation not because they are poorly run, but precisely because they are well run.”

The incumbents are known for attracting incredible talent to work for them and for consistently updating and improving their products. When you have large companies that are well-resourced, well-run, and quick to react, Sacks said, chances are scrappy little startups are less likely to succeed. Andreessen, Arrington, and others took issue with this, interpreting it as a statement of doom for technology entrepreneurs. This implication caused quite a stir, although Sacks said this was not his intent.

“Clearly, I have hit a nerve,” he said. “I wasn’t seeking publicity. People can’t process nuances of my views. Why are they incapable of grasping the nuances of these arguments? I don’t think they are doing entrepreneurs a service by pretending that these dynamics don’t exist. I feel like I am being helpful by telling them some constraints they can face.”

The warning to entrepreneurs against making slightly altered versions of something else has been echoed by investors and certain journalists (ahem) alike. Kevin Rose quipped that he has no interest in investing in a “Pinterest for cats” and walking around Startup Alley yields far more “x version of y” products, trivial services, and frankly, the same old shit, than ideas that seem genuinely new and exciting.

However, Yammer actually won Startup Battlefield in 2008 and received criticism for not being a particularly original idea. Clearly, it was a compelling enough idea for Microsoft, who acquired it for $1.2 billion.

This morning on Hacker News, someone asked Paul Graham, “What is the most frighteningly ambitious idea you have been pitched on.” The scale ranges from “We are building the next Facebook” to “We think we’ve figured out how to hack into the computer our universe is running on.”

The search for The Next Great Idea is a collective effort, joined by entrepreneurs, venture capitalists, and people that want to see meaningful change (and money). Opinions differ on what the best strategy is to unearth these ideas. In a blog post titled “Black Swan Farming,” Y Combinator’s Paul Graham writes that the best startup ideas often seem like bad ideas, and big risks can lead to big winners. 500startups Dave McClure retaliated with a post called “Screw the Black Swans,” outlining his philosophy that it is better to “groom ugly ducklings” and nurture businesses that may not take over the world but can still succeed.

Forces like the migration to mobile, emerging markets abroad, and the phenomenon of “software eating the world” mean there are opportunities everywhere. Whether you are hunting black swans or ugly ducklings, revolutionizing an industry or creating a Pinterest for cats, the ultimate goal is to make an impact.

The greatest value in an event like Disrupt is that it brings together great minds and innovators to create an atmosphere that promotes change. And the free cupcakes.

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Sept. 9 - 10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Calling all cloud fanatics! Nominations are open for our Innovation Showdown, one of the highlights of the CloudBeat 2012 conference (Nov. 28-29) at the Sofitel Hotel in Redwood City.

Returning for its second year, we’re looking for examples of innovation in, and around, the cloud. Do you have a product or service that will change how businesses serve customers, empower employees and deliver tangible value to investors?

This is your opportunity to showcase that fresh idea, disruptive technology or product, with special consideration for those that haven’t been widely publicized yet. Whether you’re a tiny startup in a garage in Cupertino or an established company, we’re looking for any and all examples of innovation in the cloud. To get an idea of what we’re looking for, check out VentureBeat’s round-up of last year’s competitors here.

Here’s how it will work. Finalists will have four minutes to showcase their innovative cloud technologies live at CloudBeat 2012. Our team of judges— made up of industry experts, venture capitalists, and actual enterprise customers — will provide feedback on the products/services presented. Ultimately, our sages will recap the highlights of the competition and determine the winner.

The Showdown winner will be announced onstage at CloudBeat 2012 and will receive a VentureBeat editorial profile, introductions to investors and/or relevant potential customers in our network, and other prizes yet to be announced. Additionally, the audience will get to choose its favorite new product or service. The winner of the “People’s Choice” award will also be announced live onstage.

We’ll be announcing the ten finalists on October 31 to present to a packed house. Tickets for CloudBeat are selling fast, so don’t forget to register!

What are the guidelines and other rules?

• A short video telling us more about your company or product must be included with your application. This should not be an elaborate production. We are just looking for a no frills video of the entrepreneur or executive talking about the idea, so that we know it is concise and clear enough.
• All applications must be received no later than October 31, 2012, at 5pm PST.
• A person from your company (ideally the person in the video) must be available to pitch live on stage CloudBeat 2012.
• We do not allow powerpoints; instead you can do a demo, video, screenshots or other creative ways of presenting your technology.
• If you are a startup and/or have received less than 10 million in funding, we will provide you with a mandatory “bootcamp” where experts will help you to hone your pitch (don’t worry, this will be amazingly useful).
• We’ll accept products that haven’t even been launched yet, and in fact we’d encourage this, and prioritize this.

Apply for the Innovation Showdown here. We’re looking forward to seeing you at CloudBeat 2012!

CloudBeat 2012 is assembling the biggest names in the cloud’s evolving story to learn about real cases of revolutionary cloud adoption. Unlike other cloud events, customers — the users of cloud technologies — will be front and center. Their discussions with vendors and other experts will give you rare insights into what really works, who’s buying what, and where the industry is going. Register now and save 25 percent! The early-bird discount ends September 14.

Special thanks to the industry leaders who are supporting CloudBeat 2012: Ping Identity as Gold Sponsor; New Relic, dotCloud, Huddle, and Oxygen Cloud as Silver Sponsors; and CollabNet, Aria, Apprenda, Nasdaq OMX, Scality, Egnyte, Norwest Venture Partners, Silicon Valley Bank, RingCentral, and Scale Venture Partners as Event Sponsors.

This is a guest post from Media Ideation Fellowship’s, Erin Polgreen 

The Slurpee straw is the pinnacle of straw innovation. Widened to accommodate refreshment the consistency of baby food — and with a little shovel-shaped bottom — the Slurpee straw gets it done.

So, consider a Slurpee straw with a hole in the side: Can it even be called a Slurpee when the would-be slurper pulls unsatisfying sips of air through her straw? No. The technical term for that, I believe, is a soggy paper cup full of food coloring and sucrose.

The tech field has a similar problem. The pipeline for entrepreneurial talent, like a broken Slurpee straw, has many strengths and is delivering new products and tools faster than ever before. We are officially up to our ears in accelerators and incubators, which is terrific. There are so many accelerators, in fact, I recently learned that they’re running out of land for all of them.

Yet, despite intense growth in the field, today’s leading entrepreneurs are generally white and generally male. Women and people of color are sorely underrepresented, despite the fact that these demographics represent the largest consumers of emerging technologies, such as mobile.

Accelerators perform the valuable service of providing the founders of promising early enterprises with direction and support. Accelerators launch new ventures and support new talent by providing invaluable critical feedback, a network of support, and, often, access to future investors.

Before enterprises are ready for accelerators, however, what structures exist to support individuals capable of launching such promising enterprises? Few to none.

The learning curve for would-be entrepreneurs is incredibly steep, and valuable swaths of runway are eaten up by minutia and misdirection. Less time plus less support equals fewer leaders who are able to take the leap and start their own ventures. This is especially true for would-be entrepreneurs that are also women and/or people of color, contributing to the virtual absence of diversity we see among tech entrepreneurs.

When it comes to social entrepreneurship and social ventures, things can be even more challenging. Social change-makers who want to take the leap from idea to venture often need extra support developing strong business plans and smart pitches necessary to bring their concepts to life. The risks are greater.

Between having an idea, acquiring the hard skills, and arriving ready to benefit from everything that accelerators offer, there is a gap in the entrepreneurial pipeline. That’s right, techies: There’s a hole in our talent-Slurpee straw.

We must patch our pipeline and diversify entrepreneurship. We need a means of supporting talented individuals with early-stage ideas–ideas that are mere twinkles in techies’ eyes. This concrete problem is something I’m trying to address with the Media Ideation Fellowship program. According to one recent estimate, only 1 percent of tech entrepreneurs are African American, despite the fact that the coastal capitals of U.S. tech — Silicon Valley and New York City — are among the most diverse places in the United States. The fact is that we are leaving talent untapped. Tomorrow’s entrepreneurs need better early-stage support.

As a sector, technologists are failing to utilize the full sum of talent our nation offers. Why is it that we should strain to think of a dozen African American or women tech entrepreneurs? Or even a half dozen? A recent article in The Guardian claims that young entrepreneurs are the future – yet all of the visionary, game-changing entrepreneurs mentioned in the article were men.

Long prosper the accelerators capable of helping ventures reach their potential. Might we offer them better prepared and more diverse enterprises to choose from, though? Let’s give individuals opportunities to fulfill their potential. Let’s flood the tech sector with a new crop of diverse, talented leaders that we, as a nation, are capable of providing.

Erin Polgreen coordinates the Media Ideation Fellowship program, which supports entrepreneurs for social good at the earliest stages of their careers. Applications for the fellowship’s inaugural class open on Sept. 11, 2012. Learn more at mediaideation.org. 

Nathan Myrvold would probably agree.

That’s why it makes perfect sense that the first satellite office in the USPTO’s entire 220 years of existence is opening in Detroit, Michigan.

Yeah, you heard that right. Detroit.

I suppose Silicon Valley is rather hard to get office space in. And Austin is fairly warmish. Seattle … kinda rainy, no? New York? Already covered by the D.C. office, perhaps. L.A.? Too many trashy reality TV types prancing around on the streets, maybe.

The USPTO is legally required to set up at least three satellite offices within the next three years — that’s one of the stipulations of the America Invents Act (AIA) of 2011. AIA was primarily about patent reform and removing barriers to innovation.

One identified barrier is the typical three-year wait for patent approval. That’s just too long, and more examiners — in more offices — could help speed approvals of good patents and rejections of bad ones.

But … why Detroit?

The USPTO says that “the city of Detroit is an important national innovation center.” Who knew?

While declining to be named, a manager at the already-operational-though-not officially-launched Detroit office told me “we’re still looking at a concept of operations for the future offices.” I’m not sure what that means, but he also said that in the next couple of weeks the USPTO would finalize decisions and start talking publicly about other satellite offices.

Even a post pumping Detroit as an innovation center just two years ago admits that “there’s no question that Detroit falls short on many of the ingredients that propel tech-company growth.” And CBS Detroit’s Great Lakes Innovation Report contains sizzling nuggets like adult literacy classes and Office 365 events.

That said, there’s no denying a history of innovation in a city that still hosts two of the largest U.S. companies: Ford and GM. The city has seen the invention of the assembly line, the traffic signal, guerrilla marketing, and much more. Ford Sync, an innovative implementation of technology in cars, is from Detroit.

And Ford recently helped put a TechShop into Detroit, taking advantage of large numbers of mechanical engineers and scientists in the Michigan area.

But a complete innovation ecosystem is the result of serial inventors, a rich array of angel and venture investors, in-migration bringing new people and ideas, mature large companies, and universities regularly churning out new talent. And most innovation now is happening in web and internet technology — not historically a Detroit stronghold.

So surely there were better places to start.

Image credit: Spirit of America/ShutterStock