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Innovation 2010 Event - held at CVCC on November 10, 2010
Keynote Speaker: Andrew B. Hargadon - His Blog
Professor of Management
Director, Technology Management Programs
Faculty Director, University of California at Davis Center for Entrepreneurship
Chancellor's Fellow
Ph.D., Stanford University
Short introductions were made by Dr. Garrett Hinshaw of Catawba Valley Community College and Scott Millar of the economic development Corporation. Dr. Hinshaw wanted to point the connection between education and economic development. He talked about the possibilities of ideas being translated into realities; such is the nature of innovation. He stated that now is the time for innovation to restore this area to its appropriate role as a national leader in business, industry, and education.
Scott Millar made the introduction of Andrew Hargadon. He made some points about our local area and our heritage of manufacturing. In essence, he stated that the entrepreneurial spirit comes from a combative mentality. Lightheartedly, he made the point that many people struck out on their own, because they couldn't get along with their boss. People love to be able to develop their own opportunity. At one time, we led the nation in the percentage of workforce involvement in manufacturing. In the 1980s and 1990s there were almost 600 manufacturing firms in Catawba County.
Dr. Hargadon began his presentation by talking about Thomas Edison and the beginnings of his scientific and entrepreneurial experience. In 1876, Thomas Edison was an unknown and he announced the opening of his Menlo Park scientific research facility with the promise of a new invention every 10 days and a big invention every six months or so. Edison was able to deliver on that promise.
From 1876 to 1881 Edison was able to patent over 400 inventions. The research facility became known as an invention factory and Edison became known as the “Wizard of Menlo Park.” The factory produced fundamental breakthroughs in the telephone, telegraph, phonograph, the electric sewing machine, the electric railway, ink for the blind, the first fax machine, and many more accomplishments.
What we learned about innovation from Thomas Edison and others like him are basically five lessons. Most everything that we know about Thomas Edison and the inventions that he is known for were done in that five-year period from 1876 to 1881, including the electric industry through the creation of The Pearl Street Station and the light bulb. What we need to look at is why the Menlo Park research facility was so successful.
Dr. Hargadon said that we need to get rid of the idea of the “Great Man Theory” of innovation. The “Great Man Theory” says that for every great idea there was a single point in time where a single person had the idea. Before that point the idea didn't exist and after that the world was never the same. If we follow this theory, it says that we either need to be that great man, find that great man, or hire this person and pay them whatever they want. And if we don't do this, wet will sit back and watch the innovation process happen somewhere else. This is not a particularly useful message.
Dr. Hargadon's first point is that it's not about the idea. If we focus on the idea, we focus on the wrong thing and we don't get anything done. He gave an example of mousetraps. He talked about the quote from Ralph Waldo Emerson, which has been misattributed. Emerson's quote was much more complex than the "build a better mousetrap" quote that has been attributed to him. Emerson's point was that if you sell a better product that people will buy it from you. The misattributed quote did not come until seven years after Emerson had died. It was made by a journalist.
The facts show that the journalists interpretation of Emerson's quote is Misanalyzed. Since 1828, 4,400 mousetraps have been patented. Of those, only 24 have made any money and only two have been truly successful. The Victor mousetrap, introduced in 1897, is the most successful mousetrap ever invented and its design has not changed over the subsequent period of time up. The only evolution of the product was an idea to market the product as disposable, which took place in the 1950s, and the addition of cheese scented plastic more recently.
Next, Dr. Hargadon spoke about the Segway. When this product was initially introduced, it was said by its inventor that it would be bigger than the Internet. Dean Kamen was called a modern-day Edison. When it was initially introduced, the venture capitalist stated that the product would sell 100,000 units per year. In the first two years only 6000 Segways were sold. Why?
When the product was introduced you could only buy it at Amazon.com. The other place that you could buy it was at Brookstone, which is a high-end toy store. They built a great idea and used $100 million worth of investment money, but they didn't have a distribution process.
It's not about the idea. It's about connecting. It's about building networks. Inventing is about creativity. Innovation is about getting it done.
Henry Ford started mass production of automobiles in 1906. He did not invent the car. He saw an opportunity utilizing mass production to a mass market. The idea was to create an affordable car. Ford Motor Company was his fourth car company. Proof of Concept in the early automobile industry meant that creators raced the car. Racing cars involved crashes, when the driver pushed the limits, and many times this meant the end of the car company.
The mass-market car completely changed the business model. Ford embraced the idea of building a cheaper car. He went and examined ideas that were already in the marketplace that could help him establish his mass-market company. The successful ideas included 1) interchangeable parts, 2) Continuous flow of production. 3) The assembly line and 4) The electric motor -- before this, plants were designed around a steam engine which would be located at the center of the factory.
The electric motor allowed work to be moved to different parts of a plant, instead of being centrally located around the power source, the steam engine -- Ford had worked for Edison and left when he could not convince Edison of the importance of the automobile. Ford did not invent any of the above processes, but instead he brought them together into one efficient product method.
Dr. Hargadon espouses the notion that Ford succeeded, not because he invented anything, but because he refused to invent anything.What can we learn from this? It isn't about the idea. It's about seeing the resources that are out there and being better about making the connections than anyone else.
Dr. Hargadon next talked about Edison not inventing the light bulb. That was a 40 year old technology. He built a better network around the light bulb than anyone had ever done before. He created a successful business selling people the lights, the wiring, the generators, and the steam engine used to power the generator. It became successful when it had as much reach as petroleum industry in the utilization of gas products. He took the best of all of the technologies and combined them with his friends in venture capital and utilized the utility business model utilized by the Petroleum Companies and created an entirely new business model around the idea of lighting. Most of the innovation that he created was in the service industry end of the business model.
Innovation comes from the network. Edison and Ford were able to take ideas and make them work where no one could before. Dr. Hargadon pointed to our area – the Hickory Metro -- and stated that we have an advantage because we have so many strengths and resources available that it is now just a matter of finding out the best ways that they fit together.
Dr. Hargadon talked about Apple Computer Co. He had worked there at one time. He was a mechanical product designer who worked on the number of the early laptop models. He spoke of the level of intelligence of the people that worked for Apple in the late 80s and early 90s. They had a mindset that they were going to change the world. He spoke of how these people thought that they were going to reinvent manufacturing. Their job was to redo everything that had ever been done and do it better.
While at Apple he was placed in charge of creating the smallest and most technologically advanced power supply to be placed in the new laptop computers that Apple was producing. He was given a $1 million budget and he stated that he spent it even though he later came to the realization that it really wasn't necessary. But, that was the way things were done then. Apple’s workforce was placed in charge of reinventing everything to change the world.
He believes that this is the reason why Apple almost went bankrupt in 1996. In 2001, when the iPod came out, he came to the understanding that Apple, as a company, had changed completely. The idea of the iPod is the antithesis of what Dr. Hargadon had experienced when he worked at Apple.
The iPod was the 15th MP3 player on the market. Apple had already committed to becoming the hub of the digital world and yet no one was building for that world. People did not care about the Apple Computer. It was only 1 1/2% of the market at that time. Apple realized that they would have to build their own MP3 player. Instead of going out and getting one, Apple realized that they needed to create a better network around their MP3 player.
They saw the first advantage of getting help to create this device by going to the consulting firm that designed the hardware for previous MP3 players and asking them to design a MP3 player like the others that the consulting firm had helped to designed. They next went and bought a software company to design the software for the iPod. Then they went out and did all the licensing necessary to create a proprietary MP3 player. By refusing to build a better mousetrap, they went from idea to market in eight months. None of the other MP3 players had this sort of seamless interface. They also saw that it as an opportunity to bring in the record labels.
In 2001, the record labels were famous for pursuing college kids for downloading music. Steve Jobs saw an opportunity and called up the chairman of Universal music. He spoke to him about the culture of the 1970s and the attitude of “down with authority” and the fact that now the record labels were that authority. Jobs asked, “Do you think the Internet is going to go away, which side do you want to be on?” The record labels did not have a viable Internet strategy and Jobs pointed out that Apple could help them create that opportunity. Apple created a digital rights management system that would mean that music would go on to the iPod and would not be transferred to other MP3 players. After that success, Apple went to the other record companies and this cemented the network that they were looking to establish.
Apple went on from there to create an interface that could utilize podcasts, Internet access, photos, television shows, and movies. Next they brought the chips in that were utilized in cell phone technology and created the iPhone. A Wall Street Journal journalist stated that the iPhone was the only technological device that became more valuable the longer that you owned it. It isn't the phone that is so valuable; it is all the other pieces of the network. 250,000 application developers have looked at ways to make the iPhone more valuable.
The real challenge for innovation is seeing the opportunities that are available. It is about the chance to create a new network where no network has been created before. It is about making sure that everyone in the partnership is getting something from it.
Dr. Hargadon next talked about the Barbie doll. Mattel did not invent the Barbie doll. It was designed after a doll that was sold in a tobacco shop in Europe that was not marketed to children. At that time, dolls sold in the US market were baby dolls that allowed girls to pretend to be their mother. The Barbie doll came along as one of the first successful aspirational dolls. It allowed girls to role-play as anything other than their moms. These dolls brought about a mindset of careers opportunities outside of the home.
Initially the toy buyers did not like these dolls. The first two companies that tried these aspirational dolls had failed. Mattel decided to create a network around a marketing campaign strategy over network television. Mattel began to advertise the doll on the Mickey Mouse television program. In 1958, of Mattel began to advertise on the “Mickey Mouse Show” television program, 75% of the viewing audience was watching this program. Mattel directly marketed the Barbie dolls to the children who then went to their parent and asked for them to purchase the doll. This was the beginning of children's television advertising.
Lego toys almost went bankrupt in the 1990s. They lost their demographic, because kids had more to do than play with Legos, which no longer fit into American children's lifestyle. Lego decided to go out and purchase the rights to the Star Wars franchise. Star Wars gave the children the story behind the building blocks.
Overnight, seven of their top 10 Legos products were from the Star Wars franchise. After a few years, they decided that they no longer needed the Star Wars franchise and they created their own story behind their products. Bionicles were centered around an Internet world where you can log on and see different characters with complex story lines. Now this product line has comic books, DVDs, and video games. This entire network is created around the plastic brick.
If one goes into a mass merchandise retailer today and purchases the “old-school” Lego products, they pay about one penny per brick. If one purchases one of these
New-line products, then they pay $.13 for the equivalent amount of material of the Star Wars franchise line. If one purchases the Bionicles product, then one pays $.22 for the equivalent amount of material. The difference is the network.
Printable M&Ms are now available. Mars Candy Company decided that they were missing out on a network that already existed. There are people who keep this product on their desk in their office. Mars looked at this as a way to enhance the connection. They bought an ink jet printer and experimented with vegetable-based ink and figured out a way to print two lines of 8 characters each of text onto an M&M.
“My M&M's” created the ability to go online and purchase a custom product. M&Ms that would normally cost $3 per pound cost the equivalent of $27 per pound when they are customized. This entire network was built in a tiny corner of the Mars factory, which was unlike everything else that they had built. They usually track M&M's by the ton as they are sold and this created a new network with their customers. This fundamentally change the way that they did business.
What we see is that people believe that if they don't have a great idea, then they should not move forward. People talk themselves out of the creation and implementation of a great idea, because they believe that someone else would've done it if it were a great idea. The question is who is going to see a great idea and bring it together in an effective network. People need to understand that they are just as capable as anyone else of taking an opportunity to create a network from it.
He gives the example of four undergraduates from UC Davis in the university’s entrepreneurship program who were brought together. They figured out a way to utilize microbes that could take municipal wastewater and turn it into biodegradable plastics. This saves enormous amounts on landfills and other expenses related to wastewater and when you run the numbers, you find that you make 10 times that on the biodegradable plastics. These four undergraduates who started this company have secured financing for $3.6 million and now they have a team of about 17 people. These are the kind of opportunities that are out there that people can reach for when they realize that the job is not to have an idea, their job is simply to be the ones that are aggressive and devoted to creating a network of support around the idea including investors and others.
Dr. Hargadon talked about William Gibson who coined the term cyberspace. Mr. Gibson was asked where he came up with his visions and how did he see this world that had come to fruition? He stated that it was relatively easy. He said he looks around and he sees people that are doing cool things and he follows them. The future is already here. It is just unevenly distributed.
The greatest opportunities we have as entrepreneurs and innovators is to take ideas that we see in one place and bring them into another and build a network around them to make them successful. We don't need to be geniuses to have a great idea. We need to recognize a good idea, when we see it, and recognize the networks that would make it great.
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