Will Natural Gas become a Geo-Political Tool or a Modern Weapon?

When President George W. Bush invaded Iraq on March 19, 2003, he had over 100,000 army troops mobilized to the region. It was a formidable maneuver that launched a 10+ year conflict with questionable outcomes. Today, President Obama is on the verge of another conflict in the Ukraine that involves Russia’s occupation of Crimea. Unlike Bush, however, Obama and Congress are eyeing natural gas exports as their weapon of choice to rein in Vladimir Putin from reclaiming territories along the perimeter of Russia. A geo-political tool to enable a global energy transformation or a modern weapon to settle disputes, natural gas has truly evolved.

Cleaner to burn but messy to legislate, natural gas from shale holds great promise for the US and the world. This relatively clean energy source has miraculously become the ideal bridge-fuel that society desperately needs to wean itself off its addiction to dirty coal and oil. Already there are positive signs that society is moving in the right direction. For example, utility companies no longer build new coal-fired power plants to produce electricity. Also, transcontinental transportation fleets are converting their trucks to natural gas. These and many more initiatives to replace conventional fuels have helped to reduce greenhouse gas emissions in the US to levels not seen since 1995.

The rapid expansion of wells drilled since 2006 has given engineers plenty of valuable field data to improve upon yields and safety standards. From these field trials, amazing, breakthrough technologies have emerged. However, none of these achievements could have happened without the perfect storm scenario that came together in the last few years; …where favorable property rights laws in the US made it easier to select drilling sights, …where the availability of exceptional talent in the oil industry globally was ready and able and …where the consistently high market prices for oil (above $100) was sufficient to ‘fuel’ the funding needed to keep the engines of this perfect storm humming along.

Now into its eighth year, the US natural gas bonanza is no longer a nascent business for wild cat investors. Its unprecedented success has placed it front and center on the global stage. Presently at the helm, is the US who practically overnight, has gone from being a net importer that was often subjected to the whims of OPEC, to a net exporter. For a long time, Americans have always been taught to loathe their dependence on oil-rich countries. They often accused these oligarchs of using US oil payments to wage war against the same US freedom-fighting armies that protect their regions. With this recent change of the guards, however, Americans and their leaders are finding themselves in uncharted territory. The improved situation favors the US significantly but also leaves its leaders facing a tough dilemma.

To Prohibit or To Allow Exports – a tough dilemma
While the US can boast having the cheapest natural gas on the planet and the best technology to extract it, elected leaders in Congress must deal with two opposing issues: either to prohibit the export of US natural gas so US manufacturers can create more American jobs or to allow exports to threatened US allies whose economies are constantly challenged by volatile energy prices. Already, the US’s offer to export natural gas to the Ukraine in response to Putin’s invasion of Crimea has prompted a strong reaction between both sides. Seen in this manner, one might contemplate the following question:

Could natural gas become the US enabler for global sustainable economic growth and world peace? …and if so, should it be implemented as a tool or a weapon?

There are three key benefits the US could gain from exporting its natural gas. First, the US could stabilize energy prices globally for a long time. Stable energy prices would help remove a fundamental uncertainty that concerns investors. Keeping investors happy is important since they are instrumental in relieving government coffers of additional financial burdens. A second benefit focuses on building global awareness on climate change. Just as the US has done to limit the use of their coal-fired power plants, other countries could be further encouraged to adopt similar environmentally friendly laws and best practices. Finally, for countries seeking a free trade agreement with the US, natural gas exports could earn valuable trade concessions that could lead to integrated capacity-building among government institutions, a critical component toward establishing sustainable democracies worldwide.

These lofty expectations may be too high for even the US, considering that every new encounter will introduce more complexities and unknowns. If left unchecked, however, this dominating role could awaken the Bush-era American arrogance that caused much damage among US allies in the last decade. We can only hope that US elected officials will recognize this once in a millennium opportunity and use natural gas as a tool rather than a weapon to steer the world toward a sustainable energy transformation strategy that follows a common set of internationally vetted guidelines and best practices.

To its credit, the US is quite adept at writing policies based on extensive research that can serve as effective connectors between funding sources and companies. Leaders would do well to study the success of these domestic policies and use their findings as a guide for dealing with international conflicts. One good example, I came across, is an institution called NREL (National Renewable Energy Laboratory).

NREL (National Renewable Energy Laboratory)
At a recent MIT Energy Conference in February panelists from NREL described what they do for the solar and wind energy. For these two industries, NREL devises standardized contracts (i.e. between developers and investors), catalogs best practices, creates a massive dataset for investors called SPA  and even generates a mocked up filing for rating agencies. Their work is available to anyone over the web.  No one is forced to adopt their recommendations but since they work so closely with industry, most do. US government policymakers use their data to design tax subsidy programs and special financial mechanisms (i.e. MLPs – Master Limited Partnerships and REITs – Real Estate Investment Trusts) to attract private sector investors. Since the process is allowed to work under free market conditions, successful outcomes are only a matter of time. Players who are allowed to adapt together naturally align their better interests on their own terms.

One of NREL’s key objectives is to help these two young industries adopt to a structured and comprehensive outline that can fit easily into the most current legal, financial, and policymaking world that currently govern US multinationals. The process allows for give and take from all sides, which leaves some wiggle room for new ideas and progress. This overlay is the ledge where young creative and nimble companies can push the envelope for new ideas and pathways. At the conference, we got a glimpse of what awaits NRELs future considerations.

There is Energi, a risk management company based in Massachusetts that sells insurance on the expected realized energy savings for a renewable project. In Energi’s world, if a project fails to meet an agreed benchmark of savings after an allotted time, investors are made whole according to their insurance policy. Essentially Energi found a way to treat money saved as money earned. Other companies that profit from realized savings include Opower, which gets paid by a home resident’s utility company for kilowatts of energy saved and First Fuel, which uses big data and data analytics to help office building developers lower their energy bills. On the pure concept play there is TeraCool, a young startup currently soliciting investors to build a first-of-its-kind data center at a Singapore LNG port. The data center would be air cooled from the flow of unloaded liquid natural gas. The company does not generate any revenue for its clients but instead seeks to be paid from the estimated annual energy savings it claims to generate to the tune of $70 million dollars.

As seen with the example from NREL, the US is quite capable of managing multi-sector projects to achieve game-changing results.  However, it remains to be seen if US leaders will be equally successful managing multi-country agendas with the same level of confidence. Obama and Congress will soon find out that natural gas may be the catalyst of choice, but it is still highly flammable.

© 2014 Tom Kadala

Harnessing Big Data with a Systems Thinking Approach – (A Harley Davidson Case Study)

With 90% of the world’s data created in the last two years, what can we expect our data vaults to hold two or even twenty years from now? Today we measure our lives in peta-bytes but by 2020 estimates show a 2,300% increase in the bits and bytes that will define our lives. 35 zeta-bytes to be exact. How then can we as a society leverage the intrinsic value of so much data without getting bogged down with its complexity?

Around the turn of the century, we experienced a similar moment of euphoria when retail outlets opened ‘virtual stores’ and sold products to online buyers. A famous IBM TV ad once depicted an overwhelmed young company whose products went from a few online orders a day to hundreds of thousands. In many respects we have come full circle and are back at the starting gate of yet another era of unprecedented growth only this time instead of millions of orders, the focus is on zillions of data points.

In 2000 CEOs focused primarily on IT integration and supply chain strategies to fulfill a surge of orders. Their managers implemented the latest e-commerce packages, leveraged the cloud to reduce costs, broadened and compressed their global supply chains, and trained their workforce to adapt new work flows. Success was determined from a customer’s positive experience, measured primarily by the number of accurate and timely deliveries.

Today, the paradigm has shifted away from a transaction centric one to customer centric. Companies no longer wait for customers to buy but instead develop sophisticated algorithms that can compare a specific customer’s purchase history with multiple data sets including credit rating reports, recent purchases, and most extraordinarily, their genuine propensity to buy based upon the web pages they most commonly visit. Surprisingly, web behavioral data has become a powerful data complement that can offer unprecedented efficiency benefits to both the merchant and the consumer. Customers receive compelling suggestions, while stores inventory the products their customers will most likely purchase. It’s a win-win for both. Issues of privacy remain a sticking point for some individuals, but, as the benefits to the consumer improve, even these issues are expected to become less significant.

Striking the optimal balance will be tricky especially when the journey also involves flogging through mounds of unstructured web data. One approach being talked up within academic circles is systems thinking.

MIT’s SDM Conference – (sdm.mit.edu)
At a recent Systems Design Management (SDM) conference at MIT called “A Systems Approach to Big Data: Going Beyond the Numbers”,  Senior Lecturer J. Bradley Morrison greeted a packed audience with a refresher on Systems Dynamics; the study of how all the various components within a company (people, materials, contracts, etc), for example, interact and react together to create a product or service. Morrison’s ‘Back to the Classroom’ exercise offered new insights on how the principles of ‘systems thinking’ that today help companies scale their global operations can also be applied to leverage the new era of big data. His explanation is also testimony to the incredible versatility of ‘systems thinking’ and systems design management principles.

Morrison divided ‘Systems Thinking’ into various key areas. First off was ‘Dynamic Complexity’, which evaluates reactions when a smooth-running assembly line becomes inadvertently interrupted; for example, when a supplier’s product fails and an alternative source is unavailable. According to Morrison, unexpected manufacturing events can also have a direct affect on a company’s moral and effectiveness. The reverse is also true where systems that operate smoothly can greatly improve on what Morrison refers to as the ‘Mental Model’.

Another key area is ‘Stocks and Flows’, which Morrison dubbed humorously as  ‘Bathtub Dynamics’.  Similar to balancing the water level in a bathtub with running water, systems thinking can help calibrate inflows (i.e. inventory-build up) versus outflows (i.e. sales). The depth of the bathtub is determined by a company’s internal competitive advantage. These advantages vary widely but with regards to the alignment of systems thinking with big data, Morrison focused on skills training as a key differentiator.  He highlighted his points with a case study from a US motorcycle manufacturer, Harley Davidson.

Harley Davidson Case Study
In the late ’90s, Harley Davidson implemented lean manufacturing systems throughout its operations. Management leveraged their strong union relations to encourage employee input. The response was overwhelming. After numerous meetings, participating employees elected to improve the rotor area on the shop floor. Soon new signs went up. Space allocation was optimized, and the new employee-driven initiative became a reality. Management was pleased with their progress. The improvements paid off with an increase in productivity from 70% to 94% without the need for additional floor space. All in all the project reflected a success story until a common syndrome called ‘process degradation’ set in.

Like an ambitious diet plan, the idea reached its goal only to become unsustainable thereafter. Unaddressed issues such as an understanding of who was responsible to maintain the new process wedged away the achievements. The collaborative efforts to engage and integrate the surrounding workforce were weak and gave way to a ‘do-it-yourself’, ‘if-and-when-you-can’ approach. Despite the obvious benefits, workers returned to their old habits inhibiting further progress.

Who was to blame? …management, labor, or both?

Improving productivity with limited resources is a common problem with every company. That is why CEOs leverage technology, timely intel, and training whenever and however possible. Of these three, Morrison points to training as the greatest challenge and the most commonly ignored. Even when training is available, the type of training that he recommends is not classroom-style but rather on-the-job training.

“Learning a new skill is one thing but learning how to replace one’s old habits with a new skill is quite another,” Morrison  explained. “Workers need the opportunity to ‘change their own mental model’ before the true benefits from increased productivity can be fully realized.”

According to Morrison, managers should give their workers the opportunity to learn a new system on their own terms, regardless if it requires allocating extra time during a shift or work day — even as much as 50% more time. Unless workers are given a chance to appreciate the time saving benefits on a personal level, they will more than likely return to their old habits and simply ‘add-on’ the new changes rather than adopt them for their intended benefits.

Looking ahead…
In the next few years, new skills training will involve some form of data analytics integration. As data sources swell in every part of a business, relying on a specialized team to manage the company’s data needs will become unsustainable, especially when experts tell us that big data and data analytics, done right, depend upon the seamless collaboration and exchange of data from every corner of the company. Visionary CEOs will require every employee to learn how to collect, disseminate, compare, and use data from multiple sources. Soon-to-be, ‘unsilo’ed’ departments will depend upon each other in an entirely new manner, since the data they collect will determine the value and quality of data for the rest of the company.

Just how CEOs balance this data exchange while injecting behavioral changes among their ranks will become a number one priority for years to come. …and yet will CEOs have the foresight to allow their employees to experiment with best practices on company time? As we learned from the Harley Davidson case, those leaders that do allow their employees to adopt new behavioral changes on their own terms will more than likely achieve measurable, sustainable advantages. On the other hand, those who follow the herd by, for example, hiring more data scientists to solve their data issues, may lose an unprecedented opportunity to transform their workforce. At this juncture CEOs would do better implementing a systems thinking approach today that will allow every employee to eventually become a specialized big data provider/user for the company.

© 2014 Tom Kadala

Improving the Odds of Entrepreneurial Success by taking a closer look at MIT’s Eco-System

If you were sitting at a Las Vegas gambling table with a 3% chance of winning big, would you continue to play or fold? Guessing your likely response, then let’s compare this example with launching a startup company. Statistics show that 97% of startups fail after their fifth year of operations with nearly two-thirds in their first year. If your response was to fold at the Las Vegas gambling table, then why are so many institutions encouraging students to launch a new company when the data shows that the odds are severely stacked up against them?

As though these numbers were not discouraging enough, then there are the private equity firms who search through the rubble of startups with the hopes of selecting a winner. Their expectations are even more somber. Of the thousands of business plans reviewed per year, startup investment firms will fund on average 4 deals per year, knowing all along that 3 out of the 4 companies will either fail or break-even after their first year of operations.

So, one might ask, can anything be done to improve the odds of success for a typical startup?

Lab to Market
At universities the term ‘lab to market’ is used to describe the worn path that many young companies must endure to become successful. Their humble beginnings tell a familiar story where an unexpected mishap in a lab inadvertently inspired their startup. For some, the inspiration came from a personal experience, such as in the case of DropBox’s founder, Drew Houston, who got tired of using USB drives to move files from one computer to another. Had Drew not been inconvenienced enough times, DropBox may have evolved differently or not at all. The key to his success was not just his personal revelation and commitment, but also MIT’s established eco-system that was there when needed to grow his nascent idea into a global company. MIT’s contribution was so crucial that one might ask, if every entrepreneur had access to a similar eco-system as MIT offers, would the odds of success improve? Surprisingly, the answer is ‘not necessarily’.

Ideation
Just as moving ideas from lab to market are challenging, coming up with the ideas in the first place or ‘ideation’ requires an entirely new approach and discipline, one that MIT addresses today with the first-of-its-kind ‘proof-of-concept’ center known as the Deshpande Center for Technological Innovation – http://deshpande.mit.edu/.

Recently, I attended an awards reception to honor the 2013 winning teams who were approved for nearly $1m in grants. That evening the lobby of the Media Lab (where the event was held at MIT) was buzzing with sponsors, investors, students, faculty and other interested parties. Hoping to be discovered, the teams were on hand to display their progress and answer questions. Unlike a traditional startup competition that select the best business plans, this event focused on the teams with the best business ideas. Appreciating the difference between both ideas and plans is key. Ideation occurs primarily at the very beginning of the entrepreneurial process, while business plans that build upon proven ideas come later.

When Drew Houston stumbled upon his vision, DropBox was just an idea, an idea that could have easily slipped out of his mind had it not been for a timely injection of funds to nudge him along to help him prove his concept further. That nudge, that tap, that light push made all the difference. The timely urgency to nurture ideation at this very initial point in the entrepreneurial process was what inspired Gururaj “Desh” Deshpande and his wife, Jaishree, to donate $17.5 million to launch the Deshpande Center at MIT.

An Innovative Approach
At the reception I caught up with the founder, Desh, and asked him if he was pleased with the Center’s 10-year record of 110 funded projects with 28 successfully spun out companies. A successful entrepreneur himself, Desh seemed less interested in speaking about his Center’s extraordinary achievements than he was of the impact his Center had among the faculty and graduate students at MIT. To him the true value proposition of the Deshpande Center was less about granting awards to a select few and more on the number of applicants who applied. He felt that the Center’s application process forced researchers to view their work from an ‘idea to impact’ perspective, an approach, he felt, was uncommon among researchers. With his contagious smile, Desh boasted that it was not unusual for non-winning applicants to apply a second or third time.  Last year two such teams that despite not winning a grant from the Center, succeeded in launching their startups anyway. With a deep sense of pride, Desh relished the fact that his Center’s influence had achieved an equally positive impact with every applicant, regardless of who won a grant or not. Through his Center, Desh had created an ‘ideation culture’, one that is often ignored and yet intimately critical to the success of any startup/eco-system.

Surely the odds of entrepreneurial success should improve if more startups had access to established eco-systems, especially those that support ideation early on. But perhaps the lesson to be learned from MIT’s Deshpande Center’s story is less about funding ideation grants and more about giving entrepreneurs a second or even a third chance to prove their concept. Just think how many fantastic ideas are tossed aside and lost forever simply because a business or grant contest is designed to select only three winners?  …or the thousands of business plans tossed in the garbage of an overwhelmed angel investor? …or the business plans that are rejected because of an entrepreneur’s poor presentation skills? Imagine what would happen if one-quarter of the startups presented to a private equity investor were randomly awarded a Deshpande Center-like financial nudge for further proof of concept. Maybe then the odds of succeeding as an entrepreneur would truly improve.

© 2013 Tom Kadala

Will Sustainability become the Feared Equalizer?

Why is the price of oil still hovering around $100 per barrel, if global demand has fallen and the supply of alternative energy sources, including shale and renewables, are increasing? Could it be that commodity traders are reacting to a new series of less visible market forces? 

We know that whenever Iran talks up their nuclear energy aspirations or Israel fires missiles into Syria, oil prices tend to rise or as of late, not drop by much. There is also US Congress’ lack of a comprehensive long term energy policy that has kept a tight rein on infrastructure investments such as charging stations for electric vehicles. However, as I discovered recently, there is yet another force at play, one that is far more complex than society is prepared to confront today and which will surely cause the price of oil and similar fossil fuels to double, if not triple in price, in the coming decades. This invisible force is referred to as sustainability.

What exactly is sustainability? In simple terms, sustainability is about replacing a resource so it can be used again and again. Terms like ‘recycling’ trash or producing ‘renewable energy’ are commonly associated with the practice of sustainability or the act of sustaining an activity in perpetuity with minimal environmental damage. Perhaps the best example of sustainability are e-books because they never wear out from one user to another and can be reproduced millions of times from one stored copy. Nevertheless, sustainability is more than just a repeatable process. It is also a culture, an attitude, a way of thinking that inspires inherent behavioral changes on socially-acceptable consumption practices.

MIT’s Sustainability Summit
At MIT’s Sustainability Summit last month, I came away with a deeper appreciation for what sustainability can mean to different people, especially how it can motivate them to change their habits and the habits of others, and yet, I could not help feel discouraged by the global indifference and the immense size of the problem. What set me over the edge was a powerful video called, ‘The Art & Science of Chasing Ice’ produced by James Balog on how our north and south polar ice caps are melting away from the amount of black soot dispersed into the atmosphere from our factories and automobiles. If this visual does not do if for you then perhaps a TED video by Charles Moore on the Great Pacific Garbage Patch may bring it home. The visuals are truly stunning, rude awakenings of what a planet with 7 billion individuals are capable of doing wrong.

With the UN’s projected 9.1 billion people by 2050, one can be absolutely certain that issues of sustainability will be front and center in the daily livelihood of every individual and entity. Why? …for the simple reason that our planet resources are limited and our current lifestyles and diverse cultures have yet to align and adapt to a sustainably-friendly behavior.

After attending the MIT Summit, I concluded that the efforts to align sustainable priorities are not only a discombobulated entanglement of disparate, self-appointed initiatives but also an odd assortment of potentially conflicting outcomes. To get an idea,  take a look at two opposing car ownership attitudes by city dwellers.  While the new normal has shifted favorably to shared auto usage among urbanites in developed countries (i.e. US – zipcar.com), in emerging countries (i.e. Brazil, China), new consumers expect to own their own car as soon as they move into a city!

Walmart vs WholeFoods
Another similar example of conflicting outcomes was visible at The Atlantic Magazine press conference in Washington DC on December 4, 2012. A forum of experts showcased the sustainability policies of two retail food companies, Walmart and WholeFoods.  While both companies work closely with their suppliers to recycle waste and introduce biodegradable packaging, Walmart’s Beth Keck, Senior Director of Sustainability, explained that Walmart provides their tight-fisted consumers with environmentally friendly products and chooses not to educate them on how they should change their consumption attitudes toward a more wholesome sustainable lifestyle.

In curious contrast, WholeFoods’ counterpart, Kathy Loftus, Global Leader, Sustainable Engineering & Energy Management, stated that with one-tenth the number of retail outlets as Walmart, WholeFoods is deeply committed to educating its employees and the communities they serve. The company teaches sustainability as a shared problem that begins with each and every consumer. WholeFoods believes that the improved knowledge on how one’s food is handled and prepared can help consumers make better choices and therefore lead healthier lives that will result in fewer medical issues. The money saved from fewer doctor’s visits and drugs, for instance, could justify WholeFood’s higher prices, …which explains in part why Walmart with its cadre of low-priced, branded, processed food suppliers has avoided engaging directly with their consumers.

Will the term ‘sustainability’ just become another commonly used marketing term such as ‘green’, ‘organic’, and ‘hormone-free’ that companies can push at will to meet their own corporate business agendas?  …maybe not this time.

A Key Driver – Shareholders
Fortunately the investment community is making meaningful strides with shareholders and CEOs. According to Sustainalytics, a Boston-based firm, companies are eager to disclose their annual ESG scores (Environmental Social and Governance), a metric used to measure best practices.  A total of 3,600 corporations globally have signed on since 1992, but as Annie White, their Research Products Manager noted, they have only scratched the surface with over 40,000 public companies still remaining.

Driving the increasing interest for ESG scores are concerned shareholders who fear that unmanaged risks or ‘blind spots’ could unexpectedly pull a global company down to its knees as has happened with BP’s Gulf oil spill of 2006, Foxconn’s child labor practice that affected Apple earlier this year and the five garment factories for European and American branded clothing that collapsed in Bangladesh this month. With good reason, shareholders are concerned that similar disasters will become more commonplace and that reactionary foreign government retaliation could put them out of business.

According to Katie Grace, a Program Manager involved with the ‘Initiative for Responsible Investing’ at the Harvard Kennedy School, local governments do not have to wait for a catastrophe to legislate changes but rather can take a proactive role by setting project specific policies. Regionally, for example, they can rezone areas to attract private sector investments. They can also set standards such as LEED, which is used for certifying eco-buildings. For social projects, governments can issue ‘green bonds’ or payment guarantees for investment funds (i.e. Social Impact Bonds).  Some mayors like Philadelphia’s Michael Nutter have adopted these proactive recommendations with their sustainability efforts and are starting to see positive results.

The City of Philadelphia
Katherine Gajewski, Philadelphia’s Sustainability Director, a new position also held at over 115 municipalities across the US, spoke of her challenges working within an entrenched bureaucracy of over 22,000 public employees, most of whom are reluctant to change. Her reprieve has been her frequent conference calls with her 115 peers who openly share their best and worst practices. Their collective list of ideas has grown as the group continues to innovate together, while making most of their ideas up as they go along.

Some interesting cases that have already crossed Gajewski’s desk might surprise you. For example, an Enterprise Car Rental operation in an industrial section of Philadelphia was paying $400 per month for their water bill but was costing the City millions of dollars to purify their share of dirty runoff from their car lots. Eventually, the situation was rectified but not until Gajewski ran the numbers to show the disproportionality between what Enterprise was paying for their office water usage and the cost to clean up its runoff.

Just how many other industrial installations are out there in a typical city like Philadelphia where a company unwittingly gets away with paying a small fee to use a common service but whose operations account for a substantial cost of clean up? …probably a lot!

Gajewski’s job as a Sustainability Director requires more people skills than know-how. She must craft alignments of interest among internal groups to achieve meaningful consensus. Perhaps most important, her role as director and facilitator is to refrain from becoming too preachy and be willing to dole out credit to each participant. Easier said than done, Gajewksi knows that sustainability is a shared task that succeeds when everyone is on board.

As more Sustainability Directors like Gajewski identify similar imbalances in their respective cities, the idea of charging the same consumer for both usage and their share of the cost of cleanup will become more widely accepted. …and herein lies the reason why fossil fuel prices will continue to rise for years to come.

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Below is a summary of Best Practices that were shared during MIT’s Sustainability Summit.

Best Practices

  1. At a university-run, trash audit, MIT students sieved through a months worth of the university’s garbage to discover that of the 2.5 tons of trash collected, 500 pounds was food waste while the remaining 90% could be recycled! The visual impact of over $11.4 billion of trash that could be recycled in the US alone inspired one student to launch a 30-day waste challenge on https://www.facebook.com/30DayWasteChallenge where Facebook friends could commit to ‘be inconvenienced by their trash’ by carrying the trash they personally generate throughout their day for a 30-day period.
  2. Offering consumers a list of prices for the same product but packaged with different levels of biodegradable materials would help bring to light the importance of recycling.
  3. Wirelessly integrating a soda vending machine with a recycle bin located nearby could encourage consumers to recycle their containers.  Consumers would pay, say two dollars and fifty cents, for a soda and receive a one-dollar refund on their university credit card once the soda can was disposed of in the appropriate recycle bin within the allotted time.
  4. ‘Rewire’ individuals at opportune times so their behavioral changes continue well after a recycling program or contest. For example, students can be impacted for behavioral change during a time of transition such as the beginning of a semester.  Recycling contest rules would be established at the start of the semester and monitored throughout the year.
  5. The crop of graduating students who enter the workforce concerned about sustainability issues will inspire a new set of hiring qualifications. Already companies like WholeFoods have changed their hiring criteria to reflect their corporate goals for sustainability.
  6. Teaching children in lower school to become advocates for a sustainable future is the most effective use of funds for behavioral change. Not only will these youngsters represent the future of our planet but their unbound audacity to correct adults who forget to recycle would deliver a priceless message with an impactful and lasting effect.
  7. A practical solution launched this year in California involves a utility tax on a consumer’s bill that is merely collected by the utility company and paid directly into a Global Educational Fund for educational initiatives. The tax removes the utility’s burden of financing similar programs for its sector and uses the utilities billing capacity as a pass-through.
  8. WholeFoods spends time in Washington DC convincing lawmakers that refrigeration codes need upgrading.  Currently stores are allowed to have open refrigeration, which according to a WholeFoods spokesperson, Kathy Loftus, spends considerably more energy than if the same refrigerator had a door.  Another sustainable tip from WholeFoods is the wider use of ships to transport goods rather than trucks. According to Loftus, ships have a lesser impact on the environment than trucks.

© 2013 Tom Kadala

‘Systems Thinking’ – Your Next Competitive Edge!

Imagine for a moment that a friend followed you with a web cam and recorded every moment of your typical work day.  What could you learn from so much data?  Probably not much, unless you matched each video frame with a related task. Once you did, however, you could pinpoint areas for improvement by comparing your activities on video with the expected minimal requirements (time and money) to complete each task.

The clinical engineering term used to describe this comparative analysis is called ‘systems thinking’ where choices for a set of outcomes are optimized using benchmark data. For non-engineers, ‘systems thinking’ could be described as an exercise in time management or as an example of how a person should best maneuver while driving through rush hour traffic. Surprisingly, if you are not an engineer but know how to drive effectively in traffic, you may be more of an intuitive expert on ‘systems thinking’ than you realize.

So, what is ‘systems thinking’ and why should CEOs view it as their next competitive edge for years to come?  

At a recent conference on ‘Systems Thinking for Contemporary Challenges’ held at MIT, thought-leaders, CEOs, and entrepreneurs, (some representing various Fortune 100 companies), shared their thoughts and experiences. At first, I wondered why so much attention was being given to a decision-making process that appeared so intuitive. It was not until I realized that the clinical term, ‘systems thinking’ actually has two very different meanings.  One definition applies to how an individual must think to solve problems, while the other applies to how groups of individuals must think collectively to find solutions. Then it became obvious to me that the latter was the principal reason for the conference.

Another way to look at this important distinction is to split ‘systems thinking’ into two separate definitions, one for the individual within a company and the other for a group of integrated companies that work together on large projects.

Definition #1 – An Individual learns to think in terms of systems
The first definition focuses on an individual’s ability to use ‘systems thinking’ for self-improvement and measures the potential effects from a group of employees that improve at the same time.  For example, the web cam data exercise stated earlier would have given you a frame-by-frame glimpse of your daily routines and potentially exposed hidden areas for improvements. Now, imagine if everyone in your company analyzed their daily activities frame-by-frame too?  No doubt, the sum of their improvements would translate into a significant productivity boost for the entire company.

Definition #2 – A Group of Systems learn to think together
The second definition looks at how a group of companies can effectively work together as a ‘network of systems’ to complete huge complex projects such as the production of a fleet of fighter jets at Raytheon or the design of new wind turbines at GE.  As a fragmented bunch of contracted companies, these entities would find it impractical to use a web cam to video their collective daily activities the same way we proposed in Definition #1. Instead they would apply proven ‘systems thinking‘ tools and methodologies that are specifically designed to coordinate and optimize the collective efforts from multiple companies.

How ‘Systems Thinking’ Works…
‘Systems thinking’ begins by breaking down processes into their minimal components, even down to a molecular level, if need be. The data representing the flow of information from people, machines and business objectives are thrown into the same soup and mapped onto a Design Structure Matrix (DSM) that visually connects the dots among people, activities, priorities, and time tables. Even management is treated as just another series of systems and data points. Industry tools such as TRIZ and ANYLOGIC are commonly used to identify patterns and determine optimal interactions from one group or system with another. They also highlight critical path areas caused by any number of factors such as supply chain bottlenecks, limited use of shared resources, or a realignment of priorities.

When seen from close range, flaws and inefficiencies that were once hidden are suddenly exposed like a knitted fabric with a faulty stitch. When changes are implemented, the same ‘systems thinking’ methodology used to unearth the problem in the first place is ‘recycled’ and reassessed using more current data.

Looking Ahead…
If ‘systems thinking’ is something you feel that you have been doing all along but never knew that it had a name, you are not alone. Many professionals unwittingly apply the basic principles of ‘systems thinking’ to improve their time management at work or at home.  However, the ‘systems thinking’ discussed in Definition #2 goes much deeper. It evaluates companies as though they are systems operating within other systems and applies innovative methodologies that can spot hard-to-find problems or solutions.

Companies that already subscribe to ‘systems thinking’ ideas designate one person or team to offer company-wide recommendations, but past experiences have shown that a greater emphasis on a participatory effort from a wider range of individual inputs can be more effective, especially when it comes time to implement any changes. As the workplace becomes increasingly automated, an employee’s role will also change and require a better understanding of ‘systems thinking’. Companies would do well to invest in various levels of ‘systems thinking’ training for their entire workforce or hire employees who already have a degree or experience in ‘systems thinking’.

Not everyone needs to receive a graduate degree to get hired, of course, since as shown earlier, the majority of staff can be trained in ‘systems thinking’ at the individual level (see Definition #1). Management or specialize staff members, on the other hand, can opt for degree-level programs that use sophisticated tools to evaluate groups of systems (see Definition #2). Currently the number of institutions offering degrees in ‘systems thinking’ is limited, but as the demand for training is expected to increase in the coming years, many more options will become available.

MIT’s Masters Program
For those of you who are anxious to get started or are looking to realign their MBA degree should consider MIT’s System Design and Management Program (SDM), which offers a Master’s Degree in Engineering and Management.  This degree program is flexible with 13 to 24-month career-compatible options comprised of on-campus and live, synchronous, at-a distance classes.  Students work with their peers on problem sets that in many cases can be immediately applied to their existing companies. Many students who attend the program are sponsored by their company. Of course, you do not need to wait for your employer to sponsor you.  If the timing is right to advance your education, you might do better by taking your own initiative.   Aside from getting a leg up on this new and exciting trend,  you will also have much to gain personally, collectively, and professionally.

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– Appendix –

Client Case Studies using Systems Thinking to Improve Customer Satisfaction
As stated by one speaker, ‘systems thinking’ is a balance between science and art. To that description, I have arranged the following ‘systems thinking’ case-studies presented at the conference accordingly.

Science – using Machine Data
General Electric
At the event GE’s VP and GM for Technology and Sciences, Gary Mercer, spoke on behalf of GE’s Aviation Division.  Mercer explained how GE views its aircraft as magnets for collecting reams of machine data, to the tune of 18 million date points per month.  This data is used in various capacities to improve on aircraft design, manufacturing processes, and ultimately the passenger’s experience (in that order). Their software and analytics platforms also referred to as SAGE, allows GE’s 3,000 technologists to share the aircraft machine data and publish their ideas on a common platform.

John Deere
Another example came from a member of John Deere’s power systems team, Genevieve Flanagan.  Based on Flanagan’s ‘systems thinking’ analysis, John Deere inserted more probes in their tractors that would collect additional ‘machine data’ on a per customer basis. The ‘machine data’ is transmitted back to a central data bank for analysis and like GE is used to improve the product and customer experience.  Based on a set of algorithms, the data bank also alerts the user when maintenance such as an oil change is needed.  In this manner, the decision to change the oil or any other component is based on a client’s specific usage patterns rather than solely off a generic instrument reading such as the mileage from an odometer.

Art – understanding Client Needs
TIBCO Software
At the event TIBCO Software’s Executive VP of Global Field Operations, Murat Sönmez, cited two examples of how his company’s platform software allowed his clients to analyze their data to identify, design, and deploy ‘system thinking’, solutions dynamically.  His first example involved capturing profile data from Las Vegas gamblers for a client hotel. As soon as a guest would arrive at his client’s hotel, the hotel’s IT system would apply an algorithm that reviewed the guest’s past gambling experiences and established their most likely tolerance level for losing money.  Prior to reaching their threshold of ‘unhappiness’, the guest would receive a text with a special offer, such as a pair of show tickets. Appropriate staff members would be alerted instantly to ensure prompt delivery of the tickets and any other necessary amenities.

His other example involved preemptive measures taken for two major airline clients to minimize a passenger’s negative experiences during a luggage loss claim. Prior to landing, the airline’s systems would apply an algorithm that automatically communicated with a passenger via text and offered them instant remedies such as an approved check-in number at a hotel, a link to enter a delivery address once the luggage arrived, or a credit for purchases at a popular clothing store. In both examples large amounts of data had to be captured, analyzed, and acted upon involving numerous internal departments and partners, so that a one-remedy experience could be delivered to each guest/passenger in a timely manner.

To truly appreciate the value of ‘systems thinking’ from these two examples, imagine each client incident as a series of baton passes in an Olympic track relay.  Then, multiply this one event by thousands of different relays and baton passes where each relay represents one customer who must be treated according to their specific profile that is based upon the results generated from a dynamically, self-adjusting and self-correcting set of algorithms. Having all of these benefits perfectly determined, coordinated and delivered using the same staff as before and with minimal training requirements, if any, is an excellent testimony of the extraordinary capabilities from applying ‘systems thinking’.

CISCO Systems
Another example came from CISCO’s VP of Enterprise Smart Solution Engineering, Phil Sherburne.  Similar to the last example, CISCO learned that their customers had a 6 month threshold/tolerance for adopting new technologies and as a result adjusted both their R&D and engineering implementation processes to follow in tandem .

To continually fill the R&D pipeline with relevant projects, Sherburne used ‘system thinking’ analysis to discover missing links between his sales force and client’s needs.  The results favored a new type of sales force, one that he referred to as ‘honest brokers’ who would focus less on selling products by product line and more on solving client problems that included CISCO products.  Also in the works is a new video conferencing service that Sherburne hopes will further engage their clients into an ongoing solutions oriented conversation.

‘Big Data’ – Indigestion or Innovation?

With Facebook having recently logged in its billionth user, social networking has undoubtedly become the ultimate source for ‘Big Data’. Does the possession of gargantuan amounts of data provide a guarantee for success or failure? …success from getting the right information to the right person at the right time or failure from not knowing how to manage so much data?  

To get an idea what ‘Big Data’ means to Facebook, visualize a system that handles 6 million photo uploads, 160 million newsfeed stories, 5 billion realtime message exchanges, 10 billion profile photos shown, and 108 billion queries — every 30 minutes! Impressive by today’s standards, but not for long, for what is coming next, better known as the ‘Industrial Internet’ as opposed to the ‘Social Internet’, will very likely generate orders of magnitude more data than the social-driven ‘Big Data’ we have today.

Facebook vs ‘Panelbook’
For the sake of argument, let us consider a machine-version of Facebook, one that we will call ‘Panelbook’, where ‘Panel’ refers to the ‘face’ or screen used to operate a machine. At ‘Panelbook’, machines rather than people would ‘socialize’ with their fellow machines by exchanging lots of data,  24/7. For example, a smart meter in your home would collect data from your appliances and relay messages back to the manufacturing plant (i.e. GE) where more machines using algorithms to assess its condition might issue alerts to yet more machines including, perhaps, the homeowner’s smartphone. Don’t expect uploads of photos of machine-tikes in diapers any time soon on ‘Panelbook’, but you can get the point.  ‘Big Data’ in the ‘Industrial Internet’ will undoubtedly dominate ‘Big Data’ from the ‘Social Internet, a trend that CEOs and industry leaders should take close heed when allocating corporate resources.

At a recent annual technology conference called EmTech 2012, CEO’s, innovators, investors, academics, entrepreneurs, and major industry players gathered at MIT’s Media Lab to hear the industry’s thought-leaders share their best practices, comment on trends, and recommend new ideas. I felt that their various presentations on ‘Big Data’ barely scratched the surface of what potentially lies ahead. ‘Big Data’ is more than just an onslaught of information to be managed and disseminated but is also the fluid mosaic of the constantly changing faces of the Internet, its increasing number of users, and its collective implications on our growing societies.

To make some sense of  ‘Big Data’ today (indigestion or innovation), I organized four presentations from the event in a specific order to emphasize their complementary roles in the ongoing transition of ‘Big Data from ‘social’ to ‘industrial’ data. They are mission critical data, faster access to data, and organically generated data to trigger innovation.  Notice in each description how each role has influenced areas of society that have had to react to an ever growing number of new capabilities. As one might expect, these roles will continue to evolve, causing even more changes, as nothing on the Internet remains in its current state for long.

Siemens – Mission Critical Data
Leading the charge for ‘Big Data’ was none other than the CEO of Siemens Industry Sector, USA, Dr. Helmuth Ludwig who spoke of the crucial role ‘Big Data’, played with the Curiosity vessel that landed on Mars earlier this year. On the vessel are thousands of probes that monitor more probes that eventually release a signal back to NASA’s base station where receiving probes are monitored by more probes. Managing massive amounts of data from probe to probe is one challenge, but doing so flawlessly so tasks are performed perfectly each time, requires a well-trained and coordinated workforce of global experts who must use a common digital platform to share their data. For example, some of the parameters released by NASA to its contractor JPL and others for Curiosity’s landing on Mars included an entry speed of 13,000 miles per hour with an atmosphere one hundred times thinner than earth, a time frame of less than 7 minutes to touchdown and only a two-week window per year for launching from earth.

According to Ludwig, more and more projects will resemble the risk profile of Curiosity and the type of workforce needed to execute mission-critical projects. To that end Siemens currently spends over $500 million to train 1.2 million students per year. They also sponsor $100,000 rewards for innovation contests to encourage STEM (Science Technology Engineering Mathematics) career interest at both the high school and college levels.

Qualcom – Faster Access
Less on mission critical data and more on making room for more data through existing resources, Qualcom’s CTO, Matt Grob, focused on catapulting today’s 3G, 4G, and WiFi data capacities to 1,000 times faster access speeds by collating a clever topography of mini cell towers controlled by readily available  interference management technology. Overlapping signals from one tower to another would be automatically tweaked at just the right time to deliver an optimal throughput. The amounts of ‘Big Data’ to get the signals just right, are truly a task for machines. One can only imagine what new apps will emerge from an almost incomprehensibly faster mobile web connection, 1000x faster!

Iridium – Mission Critical Data and Faster Access
For ‘Big Data’ to be mission critical and responsive Matt Desch, CEO for Iridium, discussed his firm’s challenges with a global phone service that relies on an interconnected canopy of 66 orbiting satellites.  No matter where a call originates with an Iridium global phone, an Iridium satellite is no further than eight minutes away to pickup incoming signals and relay them to a central base station in Phoenix Arizona where calls are connected.

Iridium has reserved seven rocket launches from SpaceX to replace its aging fleet of satellites. The new fleet due by 2016 will unleash exciting apps including a top-down aircraft surveillance system that can save fuel by allowing planes to fly closer together and away from bad weather systems. At the end of his presentation, Desch held up a thumbnail-size ‘Iridium’ chip that enables any device to connect to its network including existing mobile phones. Perhaps, in the not too distant future, airline passengers will be able to make calls from their ‘Iridiumized’ mobile phones while in flight.

Xerox – Using ‘Big Data’ to Innovate
‘Big Data’ is not just about the collection of random data but also about the organic creation of more data.  The CTO at Xerox, Ms. Sophie Vandebroek, taps on ‘Big Data’ for innovation by treating its workforce as data points and deliberately mixing and matching unlikely pairs of experts to see what can happen. Xerox believes that innovation evolves when experts from different fields of study can look inward at a problem and lend a relevant suggestion. However, hitting a home run is analogous to winning a lottery ticket. For this reason, Xerox and other companies like Shell International with their “Game Changer” program encourage their participants to be critical from the out start and seek the fastest routes to failure before committing to a new idea.

In Summary
‘Big Data’ offers so many options for companies that without a clear set of objectives CEOs could run up huge losses from negative investment returns. Similar to chasing the end of a rainbow, ‘Big Data’ can become elusive, misleading, and overwhelming. One distinction that became clear from the EmTech 2012 conference was the growing importance of the Industrial Internet where machines communicate with other machines. Although the social data is useful for understanding markets and spotting new trends, industrial data is by far the platform-of-choice for what soon will become the ‘BIGGER DATA’.

Winning by Failing, the new Entrepreneurial Paradigm Shift

Why is it that startup companies that fail never make headline news? A likely reason is that few readers are interested, and yet, over one-half of new startups fail during their first year of operations. To make matters worse, their unfortunate founders are often subjected to heavy losses, fines, foreclosures, and humiliation, just for trying to fulfill their dreams. Why then, do societies worldwide come down so hard on these well-intended individuals, especially when they represent a potential source for job creation? Are entrepreneurs who fail, outcasts or overlooked assets? 

Successful startups or inventions do not just surface out of thin air. Thomas Edison, one of the greatest inventors of modern times, once claimed that he never invented the light bulb but rather confirmed 2,000 ways of how not to make a light bulb. Edison knew that his inventions hinged on repeated experiments, the vast majority of which would fail. Why then did he consider his failed attempts more valuable than his inventions? Was it because he viewed his successes and breakthroughs as an afterthought? In a new world order where inventors have had to become entrepreneurs and entrepreneurs, inventors, could Edison’s approach to ‘inventing/winning by failing’ offer us some new insights?

Imagine if…
Imagine if, instead of shunning entrepreneurs who failed, societies embraced their expertise (such as the many ways not to make something work) by efficiently reintegrating their experiences/experiments into an ongoing process of discovery and invention? Take this idea one step further. Imagine if, these entrepreneurs were motivated to work together by co-owning shares of an organization that was partially funded by the profits of the companies whose ideas/inventions did succeed.

While most entrepreneurs would support this type of arrangement, the traditional establishment of venture capitalists, private equity investors, politicians, and large established companies may not. But, as technology advancements continue to enable entrepreneurs to accomplish more with lower funding requirements, investors and their cohorts may, at some point, be wise to reconsider their old business models.

Evidence of Edison: A Five Country Review
To see, if indeed, entrepreneurship is trending toward an inventor’s model, I met with key leaders from 5 different countries including an academic institution, (Ecuador, Chile, Kenya, Mexico, and MIT) and compared their respective entrepreneurial initiatives. My choice of countries coincided with a slew of conferences and meetings that I attended between the months of August and September of 2012.

With each person I met, I inquired what policies, if any, they or their respective governments/institutions were actively pursuing to promote local entrepreneurship. If they were entrepreneurs, I asked about their experiences and expectations. Over time their collective comments developed into an interesting mosaic, which reflected their wide range of experiences promoting entrepreneurship. Less experienced countries sought lofty goals and often highlighted successful models elsewhere. Assuming this trend, one might conclude that the country/institution with the most experience could thus be considered the industry trendsetter.

Least Experienced – Ecuador, Chile, Kenya
A countries with the least experience promoting entrepreneurship such as Ecuador are usually held back by their own overburdening bureaucracy and an economy largely operated by a handful of family-owned businesses. Chile partially addressed these issues by legislating laws that designated a protected area (legally and physically) for its new startups. Their plan also included shared support systems (i.e. office space, Internet connection, etc.), and funding for an aggressive international mentorship program. Kenya’s government built out an Internet infrastructure that today connects over 40 million Kenyan users. They also approved the use of a mobile phone digital currency called M-Pesa that together has mobilized local entrepreneurs and investors.

Mid-Way – Mexico
At mid-way, Mexican thought-leaders are grappling with more sophisticated issues such as integrating venture capital funding. Key to their strategy is a coordinated effort among Mexican government officials, local venture funds, and public universities (i.e. Tecnológico de Monterrey) to identify the next ‘Steve Jobs-like’ entrepreneurs (or, in their words, ‘super entrepreneurs’’) who are capable of building the next ‘Apple-like’ industry on Mexican soil. To attract greater investor interest, the Mexican government recently approved a USD$120 million ‘fund of funds’ to encourage more venture fund managers to work with their most promising startups.

Most Experienced – MIT Media Labs
The highest level of experience also tagged as the industry’s potential trendsetter in my sample was MIT’s Media Lab (Massachusetts Institute of Technology). Under the direction of Joicho Ito, an accomplished investor and colorful visionary, MIT’s Media Lab operates about 350 concurrent student-related startups.  Ito explains that his primary focus is to develop a team’s collective agility rather than the prowess of one exceptional individual. Startup founders find each other, are free to innovate together as they see fit, and, when ready, present their ideas for funding by conducting a proof-of-concept such as a small pilot or survey. Funding is limited to no more than $100,000 per team. Teams that succeed may pitch for more funding (with a formal business plan), while those that fail are encouraged to join another team.

Teams are expected to conduct many small pilots and leverage their data analytics to identify timely opportunities. Ito’s unwritten rule of denying a second round of financing has forced team members to become more agile with their decisions.  As expected, however, failures do happen and are not only common at the Media Lab, but most importantly, revered. According to Ito, students who learn to fail several times, actually win by learning the art of risk taking. Given several chances to take risks within a short period of time has proven to render more ‘breakthrough ideas’ as well as develop a more seasoned crop of team leaders/entrepreneurs.

Conclusion
This brief five country evaluation simplifies the entrepreneurial process into three distinct levels and suggests that sequential levels place the most experienced country/institution as the potential trendsetter, in this case MIT’s Media Labs.

Assuming my analysis is true and MIT’s Media Lab succeeds at creating companies responsible for new industries in the coming years, then one might guess what advice Thomas Edison would have given to governments and institutions if he were alive today.  According to Edison, future entrepreneurial programs would do better if they focused more on efficiently recycling lessons from failed attempts than on sifting through hay stacks of candidates in search of a few needles of success.

Hopefully Edison’s likely advice will turn on a few more light bulbs in the minds of our global leaders!

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Appendix

I have included an Appendix for those of you interested in more details and interesting tidbits from my interviews with each country/institution for this article.

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Ecuador, Chile, Kenya, Mexico, MIT
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Guayaquil, Ecuador
Considered a hidden city by investors in-the-know, Guayaquil recently conducted a national roadshow, http://www.nationroadshow.com/guayaquil/en, that began in New York City. In my brief interview with their mayor, Jaime Nebot, he expressed his views on entrepreneurship for his city in two words. ‘Not now!” Ecuador, like other Latin American countries are controlled by a handful of influential family groups who operate the country’s key businesses. For young Ecuadorian entrepreneurs, the chance of succeeding is both intimidating and inhibiting, not to mention, the 8 month lead time needed just to register a company and fulfill all of the public sector requirements. Venture funding exists primarily for launching new businesses within already established ones. Most new businesses are proven concepts transferred from other countries rather than breakthrough technologies that could offer spectacular returns. For now, Mayor Nebot is focused on attracting established international firms to Guayaquil that have the wherewithall to weather his country’s stifling bureaucracy.

Santiago, Chile
At a recent conference on M&A activities in Latin America held at the offices of Baker & McKenzie – (www.bakermckenzie.com) in New York, a cadre of legal experts described Chile’s financial economy as brisk. Unlike Ecuador with its family-owned monopolies, Chile’s formerly family-owned firms have been institutionalized and therefore easier to merge and acquire. Despite these advances, entrepreneurialism in Chile has had its challenges. Young Chilean students who might have taken to entrepreneurialism sooner prefer careers in finance, medicine, or law.

About two years ago, the government of Chile approved funds for a revolutionary program called Startup Chile (www.startupchile.org). Hoping to change the mindset of its youth, Chile’s government is offering entrepreneurs from around the world a USD$40,000 grant to spend 6 months launching their startups in one of two buildings located in downtown Santiago. The program attracted seasoned global entrepreneurs who served as mentors to Chile’s young hopefuls.  Chilean entrepreneurs today account for over half of the startups in the program. One of the participants I interviewed at a local meeting in New York, described the environment at the incubator in Santiago as serious-yet-fun, inspiring, rewarding, and very international. Founders often work with one partner on premise and form virtual teams-on-demand using shared referred resources sometimes located in other countries.

Nairobi, Kenya
A banking phenomena called the M-Pesa has emerged in the unlikely city of Nairobi, Kenya. M-Pesa is a cell phone currency operated by Safaricom (www.safaricom.co.ke) that has transformed local economies in a manner that few could have imagined possible and that other countries have had difficulty emulating. Similar to PayPal’s online capabilities (www.paypal.com), M-Pesa funds appear as a balance on a cell phone account that can be drawn and transferred at the time of purchase from one cell phone to another. Its resounding success has created fertile ground for Kenyan entrepreneurs and has attracted investor groups including a local bank. As expected, Kenyan entrepreneurs have formed their own version of an incubator/consulting operation called iHub, (www.ihub.co.ke) where local techies and investors can congregate. Despite having many fundamental issues to resolve, Kenya’s success in lubricating its economy with a digitized currency is truly noteworthy. Credit is largely due to the Kenyan government who played a crucial role in building out the infrastructure needed to connect over 40 million cell/Internet users.

Mexico City, Mexico
At a recent conference held in New York by the Mexican-American Chamber of Commerce – Northeast Chapter, (www.usmcocne.org) on Mexican innovation, entrepreneurship, and venture capital financing, two panels of key influencers shared their views.

There I learned that 99.8% of the firms in Mexico produce just over half of the country’s annual GDP (52%).  Most revealing was that the remaining 0.2% of Mexican firms are in the hands of the ‘super-rich’ who collectively account for the other half of the country’s annual GDP. With half of the country’s GDP in so few hands, venture capitalists and similar funding sources have seized the opportunity to disrupt the status quo with a new crop of technology-based firms that could deliver ‘Apple-like’ growth and a similar eco-system of supporting companies.  Their ‘plan of attack’ as expressed at the conference, was principally focused on identifying ‘Steve Job-like’ candidates who would agree to work tirelessly, communicate effectively, innovate constantly, and function amenably with their venture capital support teams. They referred to these individuals as ‘super entrepreneurs’.

To fill the pipeline with potential candidates, one of Mexico’s largest academic institutions, Tecnológico de Monterrey, operates a Technology Center for Entrepreneurs (www.itesm.mx). The center currently manages a total of 1,500 startups per year. Startups that show exceptional promise graduate to the university’s accelerator program and may eventually compete for venture capital funding. This step also includes assistance from internationally recognized non-profit organizations such as Endeavor Global (www.endeavor.org), also present at the conference. Graduates from the exclusive Endeavor Global program work with leader/mentors along with their peers to gain additional market access and intel.

Mexico’s Venture Capital (VC) industry is small in comparison to the US but is making meaningful strides.  They have approved legislation granting VC’s with limited access to its hefty pensions. In addition, the government has recently approved a $120 million fund called the Entrepreneur’s Fund or ‘fund of funds’ to encourage more local money managers to address the needs of their up and coming squadron of ‘super entrepreneurs’. The government’s support is crucial and timely for Mexico, since its crop of qualified candidates are more global in scope than their predecessors and  could easily decide to move their businesses to another country for support and funding.

Cambridge, MA (MIT)
At MIT’s student incubator known as the Media Lab in Cambridge, MA (www.media.mit.edu), Joicho Ito, an accomplished investor and colorful visionary, oversees over 350 concurrent student-related startups.  On the surface, the incubator program appeared similar to the incubator/accelerator initiative at the Tecnológico de Monterrey in Mexico. However, a closer inspection showed that  their similarities ended at the front door.  At the Tecnológico de Monterrey, startup instruction is centered around the rigors of writing and rewriting a comprehensive business plan that might, one day, be used for funding consideration at a venture capital firm. In contrast, MIT’s Media Lab postpones the business plan writing exercises until funding has been approved.  Heretical in his approach, Ito explains that his primary focus is a team’s collective agility rather than the prowess of one exceptional individual or a business plan subjected to the rigidity of an outline and presentation. Startup founders find each other, are free to innovate together as they see fit, and, when ready, present their ideas for funding by conducting some form of proof-of-concept such as a small pilot or survey. Funding is limited to no more than $100,000 per team. Teams that succeed may pitch for more funding (with a formal business plan), while those that fail are encouraged to join another team.

Teams are expected to conduct many small pilots and leverage their data analytics to identify timely opportunities. Ito’s unwritten rule of denying a second round of financing has forced team members to become more agile with their decisions.  As expected, however, failures do happen and are not only common at the Media Lab, but most importantly, revered. According to Ito, students who learn to fail several times, actually win by learning the art of risk taking. Given several chances to take risks within a short period of time has proven to render more ‘breakthrough ideas’ as well as develop a more seasoned crop of team leaders/entrepreneurs.