Perspectives on Innovation

We recently posted a Challenge with the New York & New Jersey Minority Supplier Development Council (The Council) which seeks to identify innovative products and services that drive sustainability, create supply chain efficiencies, and benefit urban and rural communities and business owners. The Challenge offers Minority-Owned Business Enterprises and diverse organizations looking to highlight their innovation, build capacity, and develop supplier relationships with large publically traded corporations, as well as public sector agencies, an opportunity to gain local and national exposure and drive new business opportunities. We asked Kevin V.G. Wells, General Counsel and Director of Compliance for The Council, to chat with us about the Challenge.

Hi Kevin – we appreciate you taking the time to join us. Can you tell us more about The Council and its interest in promoting innovative products and services?

Absolutely. The Council has been proudly operating for close to 40 years. It links its minority supplier network, consisting of start-ups through companies with over $2 billion in revenue, to commercial contract opportunities. Our organization has three core functions: 1) Provide private-sector certification in New York and New Jersey for US entrepreneurs whose businesses are at least 51% Asian-American, African-American, Hispanic-American, Native-American or Pacific-Islander owned, operated, and controlled; 2) Facilitate contract opportunities for Council-certified suppliers with its Fortune 500 membership; and 3) Develop minority supply chains by cultivating innovation.

The Council focuses on minority supply chain development rather than minority business development. It channels diversity into the supply chains of its Fortune 500 corporate membership. These thrusts are geared toward businesses in the fields of science, technology, manufacturing, and environmental betterment. Today, if a diverse business does not address these areas, we strongly believe that it will fail.

How does this Challenge fit into your plans for your upcoming Sustainability Summit?

This Challenge is a vehicle to promote minority supply chain development and innovation within the emerging domestic market. It is also a funnel for all submitting Solvers to actively participate in our Sustainability Summit. Participants will have the opportunity to present their core competencies and to learn from the competencies of others. 

So it sounds as though the monetary prize for this Challenge, a total of $10,000, is only part of the incentive for Solvers to participate. Is that right?

That is correct. The Sustainability Summit will not only laud four winners of the Challenge, but it will also provide 40 semi-finalists the opportunity to showcase their innovative products or services. As part of this Summit, The Council is promoting an Innovation Arena. Fortune 500 companies, global business entities, venture capitalists, government representatives, environmental thought leaders, and small/medium businesses will have the chance to vet these semi-finalists as resources for their respective needs. The Sustainability Summit will take place at the Sentry Center in New York City on October 9, 2012.

The Council’s mission is to facilitate contract opportunities for Minority-Owned Business Enterprises (MBEs), yet the Challenge is open to all companies. Can you tell us a bit more about that decision?

If diversity drives innovation, our challenge pool must represent the best and brightest. Within that pool of Solvers, businesses representing the emerging domestic market will be highlighted. The Council has always encouraged its certified suppliers to create strategic partnerships, and we believe that this Challenge will facilitate that opportunity. 

You are seeking innovative and sustainable products and services that also bring benefits to urban and rural communities. Could you elaborate on the targeted community criteria, and also talk about US versus global markets? (more…)

We recently worked with an organization that defines the lean, entrepreneurial startup model - 60° Pharmaceuticals. 60° Pharmaceuticals, run by Geoff Dow and a small team of  advisors, is trying to change the model of drug development for neglected diseases – using crowdsourcing to build virtual teams for specific research projects.  He then plans to invest a portion of the profits from drug sales into further disease research.  He calls it the “Philanthropic-for-Profit” model.  We asked Geoff to talk to us about his organization and his first Challenge, seeking a team to identify an early lead compound for the treatment of dengue fever.

Hi Geoff – thanks for talking with us today.  You call 60° Pharmaceuticals  a “Philanthropic for Profit” company.  Can you explain what that means?

Hi and thanks for the opportunity to share our plans with the Solver community.

I personally believe that the goals of rewarding investors willing to take risks and achieving an important social objective are not mutually exclusive.  I also think there is no fundamental reason that social missions should only be undertaken by 501cs.

From a practical standpoint it means that the company is structured in such a manner that it is feasible to seek a margin that is in line with community expectations given the kinds of diseases we are targeting. There will also be reinvestment of revenue into new neglected disease R+D. I perceive a great desire in the community for drug and vaccine makers to be more transparent about R+D costs and expectations regarding margins. We are thinking these issues through very carefully.

60° Pharmaceuticals has an interesting business model – with very few employees and a heavy reliance on open innovation and incentives to build virtual teams.  What drew you to this model and how has it worked so far?

That’s an interesting story! The team I worked with to write the business plan had a very spirited debate about the Linux model versus the Microsoft model of innovation. What would work better for drug discovery? My personal perspective is that the best ideas come from the crowd, but there needs to be vision and ownership to move a product forward successfully. From a business standpoint I think it will also mitigate risk and keep costs down.

Everyone in the drug discovery and development community knows from personal experience that there is a lot of risk. We have all heard that drug development is expensive and takes a long time. I do think these factors act as a barrier to innovation, particularly for diseases where margins are going to be lower. The way out of that box is to provide a way to reimburse drug discovery and development costs throughout the value chain based on success in reaching development milestones, so that risk and reward are not such binary outcomes. The FDA’s priority review voucher is a step in the right direction, but isn’t a complete solution. Our goal at 60P is to pioneer an incentives-based approach for drug discovery for neglected diseases.

Your Challenge specifically targets dengue fever.  Can you tell us about the disease and the current state of research? (more…)

We recently posted a Challenge with ACCION of Texas (ATI), seeking a way to more accurately evaluate micro-loan applicants who may lack traditional credit history. We asked Veronica Flores-Paniagua, VP of Communications for ACCION, to talk to us a bit about their Challenge and some of the people who will be helped by the solution.

Hi Veronica, thanks for being with us today and talking to our Solvers about your Challenge.  Microlending is a topic that may be new to some of our Solvers – can you tell us a bit about microlending in general, and the people or businesses that typically receive funding in this way?

Sure.  Most people may be familiar with microlending in the Third World, where business loans even as small as $100 can make an enormous difference in a family’s life. The philosophy driving microfinance in the U.S. is similar – lift individuals and, thereby, lift communities. But, out of necessity, domestic microfinance is done on a larger scale. By the definition of the U.S. Small Business Administration, a microloan is any business loan smaller than $50,000.

Why microlenders and not banks?  Two reasons. One: The average loan to ATI customers is about $16,000. Traditional lending institutions typically won’t touch such a “small” commercial loan because the administration of it is not a good value proposition. Two: Banks are regulated and must be more rigid in their standards to protect their assets. As a nonprofit, ACCION can be flexible. We still rely on collateral and character, as banks do. But we look at it differently. Where a bank looks at a minimum FICO score of 680 for a commercial loan, our average customer has a FICO score of 575.

A microloan customer is typically a business owner who’s just starting out. ACCION Texas clients include underemployed and recently laid-off workers who are willing to work but cannot find employment. These potential clients often have the desire, ability, and vision to operate their own businesses, but cannot access capital through a conventional bank loan. ACCION’s borrowers are 85% minority and more than 40% women, two groups that have been historically underserved by commercial lenders.

Can you give us some examples of people who have achieved success as a result of receiving a micro-loan? 

Absolutely.  One success story we like to tell is about Jerry Parker from New Orleans.  As owner of Greater Opportunity Developments, Jerry received an ACCION Texas Inc. loan to buy run-down properties, renovate them back to health and then rent or sell them – leaving neighborhoods in better shape than he found them.  So far, he’s renovated eight properties around the city, replacing blight with hope. He expects to create at least one part-time job, resulting in another small, yet positive change for New Orleans.

Another great story is about Lisa McGrath, who owns Tails Natural Pet Market in San Antonio, Texas.  Lisa’s pet store sells unique products that are environmentally friendly, all-natural or made from recycled materials such as men’s vintage neckties that now serve as doggie collars. Her business helps San Antonio pet owners  make more eco-friendly decisions when it comes to pampering their pets.

McGrath received a loan from ACCION Texas Inc.’s green loan fund to start her business. Tails Natural Pet Market also works with other socially- and environmentally-responsible companies such as its Web-hosting service, Sustainable Hosting, and Dharma Merchant Services, a certified green business that donates a percentage of credit card fees to McGrath’s preferred charity – Alamo Area Partners for Animal Welfare (AAPAW.) Even McGrath’s business cards are made from recycled product packaging.

You can read about some of our other borrowers here.

In addition to providing seed money, you provide training and support to small businesses – can you tell us a bit about that? (more…)

InnoCentive, EMC and EDF recently announced a new Eco-Challenge seeking solutions for tracking shipments of used electronic components and subsystems and ensuring that they are disposed of responsibly. Safe, legal and transparent e-waste disposal is an ongoing concern for both industry and environmental groups, which want to make sure heavy metals and chemicals are not released as part of the recycling process.  We asked Kathrin Winkler,  Vice President and Chief Sustainability Officer for EMC Corporation to tell us more about the Challenge.

Hi Kathrin – thanks for talking with us about your Challenge.  Can you tell us why responsible e-waste disposal is such an important issue for EMC and for the electronics industry as a whole?

Certainly.  Electronic waste actually contains a lot of material of value – particularly precious minerals like gold and copper. In fact, it is often said that a ton of eWaste contains more valuable metals than an equal amount of ore! The problem is that extracting this material needs to be done responsibly to protect human health and the environment. Too often, it ends up in the hands of informal workers – usually exported (often illegally) from developed economies to those still developing, but increasingly from waste generated in-country. These workers do not have the knowledge or resources to take proper precautions to protect their health and their environment. Or it finds its way into municipal landfills where some of the manmade substances in the equipment can have long-term environmental  impacts. Another primary concern is data security. At EMC, people rely on us to set the bar in terms of protecting customer data, which includes secure disposal. Responsible disposal of eWaste helps ensure that data is secured, which benefits everyone.

Why is it so difficult to tracke-waste now?

There are really two major challenges to tracking eWaste. The first is that much of it is disposed of by the consumers or users of the equipment, and as vendors, we have no way to know what happens to it. The second challenge is that the disposal process itself involves many players, each of whom tends to break it down to smaller component parts that are mixed with material from other sources and then passed on to another processor.

How close do you think the industry can come to 100% trackable e-waste?

You know, I think it’s unlikely that we will ever be able to trace everything. Ideally, we can remove the need to trace eWaste if the proper incentives and solutions are put in place to manage it responsibly. I am a bigger fan of trying to solve the underlying problem, than simply attempting to control a process we don’t like. Unfortunately, we’re not there yet, so traceability is an important bridge until the underlying system is improved.

On the other hand, we  have such a plethora of new tools available to us – from satellite data to Big Data analytics to new materials – that we may well have a breakthrough. I do think what may well arise is a means of either tracking sample streams rather than all of the eWaste, or else an approach to better understanding where it ended up without having to track its entire path. In that case, we’d hopefully have a handle on each end of the journey and could then reverse engineer the route it took.

Where do you think a solution to this problem might come from?

It’s probably most likely to come from an iconoclast – someone who sees patterns where others don’t – recognizing an analog from a completely different problem domain.

What do you plan to do with the solution?

Hard to say, without knowing what form it takes. First analyzing feasibility, hopefully performing a test or proof-of-concept, ideally with a partner or two. After that, results will determine the course of action. One thing we do know – if it’s a breakthrough idea that is broadly applicable to the market, we will want to share it!

Is there anything else you’d like our Solvers to know about your Challenge?

Yes. We have a grand vision, and it is more than stopping eWaste from going to developing countries. What we’d really like to see is an ecosystem of parties and economic model that allows eWaste processing to both be safe, and to provide economic opportunity in areas that depend on it for subsistence. And if we can create a financially sound model for recovering the maximum value from used electronics, we can do a better job of closing the loop and reducing the extraction of raw materials. This Challenge is an important step in a re-imagining the future!

Very interesting – thanks Kathrin and good luck with your Challenge!

Thank you.

By Alph Bingham

This blog is the final installation of a four part series:  ”The Profound Importance of Challenges,” by Dwayne Spradlin and Alph Bingham, authors of The Open Innovation Marketplace, published in 2011 by FT Press.  To read the previous posts, click on the links below:

The Profound Importance of Challenges (Part 1 of 4) by Alph Bingham and Dwayne Spradlin

The Profound Importance of Challenges: The Fundamental Unit of Problem Solving (Part 2 of 4) by Alph Bingham

The Profound Importance of Challenges: A Better Way to Organize and Distribute Work (Part 3 of 4) by Dwayne Spradlin

In this last segment of the series, we will address the role of a Challenge as an instrument of strategy.

Too often organizations measure their innovation success by % of sales spent on R&D, how many patents they own, or whether the leading academics in their fields are on retainer. However, in today’s economy, these should all matter much less to the management of the organization or to the shareholders than whether they can get a new product to market before the competition and dominate the category or whether resources are being managed to ensure the firm can aggressively pursue new business opportunities when they emerge.

Too many organizations struggle to even clearly define their problems and goals, much less to innovate with the precision and efficiency needed to compete in the world today. Whether building better business processes or designing new technologies to dominate a market, traditional business practices are no longer sufficient. Nowhere is this truer than in large corporations where years of accumulated standard operating procedures, poorly aligned incentives, ever-increasing bureaucracy, and entrenched culture work together to ensure that increasingly expensive and mediocre innovation is the best they can do. The existing systems are failing and firms are in desperate need of new methods to improve responsiveness and competitiveness.

Dictionary.com defines a “challenge” as “a summons to engage in any contest” or as “a job or undertaking that is stimulating to one engaged in it.” However, it is much more. Well-constructed “challenges” are an astonishingly powerful and uniquely effective tool for focusing the energies of multitudes of creative, inventive, talented audiences on the important problems facing organizations, nations, and the planet on which we live. These audiences can be employees, customers, partners, and a planet of resources. (more…)