Article of the Day

Biomimicry: using nature’s designs to transform agriculture – The Guardian


Everything about my journey to get Spanx off the ground entailed me having to be a salesperson – from going to the hosiery mills to get a prototype made to calling Saks Fifth Avenue and Neiman Marcus. I had to position myself to get five minutes in the door with buyers.
~ Sara Blakely, Spanx Founder

Prototyping to Success

Startup companies by reputation have a high failure rate, as high as 50 or more percent depending on the analysis and author. Why?  The reasons are plentiful, but in looking through literature on startup failure there is one reason that doesn’t drive failure, product flaws.

Fundamental flaws in startup business’ products and technologies are rarely the primary source of failure; perhaps less than 20 percent.  Rather startup failures result from problems with early customer development, business model mistakes, financial mismanagement, etc.

I have served as a panelist for the Successful Farming Innovation Showcase. In this contest, contestants submit their inventions for evaluation of business potential.  The proverb ‘necessity is the mother of invention’ fits most of the inventions I have seen come through this contest in that farmers build things solve day-to-day problems they experience.  Time may be saved, a sore back avoided, or an improvement in method or machine is developed.

What many of the farm inventions lack, however, is substantial business potential.  The inventions may:

  • Lack scalability in that they solve a problem for the inventor but there is a lack of others that experience the problem in the same way
  • Not have enough value to compel customers to pay for the solution
  • Not present a unique solution that will differentiate the invention enough from existing alternatives to get to launch in a competitive marketplace
  • Be so complex that the likelihood of widespread adoption is low

Development of prototypes is one means for an entrepreneur to try to avoid these types of pitfalls in development of their business.  However, development of a prototype in isolation from prospective customers can also be an empty exercise.  Entrepreneurs need to develop prototypes.  Most importantly, they also need to test and evolve them while experimenting with prospective customers.

I experienced this, more by accident than design, at my first startup, E-Markets, in 1997.  I had developed a very crude prototype for a browser-based application.  Ultimately, our first customer pointed at the prototype on projector screen and said they wanted to buy it.  But they really didn’t want to buy the prototype.  Rather they wanted to buy a much more developed version of the prototype that was highly customized to their needs.  During about a 4 month process, we worked daily with the customer and their network of business partners to develop a solution.  In the end we had simultaneously developed a much better application, but had also achieved the buy-in of employees of the customer organization and a network of others involved in their business.

Prototype development, in the ideal, isn’t a linear process.  Instead it’s an iterative process of evolving the prototype or prototype idea based on rich interactions with prospective customers.  This interaction leads not just to a better prototype, but to the winning business model that contains the new product and/or service.

Company Building Model - Kevin Kimle - Iowa State University

Developing a prototype while engaging potential customers helps discover and validate the important details of their problems and needs.  Most importantly, the engagement process converts those potential customers into real, paying customers.  As you develop those paying customers you’ve developed and built a company and business.

In 1997 my prototype work was an Internet-based electronic commerce application.  It melded business processes in the agribusiness space with software that enabled new types of more efficient and effective behaviors.  Much to my pleasure, I have had Iowa State University students apply similar methods to their products.

Colin Hurd at Agriculture Concepts developed the roughest of prototypes while a junior at ISU for what became his Track Till product in 2012.  In 2013, prototype number 2 was a much more sophisticated product that has much resemblance to today’s commercial version and got Colin his first sale.  In 2014, he sold a more refined product, not anymore a prototype, that is now being scaled up.

Ryan Augustine was senior at ISU in 2012 when he developed the business concept for AccuGrain.  The business anticipated using an ISU-patented technology for using X-Rays to measure grain flow.  By 2013/14, Ryan had secured the funds and expertise to develop prototype number 1 for AccuGrain. In 2015 he developed prototype number 2, tested it, and now is making his first sales.

Clayton Mooney, Elise Kendall, Ella Gehrke, and Mikayla Sullivan developed the concept of a mobile food dehydration unit and formed Kinosol in 2014.  They competed in the Thought for Food Challenge, making the finals in 2014, and continued to evolve their product through testing and prototyping.  Today, the Kinosol team is on prototype number 7, marching ever closer to commercial launch through trial and error in various locations around the world with prospective customers.

Prototyping while developing customers is one way that entrepreneurs fail successfully.  The only thing you know when developing new product and service concepts, is that they will be wrong.  The technology won’t work as envisioned, it won’t have a clear value, it won’t meet the needs of a type of customer, etc.  Product successes arise from the learning that happens while interacting with prospective customers who are experiencing use of the new product.  Sales is an essential function of the prototyping process.

Article of the Day

Google Designs Low-Cost Degree On Building Startups – Forbes


“Even if you don’t have the perfect idea to begin with, you can likely adapt.”
Victoria Ransom, co-founder of Wildfire Interactive  

Evaluating Startup Ideas

Iowa State University students who take my entrepreneurship course create two or three concepts for new businesses in the first half of the semester.  It’s now my thirteenth semester teaching the course, and I’ve continued to evolve the course to help students create stronger new business concepts.  The beginning idea for a startup business is only part of what’s necessary to get to a viable business, but it certainly helps to start with a quality idea.

A tool I’ve developed to help students evaluate their own and other student startup ideas is the Startup Evaluation Matrix.  It also serves as the rubric by which I formally evaluate and grade new startup business concept papers.  In addition, I increasingly use it when speaking to aspiring entrepreneurs from outside the course who are looking for feedback on their ideas.

Startup Evaluation Matrix - Kevin Kimle - Iowa State University

Each of the elements of the Startup Evaluation Matrix reflects a yin and yang relationship; complementary, interconnected, and interdependent forces that shape its attractiveness. This balance in a startup business idea is difficult to shape, yet one that consistently comes through in the most attractive startup concepts.

Migraine Problem/Value to Customer – I use Diana Kander’s all in startup book to start the class, and have adopted her notion of a problem that represents a significant opportunity, a migraine problem. A business needs to solve a problem so significant that customers will do whatever it takes to solve it, including paying someone else for a solution.  Envision the problem as a migraine headache.  The flip side of the problem is the value of the solution to the customer.  Does the solution have a clear and significant advantage?  Does it hit the ‘homerun’ of being better, faster, and cheaper?  Does the solution deliver value while making life simpler for customers?  So many technology startups miss this mark in that they may be able to solve a problem, but they are so complex or require such significant changes in behavior that they simply will never be considered viable by most prospective customers.

Niche Now/Big Market Potential – Peter Thiel in Zero to One writes that entrepreneurs need to look for ‘monopoly’ opportunities; markets where they can shield their businesses through various means from competition that will bid their profits to zero.  I think of attractive market opportunities for startups as being markets that are niches currently, but with the potential of big growth.  When we started E-Markets in 1996, there was not really a market for Internet-based electronic applications in the agribusiness space.  However, the Internet was new as a platform, and clearly had significant growth potential as a better, faster, cheaper platform for e-business.  Today I see agricultural entrepreneurs working on indoor aquaculture, robotics, diagnostic software, and other areas that have an undefinable market opportunity today, but huge potential in tomorrow’s market.

Doable Now/Unique Solution Long Term – Rarely is their something completely new, whether a technology, production system, product, service, or method.  Rather, entrepreneurs combine old things in new ways, and new places to create new solutions to new audiences.  Quality startup ideas balance the do-ability of a new solution near-term with its long-term uniqueness.  A startup that will truly scale can’t be a copycat, it must aim to solutions that are unique and represent the target for which copycats aim.

Contrarian/Surprise Element – An attractive startup idea has some element that is contrarian.  It is treading left while everything else is treading right.  Perhaps that arises from the independent-minded nature of entrepreneurs who chart their own course.  I have an exercise for aspiring entrepreneurs where I ask them to find and unleash their inner contrarian, for its often from this character within us that we find the most interesting ideas and the perseverance to see them through.  The contrarian nature of interesting new business ideas also lends an degree of surprise or unexpectedness.  The highest impact startups will be something that could not be predicted by most people.  The innovations that disrupt an established market will be initially dismissed by businesses that will eventually be put out of business.  In 1996, I was involved in a consulting project for Kodak.  The Senior VP we worked with dismissed the strategic threat of digital cameras.  Kodak was the first company to market a digital camera in the 1990s, but ignored the opportunity enough that its business was knocked from beneath it and filed for bankruptcy in 2012.

Deciding the quality of a startup business idea is more art than science.  Malcolm Gladwell’s Blink explains that choices that seem to be made in an instant-in the blink of an eye-actually aren’t as simple as they seem.  I know great investors and entrepreneurs that very quickly assess a startup idea, a business plan, or the viability of a new product or service.  I suspect that they have some kind of internal matrix-like structure that enables them to make snap judgements that are most often on-target.  Their mental matrix has been developed based on experience, but I’ve found that the Startup Evaluation Matrix is a means to embed a beginning way of thinking for less experienced entrepreneurs too.


Article of the Day

Big Banks to America’s Firms: We Don’t Want Your Cash – Wall Street Journal


“The recognition by a people that their prosperity depends on the breadth and depth of their innovative activity is of huge importance.”  
~ Edmund S. Phelps

Virtuous Habits of Free Enterprise

I read the article above last weekend about banks discouraging large deposits of cash from certain types of clients.  Instead of paying interest, some banks are charging for holding cash in deposit.  Perhaps you learned in school that banks take deposits and loan part of them out as part of their business.  Apparently not in all cases.  The regulatory environment is such that bank examiners want banks to hold collateral such as U.S. treasury notes against a large portion of cash deposits that could be withdrawn quickly.  In other words, some types of cash deposits become liabilities for banks. Private sector assets backed by public sector debt!

The current regulatory and zero-interest environment results in a variety of Bizarro stories like this one.  Banks that charge interest for deposits while working not to lend money, and bank examiners explaining to bankers that they need collateral in the form of government debt (treasuries) to back up cash.  Right.

The blocking and tackling of economic growth and prosperity is really not that complex; work/produce, save and invest.  These three activities, carried out by individuals free to make choices about what they do each day, result in individual successes (and failures) that sum to general economic growth.  How is each of these three virtuous habits of free enterprise impacted by the current policy and regulatory environment in the U.S.?

Work/produce – The U.S. labor force participation rate, the percentage of working age adults working or looking for work, steadily grew between the 1970s and the 1990s, reaching its peak of 67.3% in 2000. During the 2000s, and especially since the 2008/09 recession, the participation rate began to drop. Part of that drop was in response to the economic problems that started in 2008, and part of the drop comes from demographic factors like the aging of the US population and the retirement of the baby boomers. Nonetheless, the labor force participation rate reported by the Bureau of Labor Statistics last month was 62.4 percent, lower than January 1978.

U.S. Labor Force Participation

U.S. Labor Force Participation

Incentives to work are reduced relative to historic norms.  Marginal tax rates on high income individuals, those with significant economic wakes, have continued to creep up, for example.  I had an Iowa State University (ISU) alumnus visit one of my classes last year.  He had moved to Iowa for an exchange student year during his senior year of high school, attended and graduated from ISU, and eventually started what became a very successful trading and investing business.  He explained to the students that in the 1980s, when he’d experienced his first financial success, he bit his lip each April and wrote the federal government a check for 28 percent of his annual income.  As the years went on, however, that number continued to creep up.  Around 2010 he wrote a check to government for taxes exceeding 50 percent of his income and decided it was enough.  He had homes and offices in multiple countries and moved his residence to one with a 17 percent tax rate.  There’s no reason to pity this very successful businessman as he will be fine financially no matter where he calls home.  There is a reason, however, to pity the U.S. which lost at least part of the economic wake created by this extremely talented person.

Incentives to employ are also reduced relative to historic norms in that It costs more to employ someone today than in the past.  The Bureau of Labor Statistics reports that it costs private sector employers on average of 30.5 percent above salary costs for each employee.  About one-third is for government-required contributions (social security, workers compensation) and close to another third health care.  Health care expenditures continue to increase at a rate exceeding all other costs with Obamacare only exasperating that trend.  In addition, Obamacare has created a whole new incentive for employers to employ only part-timers (otherwise healthcare benefits must be offered) and not to grow past 50 employees (otherwise healthcare benefits must be offered).  18.1 percent of U.S. workers report their employment as part-time, far above historic averages.

Save – The U.S. personal savings rate in September 2015 was 4.6 percent, part of a decreasing trend in savings rates since President Nixon removed the U.S. from the gold standard in the early 1970s.  Saving rates averaged 5.5 percent in the 1990s, 8.6 percent in the 1980s, 9.6 percent in the 1970s, and above 10 percent before the 1970s. In the short run, higher personal savings reduces consumption, but over the longer run higher personal saving lead to stronger economic growth. The correlation between a country’s saving rate and its investment rate remains large and significant. Savings lead to investment which leads to entrepreneurial innovation.

U.S. Personal Savings Rate

U.S. Personal Savings Rate

The idea of low interest rates is to increase spending and economic growth, but it severely punishes savers.  Looking at rates at my own bank tells the story. Savings accounts rates of 0.01%, and certificate of deposit (CD) rates of 0.2% for 26 months, 0.3% for 39 months, and 0.4% for 58 months.  Essentially zero return to the simplest and safest forms of saving money.

Invest – Savings flow to investment.  Investment is fundamentally about putting off consumption today for gaining bigger results later.  It is the ultimate virtue of free enterprise.  People put faith in the future in all kinds of forms.  They put more into a savings or retirement account, for example, planning to access those funds in the future.  In that process, however, they provide funds to entrepreneurs, businesses, and others that are building the elements of greater wealth that makes everyone better off.

Investment can be measured in all kinds of ways, but the the greatest faith in the future comes when investment flows to new businesses.  Individuals put their savings into launching a new business, transitioning from employee to small business owner and entrepreneur.  Other individuals put their savings into the dreams of an entrepreneur they believe in, ‘angel’ investors in the language of the startup community.  Finally, professional investors and funds or banks inject money into new businesses or new projects at established businesses that represent tomorrow’s way of doing things better than today.

Investment activity that results in new businesses being created is difficult to measure because of its many sources, but the results are not.  The U.S. Census Bureau reports that the total number of new business startups and business closures per year, the birth and death rates of American companies. These are employer businesses, those with one or more employees, the real engines of economic growth. Four hundred thousand new businesses are being born annually nationwide, while 470,000 per year are dying in the most recent data. Business startups outpaced business failures by about 100,000 per year until 2008. But in the past six years, that number reversed, and the net number of U.S. startups versus closures is minus 70,000.

Net Number of New U.S. Firms 

Net Number of New U.S. Firms

Source: U.S. Census Bureau, Longitudinal Business Database

Economic growth that results in widespread wealth creation and prosperity will not return until this dynamic of free enterprise, new firm creation, is re-established.  Current monetary and fiscal policies that throw a wrench in incentives to work, save and invest and channel limited resources away from private sector investment are destructive. When new businesses aren’t being born, growth stalls, jobs disappear and the dynamic of prosperity fades.

Article of the Day

Research: 10 Traits of Innovative Leaders – Harvard Business Review


“Every new thing creates two new questions and two new opportunities.”  
~ Jeff Bezos

Innovation and Leadership

Last week I was asked to lead a discussion at an executive roundtable event on innovation.  The fun part of these sort of events is the discussion of specific problems and issues at the businesses represented around the table.

A simple search of books on Amazon is revealing about the interest in innovation as a topic.

  • ‘Innovation’ – 71,115
  • ‘Entrepreneurship’ – 51,286
  • ‘Business intelligence’ – 24,266
  • ‘Financial and managerial accounting – 4,629

Many books and countless articles about innovation exist, yet it remains a constant challenge for businesses.

Edison and Lightbulb

If there is a universal symbol or image for innovation it is probably the lightbulb.  While Thomas Edison did do the work to make the lightbulb a commercial reality using his considerable entrepreneurial genius, the fact is that he built on the work of others.  One of Edison’s first acts in the process of commercializing the lightbulb,  a very long process, was to license a patent from someone else.

Innovation is most often about using old things in new ways, places, and combinations.  Invention is often an arbitrage-like activity, taking technologies, processes, and methods from one place to another for a modified recipe that has new value to a new audience.

Edison combined many materials and bits of know-how in what became the first successful commercial lightbulb.  Apple assembled the original iPod in 2001 only having built the software interface itself; otherwise all the parts of the iPod came from other companies.

Sources of Innovation

So where does innovation arise? Inventors?  Startups? Skunkworks projects at large companies?

Regardless of where the innovating activity takes place, most innovation arises from individuals and small groups experimenting in some way.  Often those who are doing the innovating don’t even recognize it as such until later.  Rather they are simply working to solve a problem, save time, or making some kind of serendipitous discovery.

Phelps argues that innovations are not determinant from current knowledge, thus are not foreseeable (Mass Flourishing).  Innovation isn’t predictable.

Ridley’s earthy notion is that ideas have sex (Rational Optimist).  Ideas happen when people get together.  Past learnings combine in new and unique ways when the right people meet at the right place at the right time. Certainly this concept provides some justification of why certain places or organizations seem to exude innovation.

From an organizational perspective, innovation arises from a process of experimentation, failures, and learning that leads, often in winding paths, to success.  I call this entrepreneurial churn.  Businesses and organizations that continue to produce impactful innovation find ways to maintain an environment where experimentation flourishes through entrepreneurial churn.

Central to entrepreneurial churn is failure. Experimentation, iteration, and innovation success is by its nature littered with failures.  Innovative individuals and organizations have a great capacity for dealing with failures.  Their failures are not financially or emotionally devastating, but rather part of a winding pathway toward success.

Leadership’s Role in Innovation

What is leadership’s role in spurring innovation and what does it look like?  Different leadership models include the following.

  • ‘Tinkerer in Chief’ in the mold of Edison or Jobs
  • ‘See’er in Chief’ whose crystal ball and ability to make good choices is reliable
  • ‘Innovation manager’ who can identify and organize talent for results

No matter your leadership skills, I believe innovative organizations have leadership that understand the notion of entrepreneurial churn.  Leaders find ways to create an environment/culture where failure can occur without derailing the business or a high proportion of careers.

Leadership’s role in innovation also involves risk management.  While the perception is that innovation is all about risk, the more accurate description of successful, ongoing innovation is that leadership finds ways to mitigate risk.  The analogy I use for effective risk management with innovation is options.  Mitigating risk in innovation effectively involves finding opportunities where the business obtains the right, but not the obligation to participate.  Leadership is looking for opportunities with a limited downside and big upside.

An example.  At one of my past companies we secured an investment from a strategic partner.  The business had spent millions attempting to implement what my business did, but with no success.  For a $500,000 investment in my business, it was able to try one last means of working on an innovation.  While there was plenty of resistance to any more work on this innovation, their risk was more or less limited to the $500,000 investment.  Within one year of the investment, the program in which my business specialized had become a well-accepted and understood success at the investing company.  A senior executive had led the effort in getting the investment deal done, but more importantly had found a means of seeding innovation in his organization in a way that managed the risk of the project carefully.

Leadership’s most important role in innovation is culture.  You, your business, and your network are all impacted by culture. Culture matters from a societal perspective, but is vital for your business and its ability to innovate and adapt over the course of time.

What/how do you bestow and infuse an entrepreneurial/innovation culture in those around you? Why are some individuals and businesses more entrepreneurial?

My hypothesis is that there is an ethic that is the guiding star for high-impact, entrepreneurial people.  This ethic infuses companies and organizations that are entrepreneurial, innovative, and high impact over the course of time.  I refer to this as The Entrepreneur’s Ethic. I won’t elaborate on The Entrepreneur’s Ethic here (much more in coming months), but will point to one way that it sometimes expresses itself at businesses.

Culture expresses itself sometimes in an articulated value set.  It could be a mission statement, but often is captured in sayings, adages, and other forms of workplace communication.

An example from a friend, Fulton Breen of North Carolina.  Fulton worked to articulate a set of values of his company XS, Inc. based on the seven cardinal virtues.  They include the following.

  • Dream Big – Have the courage to take risks
  • Work Hard – Duty before fun
  • Have Fun – Celebrate wins
  • Play Fair – Integrity in all we do
  • Speak Out – Speak your mind with conviction, but respectfully
  • Stay Sharp – Always seek improvement

These values are on the office wall, but much more importantly are a part of the living and communicated culture of the company.  Fulton has now parlayed his experience at XS, Inc. to a new company that works with other businesses on articulating its own values, Novarete.

I recently heard an entrepreneur talk about his rule of three (or something like that).  After having been through a few startup company experiences his observation was that company culture changed or needed to change every time the number of employees tripled.  When the business went from 1 founder to 1 founder and two employees, everything had to change.  The same when employee numbers went from 3 to 10, 10 to 30, and 30 to 100.  As I heard him describe this I had to smile a bit thinking back about my own startups.

Something similar holds true for business innovation.  Successful innovation over the course of time reflects an ongoing leadership element that works to constantly reinforce and re-model aspects of culture and how it impacts how people imagine, create, and work.

My take-aways for the executive roundtable group:

  • There’s a disorganization element to innovation.  If your plan is to ‘manage innovation’ better, you may want to think again.
  • But leadership is key…
  • …And leadership’s biggest impact on innovation is by shaping culture.

Article of the Day

Chris Sayer, Ventura County Farmer and Entrepreneur – KCET


“Part of the reason we grow lemons in Ventura County is because we can grow them year around…and grow them efficiently. You will never see Iowa avocados. In theory, they could grow greenhouse avocados, but that might not pencil out. You could see Iowa strawberries…but not in January. There are opportunities for other states, and great for them if they jump on those.”  
~ Chris Sayer

The Farmer Entrepreneur, Then and Now

I recently took my family to the Iowa State Historical Museum in Des Moines. The quote below was placed on the wall near the exhibits about the early days of settlement of the state. Iowa in the 1830s was part of what was referred to as Wisconsin Territory.


Seeking opportunities is a fundamental part of America’s history, and farming has had a central role in that history.  In the nineteenth century huge tracts of productive farmland in states like Iowa were opened to those who were willing to settle the country.  People like Aristarchus Cone came to Iowa in the 1830s when there was very little waiting; few, if any, established governments, towns, roads, and railroads.  Therefore, farming was both necessity and opportunity.  Establish food and shelter for your family and then work as settlement occurs over time to develop commercial production.

Early settlers forged lives from what the country could offer and built farms, businesses, towns, and states in the spirit of pursuing opportunities. The virtuous basics of free enterprise took hold – work/produce, save, invest – and each generation was better off to pursue their own opportunities whether in farming or something else.

In the twenty first century in America there is no more homestead land for those who want to ‘go into the farming business.’  However, there are still ample opportunities for the farmer entrepreneur.  Instead of just arising from earth’s resources, today’s farming opportunities arise from a limitless source, human imagination.

Categories of opportunities pursued by today’s farmer entrepreneurs that I find most interesting include:

  • Niche products – Arronia berry products at Sawmill Hollow Farm, Berkshire pork from Berkwood Farms, and Wagyu beef from Majinola Meats are just three examples of consumer-facing products from farmer entrepreneurs.
  • Technology-enabled production models – Butter lettuce from Leaf Safari, barramundi from Iowa’s First, or shrimp from Shrimp 59.  All these products are available from other places in ample supply, but farmer entrepreneurs for each of these businesses make their products available in new places using technology to create new production models.
  • Innovative business models – A farmer entrepreneur from Iowa I visited with recently shared a business model strategy underway for his operation.  He purchased farmland to develop recently.  This is nothing different from what he has done in the past to become a 10,000 acre+ farm in Iowa. What is different about his recent purchase, however, is that it is 1,500 miles southeast of Iowa.  He is planning to ship some equipment from Iowa and part of his labor force south to work in the winter at improving the land that he thinks is undervalued as cropland relative to the Midwest.  Perhaps just land arbitrage, but also potentially the beginnings of development of an innovative new business model for his farm operation.
  • Global agriculture development – Technology from the U.S. can make a difference across the globe, but the most important ingredient American agriculturalists can add is know-how.  Farmer entrepreneurs from the U.S. continue to find interesting new ways to use their experience and talent in parts of the world that need them. Stevenson Angus Ranch in Russia and Full Circle Global Ag in Ghana are two examples of farmer entrepreneurs involved in transformative agricultural development projects in places dotting the globe.

Two of the most popular search terms that bring visitors to this website, a majority from outside the U.S., are ‘farmer entrepreneur’ and ‘agricultural entrepreneur.’  It’s been 180 years since farmer entrepreneurs first settled the part of the world where I live, Iowa, but the idea remains firmly of interest to people here and many across the globe.

“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”  

~ Nolan Bushnell, Entrepreneur

Startups Then. Startups Now.

I’ve been a fan of David McCullough’s books for a long time.  He’s an historian who knows how to build a highly readable story from solid research.  History is often more vivid than fiction, as you can’t make up some of the funny/crazy/amazing things that people have done through time.

I recently read McCullough’s new book, The Wright Brothers.  While familiar with Wilbur and Orville Wright as inventors of the airplane, I wasn’t familiar with the details of their pathway to legend.  It wouldn’t have been labeled as such in the first years of the 20th century, but the Wright Brothers effectively operated as a startup from 1900 to 1903 when they made their first successful flight with a self-powered machine.

The term ‘startup’ has been used for a while, but certainly has come into prominence in the last twenty years.  Today’s entrepreneurship programs at universities, incubators, accelerators, and entrepreneurial community-building efforts underscore the cultural prestige of startups as a means to innovation, job creation and professional fulfillment.

But is there something completely unique to our era about startups?  A reading of The Wright Brothers indicates to me that the answer to that question is no. Wilbur and Orville Wright may not have termed their research project and later business a startup, but their activities that resulted in the first airplane shared all the characteristics of what we call startups today.

Found a Secret

Peter Thiel says that entrepreneurs are looking to uncover the world’s secrets.  The insight the Wright Brothers developed was based on their opinion that a reliable method of pilot control was the key to successful, safe flight.  At the outset of their experiments about 1900 they regarded control of an aircraft as their key aim. There was promising knowledge and development in wings (lift) and engines (power) but nothing related to control.  Most experiments in human flight up to that point in time resulted in laughable or tragic failures.  The Wright Brothers’ methods of wing warping and a rear rudder were eventually awarded a patent, and provided the template for airplane control that lasts to this day.

Product Development Through Trial and Error

The Wright Brothers gained very little through existing theories or basic research.  Rather, they developed the first powered airplane through years of trial and error.  Their pathway was through flying kites, carefully watching different kinds of birds in flight, building models, building a wind tunnel, and finally traveling for three straight years from their home in Dayton, Ohio to Kitty Hawk, North Carolina to try their planes.  Theirs is another example of theories following invention, not the other way around.  The Wright Brothers used some of the mathematical aerodynamic theories that had been developed with their second prototype, but they were wrong and a tremendous frustration to their efforts.  Articulate theories on why an airplane works the way it does emerged after the invention.

Intensity of Purpose and Hard Work

John T. Daniels (witness of 1903 first flight) – “It wasn’t luck that made them fly, it was hard work and common sense, they put their whole heart and soul and all their energy into an idea and they had the faith. They were the two workingest boys I ever knew.”

It’s Not the Money, It’s the People

The Wright Brothers weren’t the only ones working on airplanes.  The Secretary of the Smithsonian Institute, a very prestigious position at the time and a PhD, Samuel Langley, had been working on a project for a number of years.  The Langley project cost $70,000, the greater part public money, whereas the Wright Brothers expenses for everything from 1900 to 1903 was less than $1,000, paid entirely from the modest profits of their Dayton, Ohio bicycle business.  The Wright Brothers produced a working airplane, Langley did not.

Team Building

The Wright Brothers in the long-term (and with 20/20 hindsight) could have done much better at building an organization to take business advantage of their invention.  However, during their startup period, they did very well at including the right people at the right time.  Charlie Taylor ran their bicycle shop in Dayton while they were working on the airplane, but became an indispensable part of the team when they turned to construction of an engine for the machine.  He developed what may have been the first aluminum block engine ever, this in the very early days of gasoline powered internal combustion engines.  It was vital that it be light, and the bicycle mechanic came through with a solution neither Wright brother would have been likely able to do themselves.

Generate Skeptics and Believers

The Wright Brothers, and the idea of manned flight, generated all kinds of debate at the time.  Prestigious scientists, professors, and even Scientific American published numerous articles denouncing either the general idea of a workable airplane or specifically the Wright Brothers project as word spread.  The press, the U.S. military, even the local Dayton Newspaper (for a time) were openly skeptical.  Key people, some close to the Wrights, others not, were strong believers, however.  Disruptive ideas and projects generate both strong skepticism and belief, then as now.

Wright Brothers First Flight, December 17, 1903. Orville piloting. Wilbur at the wing.

Wright Brothers First Flight, December 17, 1903. Orville piloting. Wilbur at the wing.

Headlines and Articles

Agriculture in China rapidly modernizing – Pig Site
U.S.-EU trade agreement could benefit agriculture – Capital Press
Salt poisoning costs agriculture $27 billion annually – Nature World
Beyond disruption: The age of the impact entrepreneur – Wired
Problems are only hurdles in front of goals – Entrepreneur
The future of innovation belongs to the mega-city – Washington Post
Amidst public controversy China debates GMO development – Forbes
This is the path of innovation – Globe & Mail
There’s no ‘there’ there with latest ‘deflation’ scare – Forbes


Whether manufacturing becomes of greater or lesser relative importance in China than in the United States, it is certain that there will be need for a constantly increasing agricultural production, and that the fullest utilization of the arable land consistent with a permanent agriculture should be a major concern of the Chinese government.. 
~ O.E. Baker, 1928 Issue of Foreign Affairs, Agriculture and the Future of China

Opportunities for US-China Investments in Agricultural Innovations

I recently published a paper with the Paulson Institute, Opportunities for US-China Investments in Agricultural Innovations and New Technologies.  The paper outlines four models that can link US and Chinese investment activity, particularly private sector investment, to help yield productive new avenues of commercial collaboration. All four models focus on animal protein supply chain technologies. That is because agricultural innovation in this realm is of particular importance to demand side developments and rapidly changing consumption patterns in China.

The models focus on early-stage agricultural business development activities, representing a new element of US-China private sector engagement. Although mergers and acquisitions (M&A) between US and Chinese agribusiness and food companies—for example, the acquisition of Smithfield Foods by Shuanghui—may continue to be an important part of strengthening agricultural ties, collaborative early-stage commercial activity promises to deliver more enduring impact. Connecting investors, business people, and entrepreneurs from both countries has the potential to build collective knowledge and imagination, resulting in greater indigenous agricultural innovation in both countries.

The United States has in many ways set the global standard for agricultural innovation. And China, for its part, has made significant strides in agricultural productivity as well. China continues to both rapidly integrate innovations from abroad and to develop homegrown innovations. But is the rate of agricultural innovation adoption in China rapid enough to meet the growing food needs of a huge and increasingly wealthy population?

The average family in the United States today spends 10 percent of its disposable household income on food, while that figure is double in China. Both of these figures have declined over time—in the United States over an extended period, and in China more dramatically in the last thirty years. When families spend less of their income on food, it represents a relative gain in prosperity as disposable income can then be spent on other necessities, leisure, or luxury items.

The decline in food prices is directly related to the rise of agricultural productivity over the last thirty years. The key factor responsible for such significant gains is innovation, not just previous gains from input intensification and crop-area expansion. It takes significantly fewer resources today to produce one calorie of food than it did in the past, with much of the credit for that improvement attributable to agricultural innovation.

For this reason, investment in agricultural research and development (R&D) is an important driver of agricultural innovation. But while public sector spending on such R&D is important to both the United States and China, it is private sector investment in both R&D and commercialization that will determine the ultimate effect of future agricultural innovations.

This raises an important question for the United States and China: are there opportunities to link private sector investment activity in agricultural innovation and connect the agricultural innovation engines of the two countries?

This paper suggests four models could link US and Chinese private sector investment, and thus yield productive new avenues for commercial collaboration. All four models focus on animal protein supply chain technologies. That is because agricultural innovation in this realm is of particular importance to demand-side developments, and rapidly changing consumption patterns, in China.

Model One: Joint Agriculture Fund. Such a fund, backed by US and Chinese equity partners, would have an explicit focus on investing in businesses with technology relevant to both the United States and Chinese animal protein supply chains. Chinese investors would be limited partners in the fund itself, but personnel with deep experience in, and perspective on, Chinese agriculture would help to bring unique capacity to the fund’s portfolio companies. The goal would be to help them scale portfolio businesses in both the United States and China.

Model Two: Joint Agriculture Accelerator. In this model, Chinese investors would partner with a US-based organization to start a US-China Agriculture Accelerator. Such an accelerator would provide participating businesses with office, laboratory, and/or engineering space, as well as access to mentors, skills training, a support network, and ultimately connections to investors and customers. The joint accelerator would, as is customary, often take an equity stake in businesses that participate in the program.

Model Three: University Student Incubators. In this model, US and Chinese investors would help to create student incubators at US universities, with the explicit goal of supporting development of startup businesses created by teams of both US and Chinese university students. Startup businesses that emerge from this student incubator would have market potential in both countries.

Model Four: Emerging Africa Agriculture Fund. This model would combine Chinese and US investors (and potentially third-country investors), as well as agribusinesses from both countries, into partnership active in third countries where agricultural development is a pressing need. One opportunity that stands out is the prospect of investment in greenfield agriculture projects in Sub-Saharan Africa. Such a fund would aim to discover projects where mutual participation would benefit the Africa-based project but also build opportunities for participating US and Chinese agribusiness partners.

The rise of the Chinese consumer has been one of the most important drivers of change in global agriculture in the last 25 years, and that process is only beginning. Combined with the emergence of middle class food consumption habits across emerging markets, the resulting demands on agricultural production systems represent among the most important economic and environmental challenges of the next 50 years.  To meet these challenges, these four models represent opportunities to link investment activity in agricultural innovation—and connect the agricultural innovation engines of the two countries at the center of global agriculture.


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