A couple of links/quotes on the relationship between perceived value and technology [tied to a business model]:

The first one is about new methods for squeezing oil out of stone:

What makes the new fields more remarkable is that they were thought to be virtually valueless only five years ago. “Everyone said the oil molecules are too large to flow in commercial quantities through these low-quality rocks,” said Mark G. Papa, chief executive of EOG Resources.

EOG began quietly buying the rights to thousands of acres in the Bakken and Eagle Ford after an EOG engineer concluded that the techniques used to extract natural gas from shale — fracking, combined with drilling horizontally through layers of rocks — could be used for oil. Chesapeake and a few other independents quickly followed. Now the biggest multinational oil companies, as well as Chinese and Norwegian firms, are investing billions of dollars in the fields.

The second is about missing out on the McDonald's franchise opportunity:

An older brother had promised to finance his first restaurant when Mr. Langerman was ready -- and if the brother approved the venture.

Mr. Langerman studied his trade. He read restaurant magazines. And in 1949 or 1950, he says, he read an article about a restaurant in California called McDonald's.

He wrote to the McDonald brothers about opening a franchise. They advised him that he would need $35,000 to $50,000 to buy their very first franchise and to make a down payment on the equipment he would need.

Mr. Langerman went to his brother Charley and told him he was ready to open his own place -- a hamburger operation.

"Who eats hamburgers?" he recalls his brother as saying.

Exit Mr. Langerman. Enter Ray Kroc, to earn a fortune and a page in history as the driving force behind the McDonald's empire.

tags: technology, system, business, model, high value

How to Invent: Reverse Brainstorming (part 4). Problem selection.

The second half of Reverse Brainstorming is Problem Selection.  By the end of the session, we have to select problems that are worth solving, i.e. the problems that are worth our investment of time, money, and effort. Everything else (like 95%) is noise.

Here's a couple of diagrams illustrating the outcome of the session:

As you can see, numbered problems from the list created during the first part are first assigned Value and Timing, then sorted accordingly. Since the Value dimension invokes many questions from participants, I'll have to explain it in a separate post.

On the other hand, Timing is understood intuitively. Nevertheless, it is still important to make sure everybody has the same frame of reference. For some people, like a startup product organization, short-term means six months; for others, like a nanotech research group, short-term means six years. To avoid confusion, both short-(ST) and long-term (LT) terms have to be defined before problem evaluation, e.g. ST = 1year, LT = 5years.

One important consideration to keep in mind, though. You, as the session moderator, have to have a more sophisticated understanding of timing because when it comes to invention most simple intuitive notions, even the familiar ones like timing, tend to be wrong.

Let me explain. Time measured in calendar years reflects periods of rotation of the Earth around the Sun: 1 year - one rotation, 5 years - five rotations. Unless your group is dealing with agricultural products or services, which depend on Sun patterns, the Earth's rotation has almost no connection with invention and innovation. I say almost, because we do have major purchasing seasons, e.g. Christmas, Chinese New Year, Back to School, etc. Nevertheless, real timing has nothing to do with the rotation of the Earth. Rather, orthogonal to our everyday thinking, innovation timing has to do with technology or business constraints. That is, short-term means we are working inside a set of constraints, while long-term means we've managed to break through at least some of them.

If you have time during the session, it might be a good idea to convey to the group the concept of timing as constraint-related, rather than calendar-related. Often, it gets people thinking outside of the box their intuitive mindset and leads to a better understanding of Value and problems that prevent us from getting to it.

tags: reverse brainstorming,  reverse brainstorm, book, course, stanford, constraints, time, high value.

Previous posts on Reverse Brainstorming Howto:
1. How to Invent: Reverse Brainstorming.
2. It may look like this.
3. Concept Diagram: Reverse vs Traditional Brainstorming

The beauty of simplicity

"Investors should remember that their scorecard is not computed
using Olympic-diving methods: Degree-of-difficulty doesn't count.
If you are right about a business whose value is largely dependent
on a single key factor that is both easy to understand and
enduring, the payoff is the same as if you had correctly analyzed
an investment alternative characterized by many constantly shifting
and complex variables." (Warren Buffet, 1994 Letter to shareholders)

With regard to problems, inventions work in a similar fashion: it's not the complexity of the problem that matters, but rather the value of the solution that problem "sufferers" attribute to it.

Reportedly, Facebook spent $40M on a social-networking patent porfolio:

A set of documents from the United States Patent and Trademark Office (USPTO) reveal that Facebook acquired the 18 patents earlier this summer from MOL Global, the Malaysia-based payments company that purchased Friendster last year.

Most likely, it's a defensive move and has nothing to do with the intensifying Google-Facebook rivalry, as the CNET article alleges. Had the patents fell into the hands of an experienced IP litigation firm, Facebook would face massive legal costs and huge potential financial damages claims. I'd say they got away fairly cheaply. Especially, in view of a Bloomberg report that "Facebook Inc.’s biggest advertisers have boosted spending by at least 10-fold in the past year as the social network crossed the half-billion user mark."

In any case, Friendster's patents turned out to be worth a lot more than the business itself.


tags: patents, licensing, 10x,  high value, social,  network

The value of aproblem: finance.

From George Soros' book "The Alchemy of Finance" (2003 paper back edition):

The major insight I gained ... is that all human constructs (concepts, business plans or institutional arrangements) are flawed. The flaws may be revealed only after the construct has come into existence... Recognizing the flaws that are likely to appear when a hypothesis becomes reality puts you ahead of the game. p. 37.

This is a good argument for starting a project with Reverse Brainstorming, a technique I've developed to search for problems rather than solutions. In a Reverse Brainstorming session participants are required to generate a 50+ problems within an hour; 100 is my preferred number. The vast majority of the flaws discovered during the session will never be exposed, or will never become important enough to entail a corrective action. But there will be several that will reveal critical issues. Understanding and inventing ways to address them will put us ahead of the game.

tags: reverse brainstorm, method, problem, solution, high value, money

Patent Value: the haves and have-nots

     In search of data on patent values, I've found a survey of German inventors by Dietmar Harhoff and Karin Hoisl(2006). The paper studies the impact of the German Employees' Invention Act(GEIA), a German law that regulates how employees are paid for their patents.
Check out the payment distribution chart: only 1% of patents results in a payout above 20% of salary; the remaining 99% barely make a dent in the inventors' income. Since patent awards are calculated as a percentage of value to the company, most likely, patent values vary as dramatically.

Interestingly enough, planned inventions are more valuable than spontaneous ones:

"Somewhat unexpectedly, two other R&D process variables turn out to have a significant impact. First, patented inventions that are the planned product of R&D projects are more valuable than unplanned results or mere by-products of R&D.
The surprise lies in the second R&D process variable with a positive coefficient – inventions made during the inventor’s leisure time are considerably more valuable than other types of inventions."

References:
Dietmar Harhoff and Karin Hoisl. 2006. Institutionalized incentives for Ingenuity. Discussion Paper.

Banner ads are the least useful type of advertisement. That is why in early 2000s, despite the fact that search results were the same, people moved away from Yahoo to Google.

via The Business Insider.

I found a good quote on the importance of problems for personal growth in Ichak Adizes' book "Managing Corporate Lifecycles":

Each of us is as "big" as the problems we handle and struggle with. "Small" people deal with small problems: the kind of car they own and the quality of their neighbor's kitchen wallpaper. "Big" people struggle with such problems as the quality of their children's education, the environment they will leave behind, and the quality of life in their communities... Addressing and being able to solve bigger and bigger problems means that our strengths and capacities are improving. We need to emancipate ourselves from small problems to free the energy to deal with bigger problems. (p.6).

It's tempting to compare the size of each other's problems :) Size does matter, especially, from somebody else's, i.e. external, point of view. Nevertheless, for pesonal growth marginal size of the problem matters the most. In other words, a positive difference between a new challenge you are willing to take on now and the most difficult problem you solved to-date is be a sign of growth. Living with this difference tends to create Flow, a mental state of full involvement and maximum personal effort.

more Jeff Hawkins (p.78)

...the problem of undestanding how you cortex forms invariant representations remains one of the biggest mysteries in all of science. How difficult, you ask? So much so that no one, not even using the most powerful computers in the world, has been able to solve it.

Sounds like a really important problem. I need to find out more about it. 

12/27/07 News Agencies

Beijingers were warned to stay indoors on Thursday as pollution levels across the capital hit the top of the scale, despite repeated assurances by the government that air quality was improving.

"This is as bad as it can get," a spokeswoman for the Beijing Environmental Protection Bureau told AFP.

"Level five is the worst level of air pollution. This is as bad as it has been all year."

According to the bureau's website, 15 out of the 16 pollution monitoring stations in urban Beijing registered a "five" for air quality rating.

The main pollutant was suspended particulate matter, which is usually attributed to coal burning and automotive exhaust.

Chinese cities are reaching growth limits.