Enterprise Resilience Management Blog

The Medici Effect and New Design

One of my early posts [The Medici Effect] discussed Frans Johansson's interesting book The Medici Effect: Breakthrough Insights at the Intersection of Ideas, Concepts, and Cultures, which focuses on the value of creating a space in which people from diverse fields of expertise can get together to exchange ideas. In a special report on design, BusinessWeek highlights designers who have created new products by bringing together knowledge from different disciplines ["Pushing the Boundaries of Design," by Jessie Scanlon, 12 June 2007]. I'm a believer in the Medici Effect, which is why I hire a diverse work force. The results, to say the least, have been interesting for me and have drawn Enterra Solutions into areas that my background alone might never have taken the company. The designers BusinessWeek highlights are also obvious believers in the Medici Effect. Scanlon writes:

"The Frisbee. The escalator. Reinforced concrete. These very different inventions share one thing in common: They weren't invented exactly—each was borrowed from an unrelated field. The flying toy was inspired by the metal pie tins of the Frisbie Baking Company that college students of yore tossed for fun. The escalator was originally conceived as a Coney Island amusement ride. And reinforced concrete was first patented in 1848 by a French gardener trying to develop a better flowerpot. These stories of productive serendipity sound almost unbelievable—the urban legends of the inventing world. Even if they are true, you might think they're nothing more than dumb luck—as relevant to business strategy as a winning lottery ticket. Yet such examples are less rare than you might think. In his 2005 book The Ten Faces of Innovation, Ideo general manager Tom Kelley gathered these examples and more recent ones in a chapter on 'cross-pollinators,' those who 'create something new and better through the unexpected juxtaposition of seemingly unrelated ideas or concepts.'"

In other words, cross pollinators rely on the Medici Effect to generate ideas. I will go as far to say that most of the interesting developments that occur in many sectors (not just design) are fomented at the seams of different disciplines. Scanlon goes on:

"Then, as now, the most exciting work in design happened at the intersection of two or more disciplines, where knowledge from one finds relevance in another. Many designers might say, quite rightly, that they always work at the nexus of disciplines—synthesizing the demands of engineering, business, and human factors, not to mention style. Yet some designers still push beyond the expectations of their profession, breaking down more boundaries."

Scanlon discusses the work of several designers who have worked in the nexus of disciplines:

"In the work of Richard Liddle, founder of the British Cohda Design, recycling melts, quite literally, into furniture. ... The designer showed his new RD4 chair, a seat formed of old plastic bottles. The combining of traditional furniture or industrial design with advanced technologies or manufacturing processes is a fruitful one. A team of product designers and engineers at the San Francisco-based Lunar Design pushed that boundary in its design of the Novint Falcon, a video game controller based on haptic (tactile) technologies, allowing players to experience the sense of touch—and also turning the video game peripheral into a training tool for medical students. Similarly, Hilmar Janusson, a vice-president of research and development at prosthetics maker Ossur and lead designer of the company's motion-sensing Proprio Foot, draws on artificial intelligence in the design of Ossur's bionic products. And although he works in a very different medium, Web designer Jeffrey Zeldman's efforts at the forefront of the standards-based design movement—which has pushed for the use of common protocols that make Web sites far more usable—similarly interweaves graphic design and software code. Recently, many designers have been drawing design into the realm of the public good. A design activist of sorts, John Thackara spearheads multidisciplinary projects such as Design of the Times (DOTT), a yearlong festival of social innovation and design taking place throughout Britain. Also in the realm of the public good, Cameron Sinclair's Open Architecture Network builds on architecture and open-source technology to create a global design platform that introduces a new intellectual property framework to the architecture world. And goloco.org, the new venture of Robin Chase, founder of ZipCar, sits at the cusp of networking technologies and transportation design—and has the potential to transform our cities' urban planning. Such aggressive cross-category experimentation is also true of nondesign fields, and what was once regarded as dumb luck is coming to be seen as smart strategy. Today, Procter & Gamble actively cross-pollinates among traditionally divided business units, with results like Crest Whitestrips—a dental product based on the laundry division's knowledge of whitening agents."

Scanlon concludes by noting that BusinessWeek selected ten designs for special attention, most of whom were mentioned in the article. A more detailed look at their work was found on-line ["Cutting Edge Designers," 26 June 2007]. The first designers highlighted come from the San Francisco firm Lunar Design. They were asked by Novint Technologies to design an affordable game controller that would provide participants with a tactile gaming experience.

"The 23-year-old firm's recent work on the Novint Falcon, a just-released PC video game controller that offers 'haptic' effects—or, tactile, textural sensations, such as sinking through viscous liquid—is the latest example of how Lunar's designers welcome challenging projects that often have no design precedent. The Falcon, for example, is the first mass-market haptic device for PC video games. Jeff Salazar, design director on the Novint Falcon project, Alex Rochat, the lead designer, and an engineering team led by Art Sandoval drew upon past experiences from wildly disparate projects to inform and inspire the Falcon's groundbreaking design. Lunar's team also designed it with easy-to-exchange handles so it could be adapted for professional training, such as medical simulations. While formulating their design strategy, the Lunar team looked back at the company's own past design projects, such as the Oral-B CrossAction manual toothbrush and the robotic da Vinci Surgical System, each of which had no direct predecessor and, therefore, no easy design reference points. ... Salazar, Rochat, and Sandoval blurred the boundaries of industrial robotics, personal computing, gaming, and medical design."

The second designer is Martin Wattenberg, Group Manager for IBM's Visual Communication Lab. His mission is to encourage a more social approach to data visualization and analysis.

"A software programmer and artist whose computer-based work has been shown at venues such as New York's Whitney Museum of American Art and who holds a PhD in mathematics from the University of California at Berkeley, Wattenberg is a polymath striving to make the field of data visualization more aesthetic and social than typical ho-hum Microsoft Excel spreadsheets and charts. If Wattenberg has his way, most of us will use some form of the next generation of experimental graphics software that he is working on at IBM to create eye-popping visuals. And we'll react to them with the revelatory joy of an inventor experiencing an 'aha!' moment in the lab. ... His goal is to 'democratize data' via Web-based software applications that allow anyone, from a junior high school student to a C-suite executive, to present statistics or other information in elegant, engaging visuals, which they can subsequently post online with ease. The data can range from the recurrence of words in the best-selling Harry Potter books to the comparative fuel efficiency of various automobiles."

Wattenberg's work reminds me of the innovative visual data displays offered by Gapminder, a Swedish non-profit venture for development and provision of free software that visualize human development. It's worth a look if you're interested in development.

The third designer is Richard Liddle, "an innovative champion of sustainable design is turning plastic into the ultimate recyclable material," who was mentioned in Scanlon's article.

"How, Liddle wanted to know, could all of that plastic waste be turned into something productive, its energy and value reclaimed? He spent two years at London's Royal College of Art studying the problem and developing a solution—a proprietary process that melds plastic recycling and manufacturing into a single, seamless process. Then he returned to Newcastle—where he'd earned his master's—in part because of the region's manufacturing history. 'I could take advantage of the deep knowledge in this area and get access to industry,' he says, and indeed, with some effort, he found a company willing to let him use its industrial machines for some early experiments and trials. And so it is here, in a small studio that looks more like a tiny factory, that Liddle's Cohda Design refined its process of efficiently converting waste materials into new products. The studio is equipped with the modified industrial machines that can take bottles made of HDPE—a plastic used in the construction, housewares, automotive, and packaging industries—grind them into flakes, melt them, and form that molten plastic into chairs, lamps, and other products using a process he calls uncooled recycled extrude, or URE. Production-ready prototypes, as well as more experimental geometric and woven forms, show the myriad possible designs. In most cases, those could be melted down and fed back through the process again and again—the opposite of what Liddle sees as the built-in obsolescence of most furniture today."

The fourth designer is Cameron Sinclair:

"As the force behind the Open Architecture Network (OAN), Cameron Sinclair has brought the philosophy and collaborative methods of the open-source software movement to architecture, in the hopes of meeting the housing and building needs of millions of people around the globe. Sinclair is the co-founder and executive director of Architecture for Humanity, an organization that seeks to supply architectural solutions to humanitarian crises, bringing design services to communities. He helped to create the OAN as a free, Web-based platform that is part database of building projects, part design tool, and part community. Some four months after its beta launch on Mar. 8, the OAN boasts more than 5,000 members and nearly 400 projects."

The fifth designer is Jeffrey Zeldman:

"A Web designer since 1995, Jeffrey Zeldman has created scores of sites for clients including Warner Bros., Advertising Age, and the AIGA, the professional design organization. But Zeldman has made his biggest impact as an evangelist for designing with Web standards—the protocols or pieces of software code that make a site load faster, reach more users, and cost less to design and maintain. In 1998, he co-founded the Web Standards Project, a coalition of designers that convinced Microsoft and Netscape to support the same Web technologies in their browsers. His book Designing with Web Standards, first published in 2003, was an instant classic and is now in its second edition. And A List Apart—the Webzine about best practices for designing and building Web sites he co-founded in 1997—has grown into a traveling event and a book series, further expanding his influence."

The sixth designer is Hilmar Janusson:

"Hilmar Janusson is working at the cross-section of artificial intelligence and prosthetics. The lead designer at Icelandic medical-device maker Ossur supervised the production of the award-winning Proprio Foot, released in fall 2006, which applies motion sensors and proprietary bionics to provide amputees with reactive replacement feet that move in realistic motions. Janusson’s approach to prosthetics design is to develop original technology specific to amputees’ needs, rather than the more traditional approach of borrowing or adapting from other industries. The artificial intelligence of the Proprio Foot, for example, can be programmed to reflect an individual’s unique gait; less advanced designs force an amputee to adjust his or her natural walking motions to accommodate a stiff prosthetic. The foot is also designed to point downward when an amputee sits, giving a more natural look."

In a world that remains filled with landmines, prosthetics will be needed for years to come. A good prosthetic can mean the difference between being a productive member of society or an outcast in some developing countries.

The seventh designer is Lisa Strausfeld:

"Known for designing informational exhibition displays that offer seamless navigation of both physical and digital realms, Lisa Strausfeld recently led a team at Pentagram (with collaborators Christian Marc Schmidt and Takaaki Okada) to create a radical new interface design for the One Laptop Per Child project. Instead of using the traditional desktop metaphor, Strausfeld and her colleagues created dynamic, animated icons that signify concepts such as 'home' and 'friends' to guide young children, many in the developing world, through their first computing experiences. The child using the laptop is represented by a human figure at the center of the screen—a radically physical approach to interface design. Strausfeld is also a senior scientist at the Gallup Organization, where she advises on data visualizations of poll results and related topics."

I have previously written about the One Laptop Per Child project [Connecting the Poor and An Update on Connecting the Poor].

The eighth designer is John Thackara:

"A former design journalist and publisher, and tireless educator and event producer, Ganges (France)-based John Thackara is in the business of meshing innovations driving social change with design. A self-styled 'symposiarch'—someone who designs collaborative events, projects, and organizations—he’s currently focusing his attention on Dott 07, a biennial of design that tests examples of 'one planet' living across the Northeast of England (a push to promote sustainable lifestyles). This yearlong festival includes a project in Middlesbrough to demonstrate that local food production can both reduce a city’s ecological footprint and improve living standards for residents. With the support of the UK Design Council and One North East, Dott 07 projects are intended to be examples of sustainable design principles implemented by communities working jointly with design professionals. In his efforts to foster collaborative innovation, Thackara connects a network of designers with concerned citizens to bring about real change. He also runs Doors of Perception, a design network that convenes every two years at a celebrated conference in India."

The ninth designer is Robin Chase:

"In 2000, Robin Chase founded Zipcar, a car-sharing organization offering a practical alternative to car ownership. The company now has more than 90,000 consumer and business drivers worldwide, while it has also served as something of a wakeup call to the car rental industry at large. Numerous public agencies, including various urban transit authorities (Washington, D.C.) and educational establishments (University of Michigan) have replaced their fleets with Zipcar contracts. After leaving the company in 2003, Chase went on to study transportation policy, urban design, and city planning as a Loeb Fellow at Harvard University, while she’s still working at the edges of blending sustainability principles with transport design. Her new venture, Goloco.org, capitalizes on the growing ubiquity of social networks by connecting drivers and travelers, who can sign up online to share rides of all distances and thus build community—and cut down on traffic on the roads."

The final designer is actually a design company, Anomaly:

"Co-founded in New York by industry stalwart Carl Johnson, Anomaly promised to be yet another agenda-smashing advertising and marketing company. But since its inception in 2004, the founders and directors have truly shown a different way of doing things, blurring the borders between providing traditional marketing services and working as a business development partner. Eschewing the traditional client/agency relationship, Anomaly works to develop intellectual property for both itself and for its clients, including Virgin America, for which it recently developed a line of luggage with Burton—profits are split among the three partners. Another recent introduction was ShopText, a U.S.-based mobile commerce platform Anomaly developed in-house, which is now being used by the likes of publisher Condé Nast. Shown here is work in progress for Eu, a premium range of skin-care products Anomaly developed that will launch this fall."

As Scanlon noted, the common thread that ties these designers and design firms together is that they deliberately work in the seams between disciplines searching for ways to use innovations in one area to benefit challenges found in another. That is precisely the aim and value of the Medici Effect.

Reconnecting with the World

Washington Post columnist David Ignatius writes, "When foreign policy gurus Henry Kissinger, Zbigniew Brzezinski and Brent Scowcroft all start saying the same thing, it's time to pay attention." ["Wise Advice: Listen, and Engage," 24 June 2007]. What they are all saying is what my colleague Tom Barnett has been preaching for years, America's best interests are served when we are working with our friends and talking with our adversaries. Ignatius found the trio of foreign policy gurus saying these things (and agreeing with one another) on their appearance on The Charlie Rose Show.

"Their collective message was this: In a radically changing world, America needs to be less arrogant about its use of power and more willing to talk to other nations. That may sound obvious, but the United States has spent much of the past six years doing the opposite. The three former top officials argued for more dialogue not just to improve America's image but so that we can understand the new rules and opportunities in the game of nations."

The three also agreed on what I have been saying, that the world is in changing and organizations (including governments) must change if they are to thrive in this new environment. We still don't know exactly how the world transform as it changes, but it will be more connected and more dependent. Here is what the three sages said about the changing landscape:

"'The international system is in a period of change like we haven't seen for several hundred years' because of the declining power of nation-states, said Kissinger, who was secretary of state under Presidents Richard Nixon and Gerald Ford. 'We are used to dealing with problems that have a solution,' but Americans have to realize that 'we're at the beginning of a long period of adjustment.' Brzezinski described the changes taking place as a global political awakening: 'The world is much more restless. It's stirring. It has aspirations which are not easily satisfied. And if America is to lead, it has to relate itself somehow to these new, lively, intense political aspirations, which make our age so different from even the recent past.' Brzezinski served as national security adviser for President Jimmy Carter. In this new, 'very different world,' explained Scowcroft, 'the traditional measures of strength don't really apply so much. . . . It's a world where most of the big problems spill over national boundaries, and there are new kinds of actors and we're feeling our way as to how to deal with them.' Scowcroft was national security adviser for Presidents Ford and George H.W. Bush."

The Internet and World-Wide Web played roles in this transformation because they spurred globalization in unique ways. The global economy no longer runs in temporal cycles with each day beginning in Asia then moving to Europe and ending in the Americas. It is an "always on" economy. As developing nations have connected with it, millions have been brought out of poverty and given hope for a better life. Much of the strife we now see, as Tom likes to point out, is fomented by those who want to keep their little part of the world in the dark ages -- with the lights out and no connections to the outside world. It only makes sense that the answer for many of the challenges these outliers create is connectivity. That, in essence, is what Kissinger, Brzezinski, and Scowcroft are saying. Ignatius notes that the three have sharply disagreed on the Iraq War, which is what makes their agreement on how the U.S. should move forward with its foreign policy all the more interesting.

"It's noteworthy that the three offer similar prescriptions for what to do, post-Iraq. They all argue that this is a time when America needs to be out in the world -- talking, yes, but even more, listening. And their advice to the next president is almost identical. Scowcroft urged America's next leader to declare, 'I think that we are a part of the world, that we want to cooperate with the world. We are not the dominant power in the world, that everyone falls in behind us.' Brzezinski offered a similar formulation: 'The next president should say to the world that the United States wants to be part of the solution to its problems' and that it will be 'engaged in the quest to get people in the world the dignities that they seek today.' Even the sometimes brusque Kissinger agreed that the next president should express a willingness 'to listen to a lot of other countries about what they think should be done. He should not pretend that he has all the answers.' All three want to see America talking not just with friends but also with potential adversaries. With Iran, where Kissinger said 'we should at least attempt to have a quiet negotiation with a high-level Iranian to determine where we're trying to go.' With Russia, where Brzezinski advised 'we shouldn't overdramatize the current disagreements.' With the Chinese, who, Scowcroft insisted, 'need a stable world,' too. This triad of experts helped shape foreign policy for the past 50 years. They're old men now, but they remain intellectual rivals -- still jockeying for influence and trying to outsmart each other in the Faculty Club of life. What's striking is that they see the future in such similar terms: A new global game is underway; the very idea of power is changing; America's future security will be more about adapting than imposing our will."

Because the U.S. has demonstrated a certain reluctance to collaborate with others as full partners, it is now finding it difficult to convince other countries that it is seeking a different course as it moves forward. The latest indication of this is America's search for a home for its new Africa Command ["North Africa Reluctant to Host U.S. Command," by Craig Whitlock, Washington Post, 24 June 2007]. Whitlock writes:

"A U.S. delegation seeking a home for a new military command in Africa got a chilly reception during a tour of the northern half of the continent this month, running into opposition even in countries that enjoy friendly relations with the Pentagon. Algeria and Libya separately ruled out hosting the Defense Department's planned Africa Command, known as AFRICOM, and said they were firmly against any of their neighbors doing so either. U.S. diplomats said they were disappointed by the depth of opposition, given that the Bush administration has bolstered ties with both countries on security matters in recent years."

With the U.S. remaining a firm supporter of Israel and finding itself engaged in fighting in Iraq and Afghanistan, it isn't really too surprising that the U.S. is receiving a chilly reception to placing troops in Muslim countries. This has as much to do with local politics as is does with how good or bad formal relationships are with the U.S. I suspect Muslim leaders, some of whom might feel they have a tenuous hold on power, see hosting a U.S. military command as an invitation for trouble from those within in their country who sympathize with groups like al Qaeda. Whitlock reports:

"Rachid Tlemcani, a professor of political science at the University of Algiers, said the stern response from North African governments was a reflection of public opposition to U.S. policies in the predominantly Muslim region. 'People on the street assume their governments have already had too many dealings with the U.S. in the war on terror at the expense of the rule of law,' said Tlemcani, who is also a scholar with the Carnegie Endowment for International Peace. 'The regimes realize the whole idea is very unpopular.'"

The Bush administration is having a difficult time convincing people that the new command is as much about building better relations (including nation building) as it is about security on the African continent. The fact is that nation building and security go hand-in-hand. The Africa Command is the first real experiment to examine how to integrate these two concomitant missions.

"As they search for a place to put a headquarters for the new command, U.S. officials have tried to allay concerns in Africa that the Pentagon has warlike designs in the region. Ryan Henry, leader of the U.S. delegation and principal deputy undersecretary of defense for policy, said the main mission for the command would be to stabilize weak or poor countries by training local security forces and doling out humanitarian aid. 'It's mostly a headquarters and planning focus,' he said after meeting with Moroccan officials. 'AFRICOM doesn't mean that there would be additional U.S. forces put on the continent.' Henry said no decision had been made about where to locate the command headquarters, which is expected to have 400 to 1,000 people."

In fact, AFRICOM may be the first "virtual" unified command headquarters.

"During a stop in Algeria, Henry suggested that the Pentagon might 'network' the command from several sites in Africa, rather than have a single headquarters. 'If at all possible, that's the way we'd like to proceed,' he told journalists during a briefing at the U.S. Embassy in Algiers."

Central Command, which is headquartered in Tampa, FL, but has responsibility over most of the Middle East, has successfully used networking for years. AFRICOM's command structure is expected to be much smaller but even more broadly dispersed. The African continent is huge and the problems faced by various regions are very different. It makes sense to spread U.S. forces so that they are more in touch with the needs of these regions. The U.S. might be talking about building walls at home, but it needs to be breaking down walls around the world. One of the reasons I've been traveling to Iraq and other parts of the Gulf is to help in this building effort.

Kurdistan and Stability

A New York Times article by Kirk Semple caught my eye with its first sentence: "It is a measure of soaring Kurdish optimism that government officials here talk seriously about one day challenging Dubai as the Middle East’s main transportation and business hub." ["Pointing to Stability, Kurds in Iraq Lure Investors," 27 June 2007]. This optimism should come as no surprise to readers of this blog. I appreciate the Kurds optimism and for aiming high. Semple highlights many of the same things I have written about:

"The Kurdistan Regional Government is betting that it can, investing $325 million in a modern terminal at the Erbil International Airport to handle, officials hope, millions of passengers a year, and a three-mile runway that will be big enough for the new double-decker Airbus A380. 'We’re not saying Kurdistan is heaven,' said Herish Muharam, chairman of the Kurdish government’s Board of Investment. 'But we’re telling investors that Kurdistan can be that heaven.' As the rest of Iraq has plunged into a downward spiral, Kurdistan has enjoyed relative political stability and suffered limited violence, in part owing to a sectarian and political homogeneity lacking elsewhere in the country. The Kurdish region has enjoyed de facto autonomy since 1991, when the American military established a no-flight zone there, a status formalized by the new Iraqi Constitution. Although many Kurds would prefer to secede, Kurdistan, with a population of about 4.2 million, has its own army and virtually total control of its territory. Kurdistan’s rising fortunes have been nowhere more apparent than in the wave of building and investment that has swept the region in the past four years. Iraqis and foreigners alike have poured in billions of dollars, defiantly wagering that the region will remain relatively peaceful, even as the rest of Iraq slips deeper into civil war."

The Kurds have caught the same vision that has driven Singapore, Dubai, and Shanghai to excel in the global economy. Semple points out that Kurdistan's infrastructure still falls short of supporting the services required to sustain economic growth and improve the quality of life for all its citizens. On the other hand, he notes that private investment and construction is booming.

"Kurdistan’s rising fortunes have been nowhere more apparent than in the wave of building and investment that has swept the region in the past four years. Iraqis and foreigners alike have poured in billions of dollars, defiantly wagering that the region will remain relatively peaceful, even as the rest of Iraq slips deeper into civil war. Where explosions and bomb-scarred buildings have been a defining symbol elsewhere in Iraq, construction cranes are now a common feature on the Kurdish landscape, tugging hotels, shopping centers and office and housing complexes from the ground. While public infrastructure is still suffering from chronic underinvestment, the regional government has approved more than $4 billion worth of mostly private development projects since August, when the Board of Investment was created. Billions of dollars worth of other projects were already under way. Much of the money is coming from overseas, including the United States, Europe, the Persian Gulf countries, Iran and Turkey, officials say. The Kurdistan government has placed special emphasis on attracting investors from the United States and Britain, unleashing a slick advertising campaign in English called 'The Other Iraq,' which includes television commercials featuring romantic shots of Kurdistan’s mountains and waving, cherubic children. 'It’s spectacular, it’s joyful,' intones a narrator in one 30-second spot. 'It’s not a dream. It’s the other Iraq.' The government has also hired lobbyists in Washington to help promote its development agenda, urging the State Department to change its travel warning for Iraq to distinguish Kurdistan from the rest of the country. Iraqi officials regard the travel warning as an impediment to investment and tourism."

Kurdistan may be taking a page from Macedonia's book -- a country that has also mounted an aggressive campaign looking for investors. In ads it runs in publications like BusinessWeek, Macedonia talks about the incentives it is offering businesses (no corporate tax for 10 years, then a flat 10 percent rate; 5 percent flat rate income tax for 5, then 10 percent thereafter; no value added tax or customs duties for export production; free connection to utilities; great access to transportation systems; training costs for workers; building subsidies; attractive land leases, etc.). The ads also talk about its educated and affordable work force. These governments have learned that foreign direct investment, not official development aid, is the key to economic growth. They understand that private/public partnerships can build necessary infrastructure faster than the public sector alone. They realize that good public services are fostered by a population that is gainfully employed.

As I pointed out in an earlier post, much of the current boom in Kurdistan is aimed at the wealthy, often leaving poorer citizens in the same substandard conditions they lived in before Saddam Hussein was overthrown. The trickle down effect may have started, but the operative word is "trickle." It needs to become a steady and increasing flow. Semple writes:

"Contractors have been clearing savanna and brush here in the capital of Kurdistan to build suburban residential complexes that go by names like English Village Five. One development — Dream City, advertised as 'the most elegant square kilometer in Iraq' — will include about 1,200 houses priced $180,000 to $700,000, as well as three schools, a supermarket, a restaurant, recreation areas, a casino and a mosque, according to Amer Ibrahim, the project’s manager and architect. The principal partner in the Dream City project is also building an American-style megamall and four office towers downtown. It is a few blocks away from the ancient citadel, one of the oldest continuously inhabited sites in the world. Several luxury hotels are under construction, including one by the Kempinski hotel chain. A joint venture by Austrian, Turkish and Kurdish investors is developing a 500-bed hospital. There is even talk of a Burger King franchise and a ski resort. Asked about the most compelling ideas circulating in the investor community here, Mr. Ibrahim responded, 'Everything, everything, everything.' He went on: 'There’s a big lack of everything. There are no services, no infrastructure.' For all the shiny new construction in Kurdistan, there are glaring deficiencies in the public sector. Kurdistan’s residents who rely on the public system receive at most about three hours of electricity a day, although many businesses and affluent people have their own generators. Not all areas of the region have access to clean drinking water, and the health care and education sectors are anemic. There are no wastewater treatment plants and sewer systems are inadequate: even a moderate rainfall turns the streets into foul rivers."

One of the reasons that I push Development-in-a-Box™ is because it promotes the adoption of standards and best practices -- helping eliminate corruption and waste. Stemple notes that the initial surge of investment in Kurdistan failed because it lacked such an approach.

"In the immediate aftermath of the 2003 American invasion, Kurdistan’s officials were so desperate for any kind of investment that they signed off on numerous projects with only limited concern for the essential needs of the population. 'The government built like mad,' said Douglas Layton, director of the Erbil office of the Kurdistan Development Corporation, a public-private partnership promoting investment in the region. 'There was no master plan.' To make matters worse, government graft went unchecked. 'The corruption was happening because of the rushing we were doing in nearly everything in a limited amount of time,' Mr. Muharam, of the Board of Investment, said in an interview here in May. 'It caused misuse, lack of transparency.' Many projects foundered for lack of capital. Erbil, for instance, is dotted with half-finished buildings, roadways and overpasses. The government is now implementing a more transparent contracting system and is trying to rectify the imbalance between public and private sector development. Mr. Muharam said the government was also trying to strengthen the banking system and insurance laws to provide a more attractive environment for investors."

One sign of a good leadership is that mistakes are acknowledged and changes made. Kurd leadership has acknowledged past mistakes and is looking for a better way forward.

"The government passed an investment law last year that offers generous incentives to outside investors, including the right of full ownership of property, tax and customs duty exemptions, repatriation of earnings and partnerships. The government has also been providing free land to developers to stimulate construction. Officials and investors argue that Kurdistan offers the opportunity for businesses to establish a foothold with an eye toward a more peaceful future when development in the rest of Iraq will be possible."

That, of course, is the big question. Can Kurdistan keep the civil war raging to south from spilling over into its streets? Leaders there are betting they can.

The Growing Carbon Market

Environmental issues are increasingly taking center stage in a number of fora -- from Al Gore's appearance at the Oscars to discussions among leaders of the world's wealthiest nations at the recent G8 summit. Even large corporations are jumping on the green bandwagon and are trying to reduce their carbon footprint. One of the most interesting developments on the environmental scene, however, is taking place on the trading floor and it involves carbon credits -- or as a recent article in The Economist puts it "Trading thin air" [2 June 2007]. The air being traded may be thin, but it's also smelly.

"Every year the average sow and her piglets produce 9.2 tonnes of carbon-dioxide equivalent through the methane emissions from their effluent. In the past, that has been a problem both for the environment and for pig-farmers. In developing countries the pig-effluent collects in open lagoons which smell bad and get infested with flies. Sometimes it flows straight into nearby water systems."

To give you some idea of how many pigs are out there producing methane, over 100 million pigs a year are killed for food each year in the United States alone. And, of course, even more live pigs remain to carry on the business. That's a lot of effluent! Large pig farms (i.e., farms containing approximately 100,000 animals or more) generate the equivalent waste of a city of a quarter-million people, but have no wastewater treatment system. As The Economist article indicates, one of the main issues is the football field-size lagoons typically used by pig farms to capture all this waste. The extent of this problem was first revealed to most American citizens In October of 1999, when Hurricane Floyd swept through North Carolina. Flooding caused by that storm overwhelmed North Carolina pig farm effluent lagoons and spread their contents (pig feces and urine) across vast tracts of land and into many waterways. What to do with all that waste remains a challenge. The Economist notes, however, that challenges facing one group often represent an opportunity for another.

"Now this problem has become an opportunity. Bunge, an agricultural-commodities business based in America, builds lined and enclosed pools to collect the effluent and captures the methane that it emits. The farmer can use the gas to generate electricity. By preventing methane from escaping into the atmosphere, Bunge creates a credit which it can sell on the carbon market. The farmer gets to keep 20-30% of the value. Bunge has 40 such projects operating in Brazil and is planning to expand into Mexico, Guatemala, Peru and the Philippines."

The focus of this article's is not that waste from pigs (or cows or chickens or turkeys for that matter) is a problem, but that the carbon market has proven to be innovative -- not as innovative as it could be, but innovative nonetheless.

"The carbon market is truly innovative. Although it works like any commodity market, what is being bought and sold does not exist. The trade is not actually in carbon, but in not-carbon: in certificates establishing that so many tonnes of carbon dioxide (or the equivalent in other greenhouse gases) have not been emitted by the seller and may therefore be emitted by the buyer. The purpose of setting up the market was, first, to establish a price for carbon and, second, to encourage efficient emissions reductions by allowing companies which would find it expensive to cut emissions to buy credits more cheaply. It has had some success on both counts—some would argue too much on the second."

The European Emissions-Trading Scheme (ETS) currently establishes the price of carbon credits. As with other commodities, the greater the demand the higher the price. Demand for carbon credits is driven up by driving down allowances that regulate "dirty" industries. As noted above, the hope is that the price of credits will be high enough to encourage industries to reduce emissions (and thus help meet established allowances) but not so high that nobody buys them (because they remain a source of income in the developing world). Once carbon credits are established as a source of steady income, the desired goal is to encourage developing nations to build environmentally friendly industries that are profitable on their own and clean enough to ensure that they can still sell carbon credits to boost profitability. Harvesting animal waste is one great example. To really work, of course, everybody needs to sign up to this system and that is not currently the case.

"The supply of carbon credits comes principally from two sources. The first is the allowances given to companies in the five dirty industries covered by the ETS (electricity, oil, metals, building materials and paper). The second source of carbon dioxide lies outside Europe. The European Commission linked the ETS to the 'clean-development mechanism' (CDM) set up under the Kyoto protocol. This provides for emissions reductions in developing countries—such as those on the Latin American pig farms—to be certified by the UN. Such 'certified emissions reductions' (CER) can then be sold. The demand for carbon credits comes mostly from within the ETS, from polluters who need certificates allowing them to emit carbon. There is some demand from Japan, which has a voluntary scheme, and from companies and individuals elsewhere in the world who want to offset their emissions for moral reasons, or to make themselves look good. The trade is now sizeable. Some €22.5 billion-worth ($30.4 billion) of allowances were traded last year, according to Point Carbon, a data-provider, representing 1.6 billion tonnes of CO₂—a huge increase on the €9.4 billion traded in 2005. Europe's ETS made up about 80% of the total value. Developing-country CERs accounted for about €4 billion of last year's trade: 562m tonnes of CO₂."

The Bush administration, as most people know, refused to sign the Kyoto protocol, but it does favor voluntary participation in the carbon credits scheme. Money invested in carbon credits is generally used to generate more credits.

"The money has gone mostly into projects in developing countries to produce CERs. Bunge's Brazilian pig-farmers are making CERs out of their animals' effluent. But the bulk of the investment has gone into greenhouse-gas capture in China."

The article laments the fact that buying carbon credits remains cheaper than investing in emission reductions for most businesses, although it provides a few examples of companies that have found novel ways to reduce emissions.

"The carbon price has delivered some of the innovation that it was supposed to generate. Shell, for instance, is pumping CO₂ from a refinery in the Botlek area of the Netherlands into 500 greenhouses producing fruit and vegetables, thus avoiding emissions of 170,000 tonnes of CO₂ a year and saving the greenhouse owners from having to burn 95m cubic metres of gas to produce the CO₂ they need. Alcan, an aluminium company, is planning to use the heat from one of its smelters to increase the efficiency of its power-generation plant at Lynemouth in Northumberland in Britain. Wyn Jones, managing director of Alcan's British smelting and power-generation operations, says this will save 150,000 tonnes of CO₂ a year (€3m if the price of CO₂ is around €20 a tonne, as Alcan expects) and 60,000 tonnes of coal (£2.1m, or $4.2m, at around £35 a tonne). He is not sure how much the project will cost, but is reckoning on a payback period of around five years."

Environmentalists have always insisted that consumers don't pay a fair price for manufactured goods because environmental costs have never been factored in. As a result, they argue, the environment has been subsidizing consumption. Carbon credits are a step towards undoing that subsidy and encouraging a little more consideration for the environment.

Attracting FDI and Creating a Brighter Future in Dubai

I'm back in the United States after a fruitful and interesting trip to the Arabian Gulf. One of the more unique moments of my journey occurred following a flight on Zagros Air from Kurdistan to Dubai. I had packed my body armor and supporting items in my checked luggage and thought no more about it. When I arrived in Dubai, I picked up my luggage, proceeded through passport control, and then had my luggage rescanned (like everybody else) before entering the terminal lounge. My trip, however, was abruptly halted at that point. I was told I would have to accompany some armed guards to the security office. There, in a scene out of the old west, I was told that I had to check my body armor at door. I was provided a private locker, secured my property, and entered the amazing city that is Dubai.

Earlier this spring, NBC’s Today show ran its annual “Where in the World is Matt Lauer?” promotion. One of the places that Lauer visited was Dubai, in the United Arab Emirates, where he strolled on its beaches, visited shopping malls, and launched golf balls off of the helicopter pad atop the world’s tallest luxury hotel -- the Burj Al Arab where I also stayed. The hotel is amazing (click to enlarge image). What attracted the Today show to Dubai was the same thing that took me there – namely, its bustling economy.

In an earlier post [On Becoming a Tiger], I wrote this about Dubai:

"Approximately 20 percent of the world's large construction cranes are at work in that city. The world's tallest building is under construction there and there are plans for the world's largest mall. Tourists and business people fly into Dubai landing at the world's largest airport. Dubai's ports are crammed with shipping containers. You can golf, ski, shop, swim, sail, and carouse. An amusement park twice the size of Disneyland and Disney World combined is also on the drawing boards. Manmade islands in fanciful shapes are rising out of the Arabian Gulf with great effort and at great cost."

What makes Dubai’s leaders so confident in their future that they can invest this kind of money? After all, they are not overly blessed with (and, therefore, not overly dependent on) oil reserves. As I noted in my earlier post, “The secret to the Emirates' success is vigorous investment, an educated population, great connectivity with the rest of the world, and visionary leadership (indicated by the implementation of good policy) -- basically, the same strategy used by Singapore.” Dubai has learned what Singapore (and China for that matter) has learned before them – the world’s economic powers (be they countries or transnational corporations) want partners they can trust. That trust begins with the acceptance of and abidance by international rules.

Dubai's port is also busy. Attached is an image of goods piled on the pier waiting to be loaded on to small dhows for distribution elsewhere in the region. Many of the articles about Dubai discuss its excesses and the luxury items that are available for sale. As the picture shows, however, goods of all types are available. Business is good.

Stanley Reed, BusinessWeek’s London Bureau Chief, writes that most first time visitors to Dubai will be surprised by what they find [“Surprising Dubai,” 30 April 2007]. Once discovered, however, he notes that businesses flock there and they are eager to invest.

"Global banks are rushing to set up offices in the new Dubai International Financial Center. Corporations from Microsoft to Cisco Systems are opening regional or, in Halliburton's case, world headquarters there. So business travelers are increasingly likely to find themselves in the garish little emirate with its clogged streets and pricey hotel rooms. A visitor will find plenty to do in Dubai after work or between meetings. Restaurants of every description abound, from the superb but low-key Lebanese eatery Al Nafoorah in the mall beneath the Jumeirah Emirates Towers hotel to the haute cuisine at Vu's on the 50th floor. Dozens of shopping malls feature just about every name-brand store from Harvey Nichols to Louis Vuitton. Prices are good, thanks to low import duties and a currency linked to the U.S. dollar. The malls are great places to observe Dubai's rich mix of people, from Saudi women in full black veils (though they're not obligatory) to local youths with spiky hairdos. Dubai can be a painless introduction to what may otherwise seem a forbidding part of the world. A Muslim country, it stands out for its tolerance toward other religions. Unlike somber Iran and Saudi Arabia, Dubai allows alcohol consumption and turns a blind eye to a relatively unfettered nightclub scene."

Dubai’s leaders are aware that much of the building boom was built on the back of foreign laborers, many of whom were maltreated and underpaid, and they are trying to address those problems. It’s just another of the standards they must adopt if its economic boom is going to continue. In another article ["Dubai Dreams Big"], Reed wrote:

"Nestled in the heart of Persian Gulf oil country, Dubai thrives more on its commercial smarts than on black gold. Long a pearling center and a haven for the region’s traders and smugglers and their wooden dhows, Dubai—where the operating credo is ‘We can do anything we imagine’—is now turning itself into a hot spot for big business and tourism."

Much like Singapore or Shanghai, Dubai’s boom began in the financial sector. The picture is of the "gate" that leads to Dubai's trading exchange, which starts trading on-line this month. Surprisingly, the impetus for this transformation was the terrorist attacks of 11 September. Wealthy Arabs, fearing a backlash in the West, looked for a place to invest their enormous fortunes. Dubai was ready to respond. This phenomenon was discussed by Reed in another article [“As Arab Market Matures, Dubai Cashes In,” 20 March 2007]:

"A couple of years ago, the Dubai International Financial Center looked like a white elephant. Now banks have to beg for space in the imposing, gray stone and glass complex built by the Dubai government in an effort to attract financial institutions to the emirate and create a kind of Wall Street of Arabia. … Certainly those who manage businesses and governments are more likely than in the past to be familiar with sophisticated financial techniques and products. In turn, that has helped create demand for financial services such as advice on mergers and acquisitions, and initial public offerings. The region is also a huge market for project finance, and there is growing demand for mortgages and other credit products. Even U.S. private equity firms that used to pay little attention to the Middle East except as a source of funds are now starting to scope it out as a market for deals. … The Mideast has a fast-growing and demographically youthful population, which in turn helps stoke up the local economies. Even outside the oil sector, economic growth in the six member states of the Gulf Cooperation Council—which includes Saudi Arabia and most of the Gulf emirates—has been 15% per annum since 2002, says Abraaj Capital's Naqvi."

The buildings being constructed in Dubai, like this new office tower are beautiful. They are also expensive to lease space in. It’s hard to believe that Dubai sits less than 900 miles from Baghdad – about the same distance as New York is from Orlando. In many ways, the UAE and Iraq are world’s apart. Yet what I have seen in Dubai is what I am trying to help achieve in Kurdistan (perhaps with less excess). Success is infectious. I believe the Kurds have both the will and staying power to make that part of Iraq a great success and I believe that success will eventually spread throughout the rest of the country.

The Innovator's Dilemma -- 10 Years On

BusinessWeek takes an online look at how the world has changed ten year's after Clayton Christensen released his best selling book entitled The Innovator's Dilemma ["Clayton Christensen's Innovation Brain," by Jena McGregor, 15 June 2007]. The magazine points out, for example, when the book was released only Honda had a hybrid car (the Insight). A GM vice president called it "an interesting curiosity" that didn't make economic sense. Now GM has five hybrid models in a field dominated by the Toyota Prius, which was introduced the same year as Christensen's book (1997).

The magazine lists other innovations that have occurred over the past decade. In 1998, the world was introduced to Google and Internet search engines and advertising have never been the same. The next year (1999) Blackberry changed the way millions of people stay connected. The last year of the twentieth century (or first year of the twenty-first depending on how you count -- 2000), MinuteClinic pioneered "retail health care" with low-cost, same-day appointments in retail settings for treating minor ailments or health needs such as ear infections or flu shots. In 2001, iPods took the world by storm and resurrected slumping Apple fortunes. Second Life, a virtual world I've written about before [Virtually No Escape], was introduced in 2002. Skype, the "dirt-cheap" Internet phone service was introduced in 2003. Building on the phenomenon created by My Space, Facebook became the next big thing in 2004. Rupert Murdock, who now owns My Space, has offered to swap it to Yahoo for a substantial portion of that company's stock. The following year (2005) You Tube took the Internet by storm and generated numerous imitators. Last year (2006) an old name in electronic gaming, Nintendo, revived its fortunes with its innovative Wii game system, outselling new products offered by both Sony and Microsoft.

With globalization rapidly advancing, increasing the complexity of threats faced by corporations, McGregor asks how relevant Christensen's ideas remain.

"Very, says Robert Sutton, professor of management science and engineering at the Stanford Engineering School and co-founder of Stanford's d.school. 'There are very few books, whether you do innovation in the academic world or in the business world, that you have to understand equally well,' he says. 'You have to know it.' In essence, the dilemma Christensen describes—how to serve your core business while finding new markets and watching out for new entrants in your blind spot—is as critical today as it was 10 years ago. While reading it today can plunge you into a bit of a time warp—'Internet appliances,' those devices for the kitchen counter that would only browse the Web and respond to e-mail, did not upend the PC industry—Christensen's ideas still resonate. Criticisms of the book tend to surround its lack of solutions, which Christensen tried to correct in his follow-up, The Innovator's Solution, which was published in 2003 to less fanfare. One reason the first book was so well-received, says Roger Martin, the dean of the Joseph L. Rotman School of Management at the University of Toronto, is that Christensen doesn't criticize managers, as many ivory tower professors do in their books. Rather, a major theme is that great managers miss disruptive innovations precisely because they're focused on their customers, working hard to create returns for shareholders, and trying to do everything right."

McGregor provides some excerpts from an interview she conducted with Christensen on the ten-year anniversary of his book's release. One of her questions focused on the fact that Christensen's book seems focused on technology more than innovation.

(Mc) Your book focuses heavily on disruptions that are caused by advances in technology. More than ever, however, managers are defining "innovation" in a broader context, from breakthrough business processes to business models to customer experiences.

(C) I think when I wrote The Innovator's Dilemma, my brain really was a technological brain and I was looking for a technological explanation. So I called it "disruptive technology." Then as I helped people to try and use the ideas, it became very clear there really isn't anything [it doesn't apply to]. Disruption really is a business model innovation. Most disruptions have a technological enabler that [allows] people to make simpler products that are more affordable and accessible for people. In The Innovator's Solution, I recanted. We called it disruptive innovation [rather than disruptive technology]. Basically I was wrong in labeling it a technological phenomenon.

Later in the interview, Christensen's answer a question with an example of a product that he thinks would do well -- a car designed for road warriors. Being on the road as much as I am, I think he has a point.

(Mc) In The Innovator's Dilemma you warn that the maxim "staying close to your customers" can lead you astray. Wouldn't a cursory reading of the book say "don't listen to your customers?"

(C) You're exactly right. The cursory reading is "don't listen." The deep reading is you have to be careful which customers you listen to, and then you need to watch what they do, not listen to what they say. This is catching on with one of the big automobile companies in Detroit. If you look for the jobs that people hire a car to do, the opportunities for innovation are extraordinary. There are about 30 million Americans for whom [a car] serves as their office. Isn't it interesting that nobody has designed a car to work as an office? They pull up to Starbucks and go in to use their T-Mobile hot spot or if they're in Silicon Valley they'll pull up next to someone's apartment building to mooch off their Wi-Fi because they can't access the Internet in their car. They stop at a stoplight, their notebook computer falls onto the floor. They can't recharge their computer because the electrical system was not designed to do it and there's no docking station. They throw sales literature in the backseats. Nobody's designed a car to do that job. If you understand the job, the opportunities to differentiate are just extraordinary.

Still later, McGregor confronts Christensen with definitional problems his book created.

(Mc) You've said "the most widespread and dangerous misunderstanding of the model is the equation of 'new' or 'breakthrough' with disruption." Yet today, I feel like "disruptive" has become just that: A synonym executives use when they're describing something big or bold. Why is that dangerous?

(C) Because it causes them to think that, "I'll just take whatever hobby horse I have, because Clay's study showed that disruptive products create these new growth markets. I'll cause everyone to believe my idea's going to do that." In fact, big technological leapfrogs rarely create new growth. Almost all of them are defensive in character. The equation of disruptive with new and radical causes people to target markets that don't exist. Andy Grove recognized this a lot sooner than I did. There are many prior connotations in the English language for the word disruption. He was worried that the word would be so misused that he called it "the Christensen effect" internally. The problem was I couldn't call it the Christensen effect. In retrospect, it would have made things a lot clearer had I found a word that didn't have so many other connotations. It gets hijacked.

One of things I think Christensen is saying is that you can't disrupt a market that doesn't exist. One of the problems my company faced was the lack of a market. I literally had to create a market for what Enterra Solutions offers because there is nothing quite like it on the market. Where this journey has led has surprised even me. Fortunately, being a small company, our flexibility has been up to the twists and turns we've encountered along the way. McGregor then asks Christensen about trying to create a culture of innovation -- something I've addressed in several previous posts.

(Mc) I hear a lot of managers today talking about trying to create "innovators at all levels" and building innovation into every corner of a vast corporation. Is that a misguided idea? Isn't that contradictory to what you say in Dilemma, which is that disruption happens in "spin-out organizations," as you call them?

(C) Generally you create a lot of hype. People come up with lots of new ideas, but nothing happens. They get very disillusioned. Never does an idea pop out of a person's head as a completely fleshed-out business plan. It has to go through a process that will get approved and funded. You're not two weeks into the process until you realize, "gosh, the sales force is not going to sell this thing," and you change the economics. Then two weeks later, marketing says they won't support it because it doesn't fit the brand, so we've got to change the whole concept. All those forces act to make the idea conform to the company's existing business model, not to the marketplace. And that's the rub. So the senior managers today, thirsty for innovation, stand at the outlet of this pipe, see the dribbling out of me-too innovation after me-too innovation, and they scream up to the back end, "Hey, you guys, get more innovative! We need more and better innovative ideas!" But that's not the problem. The problem is this shaping process that conforms all these innovative ideas to the current business model of the company.

The interview concludes with the news that Christensen is working on two books looking at the U.S. healthcare system and public schools. He says the common theme is that both systems are fundamentally biased against innovation. Should be interesting reads.

Where the Road Ends

The USA Today published a special report by Paul Wiseman entitled "The perils of carving a path to the Taliban's front door" [20 June 2007]. What really drew me in was the secondary headline on the follow-on page that included the quotation, "Where the road ends, the Taliban begins." This is exactly what my colleague Tom Barnett has been preaching for the last few years, "disconnectedness defines danger." The bad guys in the world (as well as most of the bad things -- like disease, poverty, illiteracy, slavery, war, etc.) are found in those areas of the world that are figuratively off the map -- where the road ends. In Afghanistan, this is literally, not just figuratively, true. The road in question runs through "Taliban country to Tora Bora, the mountain range where Osama bin Laden slipped away in 2001." The Taliban, however, like most bad guys aren't interested in having the world beat a path to their door.

"U.S. officials believe roads, such as the one through rugged terrain to Tora Bora, could knit a frayed country together, improve the lives of Afghans in remote villages by giving them access to markets and hospitals and strengthen President Hamid Karzai's fragile government. Taliban leaders, who regrouped across the border in Pakistan after their fundamentalist Islamic regime was overthrown in 2001, are determined to stop road construction and sow chaos. The former U.S. military commander in Afghanistan, Lt. Gen. Karl Eikenberry, summarized the importance of the roadwork: 'Where the road ends, the Taliban begins.' The story of the road to Tora Bora shows how frustrating and perilous it can be to try to build a nation with asphalt and tar. ... The international team assigned to the $4 million project has been targeted with roadside bombs, hunted by killers and kidnappers, menaced by mobs and viewed warily by locals who think the team wants to destroy their opium crops. The attacks, threats and missteps have been costly: The United Nations Office for Project Services (UNOPS), which is overseeing the project, has scaled it back from 26 to 18 miles. So far, the team has managed only to clear and widen the rocky dirt track. Not a single foot has been paved. UNOPS is struggling to complete the road by a Nov. 1 deadline."

It's disappointing that the effort has stalled (underscoring once again how important security is to any development effort), because the motivation for constructing the road is correct. Connectivity not only helps improve the quality of life for most citizens it improves its resilience.

"Across Afghanistan, fewer than 10% of road miles are paved, leaving many villages cut off from markets, hospitals and schools. The isolation is damaging: The typical Afghan dies before age 45; nearly two-thirds of adults can't read; and more than 160 Afghan babies die for every 1,000 born — the highest infant mortality rate in the world. With vital services beyond the reach of most Afghans, road construction has become a cornerstone of the U.S. counterinsurgency strategy. The U.S. Agency for International Development (USAID) has spent $1.5 billion paving Afghan roads since 2002 — $418 million in the current fiscal year."

Islamic extremists who believe that they know what is best for other Muslims are (in the long run) more interested in controlling them than helping them. Osama bin Laden was welcomed in Afghanistan because he used his fortune to provide welfare services in places where the government couldn't. But he also made sure that they were dependent on his welfare. He didn't invest in infrastructure that would help secure a sustainable solution he set up a system of dependency. Hamas follows the same pattern in Palestine. If the Taliban were really interested in the welfare of their fellow Muslims, they would welcome the road. The fact is, since 2002 when the United Nations Office for Project Services, "nearly 100 members of its road crews have been killed by bombs, beheaded by kidnappers, gunned down in drive-by shootings or killed in traffic accidents."

Shane Middleton, the 30-year-old Irish engineer who planned and wanted to build the road, is the survivor of an IED attack. He is frustrated by the lack of progress because he knows how important the road is for those living in the area.

"The Tora Bora road would serve 250,000 people. Starting outside Jalalabad, the route runs southwest for 5 miles before turning south for 7 miles through desolate terrain. The countryside changes at Kaga, the main market town for the Khogyani district. Six miles south, water gurgles in irrigation channels. Fields of wheat and poppy push close. Okra, eggplant, pomegranates, grapes and apricots are abundant; the hills are rich with marble and talc. Bad roads keep much of it from getting to market."

Wise reports that "today, Shane Middleton is far from the road he conceived. He works with an Irish aid group in Kenya, patching up schools, building dams and digging wells." Plans to complete the road are still on the books, but without the full cooperation of the local warlord the security situation is unlikely to change. Like the Taliban, his fortunes are tied to the extent of his control over the region. Unfortunately for the people who need the road, they still live beyond where the road ends.

A New Hotline with China

In a move reminiscent of the Cold War, the Pentagon has announced plans to establish a crisis hotline between Washington and Beijing ["U.S., China Aim to Mend Ties," by Walter Pincus, Washington Post, 14 June 2007].

"A Pentagon official ... cited plans to establish a crisis hotline between Washington and Beijing as well as expanded exchanges involving top U.S. and Chinese defense officials as signs of improving U.S.-Chinese military ties. 'We believe these exchanges and mechanisms have the potential to improve mutual understanding, reduce miscalculation, and contribute over time to "demystifying" one another,' Deputy Undersecretary of Defense Richard P. Lawless said at a hearing before the House Armed Services Committee."

The hotline seems a bit anachronistic (I wonder if it will be a red phone like the famous line that connected the Kremlin and the White House). The original hotline was established to prevent global thermonuclear war in an era when communications between the two opposing blocs was rare. That really isn't the case today between the U.S. and China. Economic ties between the U.S. and the Soviet Union were virtually non-existent when the first hotline was established whereas economic ties between the U.S. and China are strong. Nevertheless, symbolically the hotline is important. We don't have to look back too far to realize that serious misunderstandings can take place even between strong trading partners.  I'm referring, of course, to the Chinese shoot-down of a U.S. Navy patrol plane in 2001.

"From a low point in April 2001 -- when military contact was all but cut off after Chinese aircraft forced down a U.S. Navy EP-3 spy plane over the South China Sea and held its 24-member crew for 11 days -- the U.S. relationship with Beijing 'has grown increasingly important and complex,' Lawless said."

Much more important than the announced hotline are the "expanded exchanges involving top U.S. and Chinese defense officials." These were activities sorely missing during the Cold War. As a result, a certain paranoia was created between the U.S. and Soviet (now-Russian) military officers that persists even to this day, especially in Russia. Open and honest exchanges, even cooperation, are a much better path to "peaceful coexistence" (to resurrect an old Cold War term) than brinksmanship, secrecy, and mistrust.

"[Lawless'] testimony illustrated that point [i.e., the important and complex relationship between the U.S. and China] by detailing favorable developments such as naval ship visits, military academy exchanges and bilateral search-and-rescue efforts, as well as more troubling ones, including Beijing's 'ambitious and long-term military modernization program,' which is 'expanding from traditional land, sea and air dimensions of the modern battlefield to include space and cyberspace.' Lawless said that Chinese authorities are ready to move on a telephone link to enable senior-level conversations in the event of a defense crisis. However, he added that China's 'counter-space efforts -- which we witnessed during the January 2007 direct ascent anti-satellite test -- will enable Beijing to hold at risk the assets of all space-faring nations.'"

Pincus goes on to note that many in Washington continue to question China's military build-up and its intentions, even though they claim to believe that China need not become an enemy. Keeping doors open and information flowing is the best way to ensure that misunderstandings are kept to a minimum and that dialog remains more important than confrontation. The Economist editorializes that caution is certainly warranted, but that outright China bashing is a bad idea ["America's Fear of China," 19 May 2007].

"The itch to get tough with Beijing is urgent in Congress. Brandishing China's growing bilateral trade surplus as proof, congressmen from both parties have denounced the country as a currency manipulator, an illegal export-subsidiser, a violator of rights to intellectual property and all-round trade scoff-law. China-bashers have introduced a dozen bills in the new Congress. Some are bound to languish, but others may be passed—though there would then be further hurdles to jump, not least the president's power of veto (George Bush has other conflicts on his mind). The most threatening include proposals that would declare China's cheap currency an illegal subsidy and allow American firms to seek compensatory tariffs. Politics in Beijing is less open, but the circumstances are similarly unhelpful. Because they have no electoral legitimacy, China's Communist leaders need to deliver the economic goods even more than most congressmen do. Worried about unemployment, the Chinese are loth to let their currency, the yuan, appreciate much faster than at today's snail's pace. And as with all dictatorships, there is the need to seem tough. With the five-yearly Communist Party congress only months away, China's president, Hu Jintao, cannot be seen to be bowing to American pressure on the yuan or anything else."

The reason that The Economist believes China bashing is a bad idea is because the U.S. has much to gain from improved relations and bashing could prove to be a self-fulfilling prophecy.

"China is already America's fastest-growing export market. ... But logic, alas, may count for less than political grievance. America's low unemployment rate looks set to rise in the wake of the housing bust. To American voters, the Chinese are likely to become more prominent rivals, whether it be displacing America at the top of some economic league tables, winning Olympic medals or buying big American firms (the Chinese are rightly keen to diversify from treasury bonds). Most worrying, though, are the strategic risks. ... China is potentially a military competitor. Trade tensions could make it easier to see China as a rival and harder to enlist it as a partner."

The article concludes that America has much to lose but little to gain from bashing and much to gain and little to lose from cooperation.

"Rather than picking fights over the currency, Congress should step back and ask why Americans are so upset with China in the first place. The answer is that China is a scapegoat for broader economic anxieties to do with stagnant wages, rising income-inequality and dwindling health and pension benefits. ... Raising barriers to cheap Chinese imports would disproportionately hit the wallets of poor and middle-income American consumers—the very people the Democrats in particular claim to be protecting. By scaling back its China-bashing, Congress could avoid such blunders. It would also leave more room to engage Chinese officials on subjects that actually matter. ... The greatest prizes of Sino-American diplomacy are nothing to do with trade. Avoiding war and conflict, naturally, comes top of the list, whether by co-operation over North Korean and Iranian nukes or by building the trust that minimises the odds of a clash in the Taiwan Strait. Then there is China's expansion into Africa, particularly its cosy relations with genocidal Sudan. Global warming, too, ought to be centre-stage. China is building a new coal-fired power plant every week and is set to surpass America as the biggest source of greenhouse gases within a year. If the world is to contain its carbon emissions, America must not only clean up its own act but also help China to green its economic growth."

The Pentagon and The Economist agree that strengthening ties and keeping lines of communication open are in the best interests of both the United States and China.

The West Bank Ripe for Development-in-a-Box™

I'm currently in Dubai, having flown here from my third trip to Iraq working on implementing Development-in-a-Box™ in Kurdistan. First of all, let me tell you that it's hot! The government has used text messaging to citizens asking them to turn down their air conditioners so that the power grid doesn't crash. The other big news story here in Dubai is what is happening in the Palestinian terrorities of the West Bank and Gaza. As you are undoubtedly aware, Hamas militants seized Gaza and set themselves in charge. The Palestinian President Mahmoud Abbas felt compelled to disband the Hamas-led government and legislature and establish an emergency cabinet. Practically speaking Palestine is now a two-state system much like North and South Korea. No one wanted to see this development since it complicates rather than moves forward the Middle East peace process. Writing for the Los Angeles Times and Washington Post New Service and published in the Gulf News, Martin Indyck asserts that this split was probably inevitable ["A two-state solution - Palestinian style," 19 June 2007].

"Abbas and Fatah have in effect conceded Gaza to Hamas while they hold on to the West Bank. Hamastan and Fatahstine: a 'two-state solution'' - just not the one that the US President George W. Bush had in mind. Of course, all Palestinian leaders will continue to declare the indivisibility of the Palestinian homeland. But in private, Abbas and other Fatah leaders may take solace from the dilemma Hamas will now have to confront."

The question is: why were world leaders so quick to jump to Abbas' support? He has not been a particularly strong leader. The reason is because this new development sets up a classic opportunity to show the best to achieve peace and prosperity in the region. Indyck describes the "two states" this way:

"The failed state of Gaza that Hamas controls is wedged between Egypt and Israel. Its water, electricity and basic goods are imported from the Jewish state, whose destruction Hamas has declared as its fundamental objective. ... Whatever transpires, Gaza has become Hamas' problem. It's a safe bet that the real attitude of Abbas and Fatah is: Let Hamas try to rule Gaza, and good luck. This turn of events would free Abbas to focus on the much more manageable West Bank, where he can depend on the Israel Defense Forces to suppress challenges from Hamas, and on Jordan and the United States to help rebuild his security forces. As chairman of the Palestine Liberation Organisation and president of the Palestinian National Authority, Abbas is empowered to negotiate with Israel over the disposition of the West Bank. Once he controls the territory, he could make a peace deal with Israel that establishes a Palestinian state with provisional borders in the West Bank and the Arab suburbs of East Jerusalem."

The Bush administration's thinking is that if they can help Abbas make the West Bank peaceful and prosperous it will go a long way towards lasting peace in the region. The administration wasted no time. Another Gulf News article ["US resumes aid to Palestinians," 19 June 2007], reported:

"The United States lifted its crippling aid embargo on the Palestinian government on Monday to bolster moderate President Mahmoud Abbas while isolating Hamas who control the Gaza Strip. The resumption of direct American aid came on the eve of talks between President George W. Bush and Israeli Prime Minister Ehud Olmert, who has said he will cooperate with Abbas' emergency Cabinet. Amid an outpouring of international support, Abbas told Bush in a telephone call on Monday that the time had arrived to resume peace talks with Israel. President Bush promised his support. Hours later, Secretary of State Condoleezza Rice announced that the United States would 'resume full assistance to the Palestinian government and normal government-to-government contacts.' At a news conference, Rice said the United States would contribute $40 million to help ease the suffering of Palestinians."

Of course, they mean West Bank Palestinians. The Israelis are also considering releasing hundreds of millions of dollars in embargoed tax revenues to Abbas' government. Hamas came to power because it had been more effective than the Fatah government in providing security and social services. New Palestinian Prime Minister Salam Fayyad said that restoring security is his top priority. The infusion of funds should help the new government begin establishing a working social services system. But that won't be enough. In order to be the shining example that the Bush administration desires, "Fatahstine," as Indyck calls it, must prove itself much more adept at taking care of the people by providing them with jobs, education, and peace than "Hamastan." That is where Development-in-a-Box™ comes into play.

Palestine needs the same kind of programs I'm working on in Kurdistan to jump start its economy, find buyers for its goods, encourage entrepreneurs, create jobs, and establish a secure environment where people can live, work and relax in peace. This kind of a program needs broad support, which is apparently emerging ["U.S. Unfreezes Millions in Aid to Palestinians," by Helene Cooper, New York Times, 19 June 2007].

"At least for now, the United States and Europe appear in agreement that perhaps the only way to salvage some advantage from the Hamas victory in Gaza is to bolster Mr. Abbas in the West Bank, in order to provide Palestinians there and in Gaza with a preview of what life could be like with a pro-Western government in charge."

Success cannot be achieved in isolation, even with millions flowing in. Banking systems must be equipped to deal with that much money. Infrastructure investments must be made to ensure steady sources of power are available, logistics chains are in place, and broad connectivity with the rest of the world is achieved.

Fostering Innovation

In response to my post "The Tension Between Creativity and Efficiency," ZenPundit Mark Safranski wrote a very thoughtful blog entitled, "On Creativity in Organizations." Included in Mark's post is an interesting slideshare on "unleashing the creative beast in your team" entitled "Un-Managing." I find creativity and innovation interesting areas to research. "While the focus in Steve's post happened to be corporations," Mark writes, "it is a paradigm that applies equally well to public education, the military, intelligence agencies, universities - basically any entity that has a legacy organizational structure. ...  I agree with Steve that Six Sigma philosophy has it's place, particularly in terms of final delivery of a service or good but it is ill-suited for maximizing potential productivity in the sense of generating that which is new. "

Mark notes that inappropriately applying "zero defect" thinking can create unintended consequences such as:

* The emphasis shifts from finding new opportunities to not making mistakes:

This inculcates a "gotcha" attitude in middle-management and makes employees exceedingly risk-averse, conservative and uncommunicative ( when management is hunting for mistakes that will hurt your career, do you run to the boss with bad news. Or do you keep your head down ?). Moreover, employees don't actually have to "be" productive so much as they need to "appear" productive, relative to the instruments by which their performance will be measured. This analytically reductionist perspective discourages a systemic approach.

* It creates a focus on the present process, not alternative pathways:

Maximizing the present and applying multiple measurement tools for individual performance leaves little time or resources for " unproductive" time for speculation, experimentation or planning. People tack to where their incentives are. Moreover, in the hands of middle-management the measurement tools begin to replace common sense in terms of driving the setting of daily objectives and prioritizing the use of time. Independent thought is strongly discouraged.

As Mark correctly asserts, "Creativity required for innovation requires behavior that is inherently 'unproductive.'" Such behavior can lead to tremendously productive outcomes, but creativity and innovation are fraught with false starts and dead ends. In fact, good innovative processes all incorporate stage gates where ideas are evaluated and, if necessary, killed before too many resources are spent pursuing bad ones. For an idea to remain on the path to implementation, decision makers need to ask the following questions about it: What are the criteria for staying the course? How long should a process go without obvious success before someone hits the kill button? How should the kill decision be made? The kill decision is not an easy one. "Slow kill" processes cost money (sometimes without providing any return) and delay implementation of other more promising ideas. On the other hand, "fast kill" processes discourage people from suggesting ideas in the first place.

In her slide show "Un-Managing," Tara Hunt discusses a number of concepts including myths about innovation, conditions for innovation, and ways to kill innovation. The first myth she identifies is that there is always a "eureka" moment. Certainly such moments occur, but more often than not, innovation comes from hours of hard work not a single crystalline moment. Think about Edison's long road to the light bulb or Dyson's years of fiddling with his vacuum cleaner. The second myth is that there is a clear path to innovation. Innovation, in fact, is more like a maze with innovators trying numerous false leads before reaching their objective. The third myth is that people "dig" new ideas. Machiavelli wrote centuries ago, "there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new." The fourth myth is about the lone innovator. Tom Kelly, in The Art of Innovation, wrote:

"The myth of the lone genius can actually hamper [an organization’s] efforts in innovation and creativity. ... Loners are so caught up in their idea that they are reluctant to let it go, much less allow it to be experimented with and improved upon. ... If you distrust the power of teamwork, consider this fact. Even the most legendary individual inventor is often a team in disguise. In six scant years, for example, Thomas Edison generated an astounding four hundred patents, producing innovations in the telegraph, telephone, with the help of a fourteen-man team."

The fifth myth that Hunt introduces is the belief that most people can't be creative. Often creativity is a matter of technique. Once people are taught techniques that permit them to view challenges from different perspectives, they are surprised how creative they can be. This myth is one of the reasons that brainstorming was invented. The belief was that more ideas could be generated by groups than by individuals because hearing others' thinking would stimulate new thoughts in all participates. Studies have shown, however, that people brainstorming in isolation then coming together to discuss ideas produce more and better ideas than teams trying to brainstorm together from the start. There are several reasons for this. First, of course, is fear. People fear that others will think their idea is stupid so they don't bring it up. A second impediment to brainstorming, however, is even more significant. People have difficulty holding on to one thought (which they must wait to bring up in a group), while trying simultaneously to come up with other ideas. Individual brainstorming doesn't suffer from this problem. People are simply able to move from idea to idea without having to wait.

The sixth myth is that you'll know innovation when you see it. There has been a lot of "serendipity discovery" that wasn't obvious at first. It took a good deal of thought and discussion before people understood its potential. Part of the problem, of course, is that it's difficult to think of alternative uses for something when one is on the quest to solve a particular challenge. Gunpowder was discovered while looking for a substance to prolong life. Penicillin was discovered while looking for an antiseptic based on nasal mucus. Teflon was discovered while looking for an alternative to Freon. That's called stumbling into brilliance, but it still takes a lot of hard work.

The seventh myth Hunt points to is that the best ideas win. Almost all experts concluded that Betamax was better than VHS, but it didn't win in the marketplace. Many IT gurus admit that Apple's operating system is better than Microsoft's, but Apple's marketing strategy was not as good Microsoft's. Good ideas require good implementation strategies and a bit of luck to come out on top. Good ideas also require a champion within a company to ensure, people often point to Xerox's Palo Alto Research Center which developed things like the mouse, the Ethernet, and graphic user interfaces, which were all exploited better by others.

Hunt's final myth is that innovation is always good. I recall a story about a Japanese vacation spot that believed its fortunes would improve if it was connected to Tokyo by high speed. The connection was built at great expense and to everyone's surprise tourism decreased. When a poll was conducted to find out why, it turned out the new connection was too good. People had viewed the spot as a great "get away place," and the fact that it was difficult to get there helped maintain that perception. When connectivity removed as an obstacle, it also removed the place's charm.

As I noted above, Hunt also discusses ways to kill innovation. Destruction is always easier than creation. Perhaps I'll tackle that subject in a later post.