Back in the 1800s, Bubba and Gerry had a monopoly. They were in the ice business. See, they had a monopoly because they were the two biggest guys in the community, and every day during the winter, Bubba and Gerry would march down to the river and cut large blocks of ice and then haul large blocks of ice back up to their customers. Bubba and Gerr y worked day and night and as their business expanded, they added more big men to cut and deliver more ice.
Unfortunately, what they didn’t see coming was a small 4’11” Italian man named Antonio who built himself an ice factory, a place where small men could freeze large sheets of ice all year long and then cut them into small blocks for delivery by horses. The ice factory was a radical innovation that put Bubba and Gerry out of business.
Antonio lived well for many years, and made a lot of money. Antonio focused on productivity and efficiencies that made his ice factory better than the one down the street , and he could replicate his ice factory in other cities . But suddenly his business dried up and he, along with his other locations and the factory down the street, were all put out of business by companies named Frigidaire and Whirlpool and SubZero who created personalized chillers called refrigerators, a radical innovation that allowed every household in the community to have their own personal ice factory in their own personal kitchen.
Over two hundred years, the ice business has been a wonderful business. But each market leader died on the curve they were on. The ice haulers were replaced by the ice factories. And the ice factories were replaced by the refrigerator companies. And today the refrigerator companies are in danger dying on the curve they are on, because Frigidaire and Whirlpool and SubZero’s idea of innovation is all about shelf configuration and whether they should launch a stainless steel or a top front panel … when actually they should be investing in biotech … because there are people in biotech that will soon forever change food can be packaged such that it never actually needs to be refrigerated, and milk never actually goes bad.
Everyone died on the curve they were on because their idea of innovation was all about incrementalism … adding more bodies … becoming more productive, more efficient … and having more colors for the curve they were on.
What I would like to talk about today is innovation and jumping curves … creating things 10x better than before … doing what FedEx did to the mail system, what Apple did to the computer business, what Starbucks did to coffee and what toilet paper did to crumpled leaves.
Innovation doesn’t have to be radical
And innovation doesn’t have to be radical. I started my career at Procter & Gamble where I was on the team that launched Bounty Paper Towels into Canada. The last thing the world needed was another disposable paper towel to wipe up spills. But we took the market by storm and were the number one brand within nine months. Why? Not because the quicker picker- upper was super absorbent and you could ring it out and reuse it. Not because you could by not only 2 roll packs, but also 4,6,8,10 , 1 2 and 18 roll packs at a time. Not because Bounty came with delightful color prints around the edges … no … we took the market by storm because we added a perforated edge that allowed consumers to tear off a third of a towel, two thirds or a full towel. We jumped from the “fight for more absorbency” curve to the “environmentally conscious consumer” curve … and left our competitors and the old curve behind.
Next challenge: Disrupt a 100 year old category
That was a fun project, and successful. So successful in fact that my next role was to disrupt the 100 year old bar soap category. For 100 years, innovation in the bar soap category revolved around better packaging, better scent, more moisturizer content, and whether the soap worked better in hard water or soft water. Our goal was to have people walk into the shower no longer with a bar of soap, but now holding an Oil of Olay puff and gel. And grew a brand new category called “body wash” into a multi-billion business in 2 years … and increased the cost per use from a half of one cent to over six cents per shower. That doesn’t seem like much … but it increased revenue contribution in western Canada from $11 million to $81 million by cannibalizing our own product. We jumped curves from bar soap to body wash and beauty.
What curve are you on?
My question is: What curve are you on? What is the next curve that will disrupt your industry? The architectural industry? The engineering industry? The cold climate construction industry? Because if we want to be the centre for cold climate construction … guess what … we need to be thinking about the next curve … because if we aren’t jumping to the next curve, I can assure you that there are many other people that will . But they will be in places like Sweden, Norway, Finland, Russia and China.
Speed of Innovation
Twenty years ago we were faxing documents. We were licking stamps. And we were looking up words in the dictionary. The price of oil was $20. The United States was the only superpower. And the newspaper was delivered at 5pm before you came home from work.
If you think the pace of change has been accelerating … you ain’t seen nuttin’ yet. Let’s look at what I call the TOP 10 sources of potential disruption to many in the room … and all of which are converging:
- Digital Fabrication – the process that liberates design, construction or production through the use of 3D modeling software and an unlimited imagination of materials that will soon be as available as printers are on everyone’s desk. Last week I met with Neri Oxman from MIT Media Labs who is focused on bio-inspired fabrication – that’s right, the blending of materials with biology for the fashion industry – such that we can blend (manufacture) hard and soft materials without ever having a seam again. And what is she working on next? Manufacturing of a child’s chair that will grow and expand as the child grows.
- Infinite Computing – confluence of three trends: an exponential increase in available computing power; access to that power; and the precipitous fall in the cost of that power … which will lead to computing in our cars, our roads and our bodies.
- Networks & Sensors – the ability to monitor everything and react or correct real-time. Monitor moisture levels in crops, shifting of buildings, or the rain levels on a roof. Everything will have an IP address and everything will be monitored, and with infinite computing, everything will be able to self-regulate and self- correct. Like redirecting solar cells to melt snow accumulation on rooftops.
- Robotics – automated machines that can take the place of humans in dangerous environments or manufacturing processes, or resemble humans in appearance, behavior, and/or cognition. It’s easy to say we have a labour problem. It’s tougher to admit that maybe more labour is not the solution.
- Artificial Intelligence – the development of intelligent machines and software that create robotic agents that can perceive its environment, makes decisions and then takes actions that maximize its chances of success.
- Autonomous Vehicles – driverless or self-driving systems capable of fulfilling the human transportation capabilities of a traditional car. As an autonomous vehicle, it is capable of sensing its environment and navigating without human input. Like the mars explorer drone or the iRobot vacuum that is now in people`s living rooms. Ifloorwasher, iGrasscutter, iwindowwasher.
- Nanomaterials – materials with morphological features on the nanoscale, defined as smaller than a one tenth of a micrometer in at least one dimension. Nanomaterials and nanomanufacturing can take water dirty slough water, and through a nanoparticle filter, separate out the H2O (two hydrogens and one oxygen) and reconfigure them into pure drinking water. And is we can do that for H2O, we can probably do it for CO2.
- Battery Capacity – Which is really the one technology innovation holding us from adopting a whole series of cleaner forms of energy. Battery capacity to store and transport energy from fuel cells and photonic/solar cells is a breakthrough innovation that will enable a whole lot of disruptive change.
- Synthetic Biology – The ability to grow new matter through stem cells or in petry dishes.
- Personalized Medicine – The ability to self diagnose and then the ability to self administer medication.
For the first time in history, our capabilities have begun to catch up with our ambitions … and we are entering an era where some of our most pressing challenges are being solved. Global challenges like:
- Fresh, drinkable water
- Safe, secure food products
- Sufficient food supply
- Alternative energies
- Smart energy grids
- Disease eradication
- Population control
And this really creates a decision for us here in Alberta. Are we going to stay on the curve that we are on? Or are we going to jump to the next curve? Let’s look at the Alberta economy for a minute. 60% of our GDP is based on two assumptions:
- That there will continue to be a demand for carbon-based energy products.
- That there will continue to be a demand for intensive livestock operations.
And at Harvard, MIT, Stanford, Berkley … as well as in business incubators around the globe … there are some of the smartest people in the world who have made it their God given purpose to prove that both of these products are no longer needed … or at least certainly not needed in the way we produce them.
Last May I was flying back from Montreal and happened to be sitting beside Patrick Pichette. Patrick Pichette is the CFO at Google. And after learning that, I thought he would be an interesting person to have a chat with. So I leaned over to him and said, Mr. Pichette, would you mind if I asked you a few questions. And he thought that would be fine.
I asked him about the culture at Google and how innovation happens. And he told me the story of how they made the decision to allow their employees to spend 20% of their time on product innovations that can change the world … meaning those products or solutions that will affect over 1 billion consumers. Pretty cool.
Then he asked me an unusual number of questions about Edmonton and Alberta. Specifically, he knew a lot about the number of engineers we have per capita, and his comment was that Google has their eye on Alberta as a massive source of talent. I suggested to him that while we have a tremendous number of engineers in Alberta, unfortunately they are all gainfully employed and that labour would be Google’s biggest challenge if they were to locate one of their GooglePlexs here.
To which he looked at me, smiled, and said … Yes, you have more engineers per capita than any place in North America. And yes they are all working … but unfortunately they are working on the wrong problems. Our mantra is to find the best engineers in the world and get them working on projects that will change the world … and not perpetuate the current world. Google is always on to the next curve.
Which makes people around here go Gulp!
The Need for Change
I took on this role at EEDC about eight months ago with a very clear mandate to get focused on both supporting our primary industry clusters and cultivating a culture of entrepreneurship. What I have learned is that the two are not separate, and that it is within our primary industry clusters that need to cultivate a culture of entrepreneurism.
My first interview with Gary Lamphier at the Edmonton Journal was all about complacency … a fear that we are becoming uncompetitive, unproductive, un-innovative which has the ability for us to be caught far offside if the world changes, if prices change, if the competition changes, or if the curve changes.
Gary and talked about:
- Not enough of our companies are investing in research and development projects.
- Not enough of our companies are shifting from labour to robotics.
- Not enough of our companies are investing in next generation products.
- Not enough of our companies are diversifying their markets.
- Not enough of our companies are incorporating purpose-based missions.
And while we sit around mesmerized by Ft. McMurray and counting our money, I’m personally concerned that we are testing the theory that a rising tide floats all boats. Or, as I like to say, in a tornado even a turkey can fly.
Picking up the Pace
Growing up in the Ferguson household, our dinner table discussion never veered to far from real estate, construction and doing business in colder, remote climates. We also talked a lot about using Edmonton as a base and growing global companies from here, like the way PCL has done, or Stantec, or the Running Room or Fountain Tire.
My father took a chapter out of Sam Walton’s success manual and implemented a strategy to diversify markets and go where others weren’t going. So he built buildings in Yellowknife and I think at one time became the largest commercial landlord in the north for many number of years.
In fact, I remember meeting Gino back then, as he was also a pioneer who was doing some of the early, early work in Yellowknife and the North. I remember him because he would always come up to me and say, “I know your mother” which I found very uncomfortable for many years, until later in life I realized that they both worked at Imperial Oil together.
Yellowknife was the start in the 1980s, but as I look forward, Canada’s North will become the next great area of exploration for energy, minerals and materials. The federal government estimates $650 billion in capital expenditures over the next 20 years will occur, and Edmonton is one of two major hubs that will service the transportation, logistics and warehousing needs … source the construction, engineering and architectural talent … and provide support for education, health care and military defense.
We need to pick up the pace as the Gateway to the North and the Centre for Cold Climate Construction Technologies, and we need to bake it into our brand and activate it in our business strategies.
Folks, we are sitting on a golden opportunity. What we have the world wants … for now. What we have is secure for the next 5-10 years. What we have creates a solid foundation for risk taking … and we need to take risks and make investments in order to play on the next curve.
If I was to encourage your conversations through this conference, may I suggest five parts of a strategy:
- Need to diversify our revenue streams by geography – and start building major international companies focused on cold climate construction across the circumpolar north.
- Need to invest in technologies that will disrupt our industries – and like the oil sands developers are doing, collaborate around challenges and opensource potential solutions.
- We need to start attracting people – but shift our focus from labour and back on the attraction of the best and brightest minds who will help us transform our industries.
- We need to open up the access point and market ourselves as the leading city as the Gateway to the North and not just cold climate construction, but cold climate technologies.
- We need to develop a missionary sense of purpose in order to have every engineer available want to come work here … because we are in a competition for talent. We need to turn our businesses into a force for change and a force for good. That gives the next generation a sense of purpose.
The Close: Call to Action
This conference was birthed out of the cluster strategy we did back in the Allan Scott days of EEDC. We got out of the cluster development business in 2007 and just started focusing on labour attraction … which was important … but it has come at the expense of long-term thinking, long-term investments and discussions about jumping to the next curve.
Today I am asking for your help to re-invigorate cold climate technologies as part of the Edmonton brand. Our team at EEDC wants to know what innovations you’re working on, what investments need to be made, and what is the path forward to allow you to jump curves.
Our job is to help you activate strategies that are good for the industry, and we look forward to learning about the priorities that emerge out of future conferences.
Gino, my most sincere congratulations for being honoured here today. Your leadership has led us to where we are today, and we look forward to helping the companies in the room define the next curve for the industry.
Brad Ferguson, President & CEO
Edmonton Economic Development