Innovation: Part II
The B-School Boys
By Donna Fenn
"People thought we were crazy to give up six-figure salaries at investment banking firms to reinvent the earmuff," recalls Brian Le Gette. "They laughed at us."
Now Le Gette and his partner, Ron Wilson, are the ones in stitches -- all the way to bank. The co-founders of Big Bang Products, in Baltimore, have been doubling revenues every year by sticking to their original strategy: to innovate the mundane.
Le Gette and Wilson are Wharton business-school buddies who knew they'd get jazzed up by designing products they could actually see people using. So they set their sights on the kinds of things that most people assume have reached the end of the innovation road: earmuffs, beach chairs, sunglasses, and gloves, for instance. The idea is to define the flaws in everyday products and to come up with design solutions to correct those flaws. Big Bang's sunglasses, for example, have pivoting temples that fold in front of the lenses; that makes them easier to slip into a front pocket and less likely to get scratched. Their newest innovation: gloves equipped with what Wilson calls "exhale technology," a port you blow into to warm your hands. Already, the two are speaking with the Department of Defense about potential military applications.
But it all began with the lowly earmuff. The two friends, both trained engineers, mused that it would be great if guys like them could keep their ears warm without looking like dorks. Thus in 1993, their first year at Wharton, they designed an expandable, collapsible, fleece-covered ear warmer that wrapped around the back of the head.
"We thought the engineering would be relatively simple," says Wilson. "But to make it so it stayed on people's heads was complex. We knew nothing about plastic or fabric or sewing or how to put any of that together." The two prowled the aisles of Wal-Mart looking for anything plastic that could be cut up, glued, and riveted together in the right shape. They charged $7,500 in start-up expenses to their credit cards, and by the fall of 1994 they were selling their ear warmers for $20 each on the University of Pennsylvania's main thoroughfare.
Then two classmates who had landed internships at nearby QVC persuaded the skeptical Le Gette and Wilson to hawk their product to home shoppers. By 1997 the pair had sold more than 600,000 earmuffs on the home-shopping network. That same year, they incorporated the com- pany, raised $2 million in capital, hired a team of five employees, and set to work on still more innovations: a radio-controlled toy hang glider, a stadium seat with self-inflating foam, a self-watering planter, a talking lunch box, and a pop-open beach mat, to name just a few. "We'd bring in top management from QVC and show them 30 prototypes," recalls Wilson. "They'd pick 10, and we'd make them and sell them on the show." The speed to market of those products was often staggering. The beach mat, for instance, went from prototype to manufacturing to market in eight weeks. Not that every product was successful. The talking lunchbox, which seemed promising in focus groups, bombed on QVC. "Innovation is the easy part," explains Le Gette. "The difficult part is choosing the right innovation."
The 55-employee Big Bang is more focused now, having culled its product line to concentrate on items with the largest market potential, such as ear warmers, gloves, sport sunglasses, and a line of beach gear. Those products, successful on QVC, got Big Bang into big-name retailers like Nordstrom, REI, Target, Galyan's, and Eddie Bauer. "We have so many large suppliers, it would be difficult for a small company like Big Bang to break into these categories if they were not unique," says Steve Fife, a vice-president of merchandising at Galyan's Trading Co. "They are one of the more innovative companies out there."
Le Gette and Wilson are projecting revenues of $35 million for this year -- more than double last year's sales -- and are shooting to be near $200 million by 2005. They're racking up double-digit profits, hiring a new employee every two weeks, and making their investors very, very happy. "We have an inexhaustible desire to question the things that most people think have already been answered," says Le Gette. "And that's how we succeed in reinventing the wheel."
The Bad Boy
By Mike Hofman
At a time when too many CEOs find themselves fending off federal investigators, Marc Maiffret can say he's been there and done that. Indeed, Maiffret, age 21, has done plenty. He cofounded a security-software business, he has developed innovative products, and he has driven computer-security changes at some of the most powerful companies in the country. All that, and agents of the Federal Bureau of Investigation once raided his home.
Maiffret is a computer hacker, you see, which has served his company, eEye Digital Security Inc., very well. In launching the Aliso Viejo, Calif., company three years ago, Maiffret set out to write software that could outsmart even the most clever of hackers. At the time, "most security software only protected you from software flaws you knew about, and nobody was forced to be innovative," he explains. In contrast, Maiffret designed such products as SecurellS firewall software, which can recognize hacking as it happens by looking for telltale signs like odd Web traffic or sudden data movement.
Maiffret's interest in wired mischief began in 1996, when he was 15 and his mom (always blame the parent) moved him and his two sisters to a subdivision in Orange County, Calif. "As soon as I got a computer, I jumped into hacking big time," he recalls. "I did it to escape the day-to-day-type thing. I was totally a loner." Friendless and bored at his new school, Maiffret dropped out of 10th grade, dyed his hair various colors, and soon hooked into on-line hacking circles. There he learned how to mangle Web sites and breach networks. At eCompany Inc., a software firm at which Maiffret was hoping to land a job, CEO Firas Bushnaq invited the brash teen to try to hack into the company's computers. Maiffret succeeded, and Bushnaq hired him.
Of course, Maiffret's hacking also steered him toward trouble. One of his hacker acquaintances was apparently suspected by the FBI of breaching a military network. That prompted a raid, during which armed agents pulled Maiffret from his bed and his mother from her morning shower. Dripping wet and surrounded by cops, she must have feared for her and her son's future. In the end, though, Maiffret was never charged with a crime. Bushnaq's response to the episode was to give his new employee more responsibility. Together, the two came up with a plan to launch eEye as an eCompany subsidiary making network-security software. Maiffret even moved into Bushnaq's home so that he could write code 24-7.
Today the 50-employee eEye has four software programs on the market and reportedly grosses more than $1 million a month. "I would characterize them as a young upstart that's driving the thought leadership of the industry forward," says Peter Lindstrom, senior analyst, security strategies, at the Hurwitz Group, a research and consulting firm.
At eEye, Maiffret holds the title "chief hacking officer" as well as a chunk of equity -- and he still uses his hacking skills to keep the company on the map. For example, in 1999 he and his team found a flaw in Microsoft's Web server. Maiffret alerted Microsoft officials to the problem, but they rebuffed him, so he unilaterally issued a press release explaining how the system might be compromised. In response, Microsoft completely revamped its protocol for responding to security issues. Since then, eEye has identified hacker-baiting flaws in software from Sun Microsystems and Oracle and on Macromedia's Flash player, generating still more press and keeping Maiffret's hacker-stocked engineering team happy. "A lot of guys here enjoy going through software," he says. "The geek aspect of it is that it's a very challenging thing to find vulnerabilities."
Maiffret, for his part, seems to enjoy making a profit as much as he once enjoyed making trouble. He does admit having to adjust to his new lifestyle. "My sleeping schedule used to be like a vampire's," he says wistfully, "but I have realized that you do have to be there when you're the manager."
The Prodigal Professor
By Emily Barker
Corinna Lathan's company, AnthroTronix, has created a toy that helps little kids who have cerebral palsy learn how to feed themselves. Her company is also developing a way for soldiers in combat to send messages or to control remote devices using wrist-worn computers. Same technology, vastly different uses. Lathan doesn't like to be boxed into doing just one thing.
That's one big reason why she's an entrepreneur now. In 1999 she took a leave of absence from teaching biomedical engineering at Catholic University in Washington, D.C., to launch AnthroTronix, based in College Park, Md. When she returned to her teaching post a year later, she was on the brink of getting tenure. Yet Lathan lasted just one month before handing in her resignation and heading back to AnthroTronix full-time.
"I never wanted to do research on one thing for the rest of my life, which tends to be the academic model," says the 34-year-old Lathan. "It's more fun as an entrepreneur because as a small company, I get to do more hands-on research. I don't have to worry about being the best in one narrow area and doing the same experiments over and over with a twist."
Still, it's Lathan's academic credentials and skills that made AnthroTronix possible. While earning a Ph.D. in neuroscience at MIT, Lathan worked at the school's Center for Space Research and became interested in how technology can enhance human performance. Then, while working at Catholic, she became inspired by a physician friend who worked with disabled kids. She got grants to explore medical applications of virtual-reality and telecommunications technology, then decided to start a company to develop a therapeutic toy.
"I was appalled at the lack of technology available for disabled kids," says Lathan. "We're taking advantage of the revolution in consumer electronics and communications, and that has not been done in the medical field."
Her progeny, CosmoBot, is a short, metallic-colored humanoid that would be at home on The Jetsons. A child wearing an ordinary-looking glove and cap embedded with hidden sensors can raise her arms or waggle her head to make CosmoBot do the same. CosmoBot can also be programmed to speak to a child or respond to a child's voice. It's a whiz at Simon Says. The system records a child's movements, making it possible to track progress over time, and it's Internet-enabled, allowing new software to be downloaded easily. Rehabilitation experts who are familiar with CosmoBot say it's a fun, painless way of getting kids with disabilities to concentrate on developing physical and language skills.
"It's not a matter of gee-whiz-bang technology. It's how you engage the mind. If you get the mind engaged, the body heals faster," says Dave Warner, a doctor who specializes in rehabilitative engineering.
Lathan is enjoying the diversity of projects she's pursuing outside academia. AnthroTronix, which now has eight employees, is developing gesture-controlled devices for the deadly serious game of warfare: for instance, sensor-equipped gloves that allow soldiers to send wireless communications to one another with hand motions. Lathan has won roughly $1 million in grants and research-and-development contracts from the Defense Advanced Research Projects Agency and other federal agencies to fund those efforts as well as CosmoBot, which is still in the prototype stage.
With an additional $3 million in funding, Lathan estimates, CosmoBot could be on the market within a year. She aims to sell a professional version of CosmoBot to clinics and therapists for about $2500 and eventually offer a simpler home model for $500. Lathan has found that dealing with venture capitalists isn't so different from life in academia. In both there's pressure to specialize: the R&D side of the business often comes across to VCs as a lack of focus. But diversity is not something she wants to give up. "I love working with new technologies and new applications," she says. "It's the learning curve that turns me on."
The Lifetime Achiever
By Joseph Rosenbloom
Stanford Ovshinsky has lost track of the number of U.S. patents he's won. "More than 275," he says. Actually, his patent lawyer puts the precise number at 274. But, hey, who can blame Ovshinsky for losing count?
The cofounder of Energy Conversion Devices has been coming up with patentable inventions since just after World War II. He's widely regarded as the father of a whole branch of science: disordered-materials physics, which uses unstructured elements like cesium to achieve superconductivity. He has even inspired two entries (Ovshinsky effect and ovonic) in the American Heritage Dictionary.
With his head of Einstein-style white curls and semiklutzy manner, the 79-year-old Ovshinsky definitely fits the part of the absentminded inventor. "He reads physics journals for relaxation," says his wife, Iris, who holds a doctorate in biochemistry and cofounded ECD.
Yet Ovshinsky, president and CEO of the Rochester Hills, Mich., company, has also been spending his life working to convert his esoteric ideas into marketable energy-saving products. His first patent came in the 1940s for the design of a high-speed, automated machine tool. Other patents have followed in a remarkable parade. They include ECD's low-cost cell for solar power; "rewritable" compact discs and DVDs; an instant-start, regenerative fuel cell currently in development; and a rechargeable nickel-hydride battery for powering hybrid-electric vehicles, which ECD is producing in a joint venture with Texaco.
"In my mind this was a clear winner, and it's what really intrigued me," says former General Motors chairman Robert Stempel of Ovshinsky's nickel-hydride battery. So intrigued was Stempel, in fact, that in 1995 he gave up retirement to become chairman of Ovshinsky's company. Since then, ECD, which was founded in 1960, has grown to 520 employees, including 41 Ph.D.'s.
"Stan talks to the atoms" is a common saying at the company. "Most people think in two dimensions," says Subhash Dhar, president of Ovonic Battery Co., an ECD affiliate, marveling at Ovshinsky's instinct for atomic physics. "He thinks not only in three dimensions but also in different colors."
The son of an Akron, Ohio, scrap-metal dealer, Ovshinsky skipped college to become a tool maker and machinist. He drew on his gritty knowledge of machines in his drive to create his first patented invention -- the high-speed machine tool -- and then to design "intelligent" machines. That quest, in turn, led to his study of neurophysiology and disordered-materials physics -- and to a host of new fossil-fuel-saving innovations. Many of his patents are in solar-cell technology, including the highly sophisticated roll-to-roll machine, which works like a printing press to produce cheap, multilayered solar cells.
"We are not tied down by previous conditions of servitude" is one of Ovshinsky's favorite expressions. And indeed, he owes much of his technological success to his courage -- some might say stubbornness -- in following his own instincts. Automotive companies, for example, were against using nickel, which is costly, as a component in a new kind of rechargeable battery that ECD aimed to develop years ago. But Ovshinsky insisted on the nickel, postulating correctly, as it turned out, that ECD could devise a high-performance, low-cost battery.
Ovshinsky's efforts to sell his innovations have recently been picking up steam. In the past three years revenues at the Nasdaq-listed ECD have more than doubled, to $71 million in 2001. But the company also reported $5.1 million in losses last year and has never managed to turn a reliable profit. Still, to Ovshinsky, making piles of money has never really been the point. "This has been a wonderful life, to have creative ideas and build things," he says.
And the ECD cofounder, who turns 80 in November, isn't done yet. When asked if he still goes to work every day, he gets a little huffy. Says Ovshinsky: "I'm studying and working all the time."
The Action Hero
By Susan Hansen
Kent Murphy's dreams are different from yours and mine -- they're the kind only an electrical engineer could understand. Like the night back in the late 1980s when he thought he was a photon. "I was riding a ray of light moving through the fiber," he recalls.
Murphy, 44, isn't one to just sit on his visions. When it comes to innovation, he moves fast. He drew on the photon dream to invent a new fiber-optic strain gauge that provides real-time monitoring of structural wear and tear in airplanes. And he built on that work to launch Luna Innovations Inc., a research-and-development launchpad in Blacksburg, Va., that has spun off five stand-alone businesses in the past three years.
Luna's progeny includes a big range of cutting-edge fiber-optic-sensing and biotech-related technologies. Luna Analytics makes bioanalysis instruments for studying proteins, Luna Technologies develops fiber-optic-measurement devices for the telecom industry, and Luna Energy manufactures advanced oil-well-monitoring equipment. And Murphy, who typically puts in 80- to 100-hour workweeks, says more spin-offs are in the works.
Murphy didn't start out at such a restless pace. A three-time community-college dropout, he spent most of his early twenties working odd jobs, hanging out with his friends at a nearby lake, and generally goofing off. "I kind of floated around in an inner tube," says Murphy, who grew up in southwestern Virginia.
Murphy began to imagine more for himself while working as a lab assistant for engineers at an area telecom. He found his focus at Blacksburg's Virginia Polytechnical Institute, earning a Ph.D. in electrical engineering and landing a tenured teaching slot in three years -- a college record. Along the way, he collected a pile of patents (he has 30 in all) and assembled a group of Virginia Tech colleagues who helped him launch Luna Innovations (originally called Fiber and Sensors Technologies), which has been funded largely by government and private-sector grants.
Murphy still has the friendly, boyish manner of a longtime goof-off. But underneath, say colleagues, he's always churning. "He's constantly bubbling up ideas," says Luna chief operating officer Walt Daub. "He'll come in and say, 'I had this great idea at three in the morning' -- and it's not just an idea, it's a whole plan in excruciating detail."
These days, Murphy is focused on turning the employee-owned company into one of the most booming technology-transfer operations around. To do that, he's given up his Virginia Tech teaching post and has been busy building Luna's in-house talent. In the past three years the number of employees at Luna and its five spin-offs has increased from 25 to 150, including 18 Ph.D.'s.
At the same time, Murphy has also been buying up patent licenses from a host of universities and government and private labs, with the aim of turning promising technologies into real commercial products. For example, the fiber-optics research behind spin-off Luna Technologies was licensed from NASA. The technology driving spin-off Luna NanoMaterials was licensed from Virginia Tech. That company is pioneering medical uses for carbon molecules called nanospheres, such as attacking cancer cells and dramatically improving magnetic-resonance-imaging contrasts. "Our whole focus is moving it into the marketplace," says Murphy. "There's tons of great technologies sitting on shelves being wasted."
As for fund-raising, Murphy does that, too. In the past two years he and other Luna execs have been meeting with venture capitalists and potential corporate partners and lawyers. So far they've brought in $70 million in outside funding, including contracts with the likes of Northrop Grumman Corp., Boeing, and the Mayo Clinic. You might think the CEO is ready for a breather. But no, he's now talking up plans for two more new launches -- in the biotech and telecom arenas -- in the months ahead. Call him a compulsive company builder. "I think I have some obsessive behaviors," says Murphy. "I definitely do."
The Green Giant
By Emily Barker
Mike Biddle's plant in Richmond, Calif., is overflowing with ground-up old computers -- thousands of 'em, all piled up in towering stacks, waiting to be recycled.
The mission: keep those PCs (and the lead, mercury, cadmium, and other toxic substances they contain) out of local landfills. It's a job that used to be considered undoable because the recycling technology just wasn't there. So Biddle, a chemical engineer who cofounded MBA Polymers Inc. eight years ago, invented it. Specifically, he figured out how to repurpose the plastics in durable goods -- computers, appliances, even automobiles. Now his company has won a reputation as the most versatile plastics repurposer around. "They're unique in their ability to take a very broad mix of recyclable materials, a mishmash of things, and turn it into high-value product," says Tony Kingsbury, an industry-affairs manager at Dow Chemical Co.
Biddle, 46, used to be in the plastics-producing business himself. In the 1980s he did a stint at Dow Chemical, where he worked on high-tech plastics for the aerospace industry. But as a guy who biked to work and considered himself an environmentalist, Biddle hated the idea of creating millions of tons of plastics that would never degrade or be reused. "I wanted to do something with my technical training that I could get excited about and feel good about," he says.
After leaving Dow Chemical in 1992, Biddle set out to do just that. He started his own research-and-development consulting company, focusing on plastics recycling. From the start, he aimed to go far beyond soda bottles, which contain only a few kinds of plastics and are relatively easy to reprocess. He took on the much trickier problem of recycling durable goods. "There are literally tens of thousands of grades of plastics that go into the stuff we use to make durable goods," says Biddle, who got early grant funding from the American Plastics Council.
But those different grades of plastics have to be separated -- or at least sorted into similar types -- before they can be recycled. And other components, such as metal, glass, and even inks and paper labels, must somehow be removed.
Biddle's solution was to look hard at such industries as mining, agriculture, and food processing, where sorting and separating materials is crucial. During the 1990s, he journeyed throughout the United States and Europe to study separation and recycling techniques in various industries. Then, with new grants from plastics makers and the auto industry, he and a newly hired associate -- Trip Allen, a former Dow Chemical colleague -- figured out how to apply those techniques to recycling durable goods.
What they came up with was a whole arsenal of tactics. For instance, traditional plastics-recycling equipment would be destroyed by any metal in the feed. So they adapted a machine that was normally used to shred nail-filled wooden pallets. They modified farm equipment designed to separate chaff from wheat and used it to remove paper labels from the mix. From the mining industry they borrowed a method of extracting minerals from rock and applied it to separating different grades of plastics. "We had to do it much more accurately, about 10 times finer," says Biddle.
Eight years ago Biddle decided to morph his R&D company into a business that recycles durable goods and sells the reprocessed plastics. He raised $6 million from investors, including Silicon Valley's Band of Angels, and used the money to launch a recycling operation that now turns out about 500,000 pounds of different grades of plastics a month.
For now, Biddle's customers are mostly small manufacturers in the West. In the future he hopes to scale up by building more recycling plants -- and thus producing the megasupply of processed plastics needed to attract bigger customers. One major selling point: MBA Polymers' recycled plastic, says Biddle, can be as much as 20% to 25% cheaper than virgin plastic.
Biddle likes to compare MBA Polymers to Nucor Corp., which pioneered a process for reusing scrap steel. "They're now the largest steel producer in the United States, and it's all based on recycled steel," says Biddle. "That's the story I think is going to happen with us."
Inc's The Innovation Factor Series concludes with:
October: A survey of national trends affecting America's gross creative output, including the work that the Fortune 500 and the government are doing with innovative small companies.
Plus: The August installment of the series -- assessing the best practices of the 50 most innovative private companies in America -- is now on-line at www.inc.com/keyword/50best.
The Innovation Factor: Part II
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