Architecture's 2010 Hot Shop Wins A Billionaire Patron

Plenty of architecture’s biggest names have been laid low by the Great Recession, as I wrote recently in Bloomberg Businessweek. One partnership has never had it better, however: New York-based Diller Scofidio + Renfro.

On Monday, the 60-person shop was named chief architect of billionaire Eli Broad’s $80 million-plus art museum in downtown Los Angeles, beating out a collaboration by starchitects Rem Koolhaas and Frank Gehry. The commission came just two months after the boutique was chosen to design an arts and film center for the University of California in Berkeley.

DS+R had a dizzying 2009 as well, completing two high-profile projects in New York: the High Line elevated park, which was created from a long-abandoned railway line, and the redesign of Alice Tully Hall in the Lincoln Center for the Performing Arts.

The studio’s partners—Elizabeth Diller and Ricardo Scofidio, who founded it in 1979, and Charles Renfro, who joined in 1997—may busy again in 2011. DS+R, which got its first big assignment with the Institute of Contemporary Art in Boston, which opened in 2006, is completing a museum on Rio de Janeiro’s Copacabana beach and a media studio in Abu Dhabi. It is also in the running for three projects, including a factory in China. (Yes, that’s right, a factory.)

The firm’s payroll has grown from 25 six years ago, with plans to expand at least another 15 percent next year. Revenue should surge 150% this year. “We have to wonder that if there wasn’t a building bust, would we be winning even more?” Renfro says. “We’re thankful that we are bucking the trend. We’re not getting rich, nor are we starving.”

I caught up with Renfro, 46, as he took a train from his office on Tuesday. Here’s an edited transcript of what else he had to say:

Q: How do you explain your winning streak?

A: The obvious answer is that we finally created several major commissions and people have heard of us and they hadn’t before. Not until the last four years have we worked on complex jobs and proven that we could pull them off.

Q: The firm has been around more than 30 years, though. Is this an example of perseverance? Or is it just good luck?

A: I wish I could provide you with a silver-bullet answer, but I think it’s a combination of all that. I also think our approach toward building and design is much more sympathetic to the economy. It’s no longer the go-go ’90s or even the 2000s. We’re operating at the crossroads of making an icon and a very thoughtful response to clients’ problems.

Q: Is it harder to do architecture in 2010?

A: It’s probably harder for some people. There are many architects who are used to working on high-profile jobs, making iconic architecture. I think you will find them getting fewer commissions in this day and age. Maybe we’re reaping the benefit of the downturn in this way. It’s not harder for us.

Q: How would you describe the firm’s design philosophy?

A: We take our inspiration from the context of the project. Having said that, we’re very interested in pushing the limit of technology, of form-making, of structure.

Q: Has it become a challenge to manage the firm as it has grown so fast?

A: It goes without saying that anytime there’s a quick jump in the staff of any business, there will be growing pains. We operate like a family. I think we’re going to continue to operate on a similar manner.

Q: What would advice would you give to a student who is thinking of becoming an architect?

A: Go into law.

Q: And if he doesn’t listen?

A: There are many other kinds of outlets that have become available to architects, from making shows to getting into museum and exhibit design to getting into writing online. Hope is not lost. The money is down, however. We were never a well-paid profession, much to a lot of other people’s surprise. Definitely, there’s less money out there to build buidlings. So we all have to be more creative.

King Oscar on the Near West Side 8/15/10

Banksy on the Near West Side 8/15/10

Groupon's Management Secret in Two Words

Andrew Mason, founder and CEO of social-shopping site Groupon, was part of a panel discussion at Google's Chicago office last night on innovation and startups. One of the questions he was asked was to sum up his management credo in just two words. "Cultivate ownership," Mason answered. Then he told a quick story.

When Groupon was launched in Chicago in November 2008, the seven employees were "just a bunch of rascals." They included one twentysomething guy who, though "supersmart," had so little gumption that Mason thought he'd end up working at Shoney's when he was 45. But given responsibility for a specific area, the guy flourished and now manages a staff of 65.

Mason also gave a shoutout to Eric Lefkofksy as the outsider most responsible for Groupon's success. Lefkofsky is a Chicago-based serial entrepreneur who, though his Lightbank venture capital firm, was Mason's original backer and adviser.

Groupon is en fuego. It is up to 11 million subscribers, offering group coupons for restaurants and retailers in 160 cities in 22 countries. In its 20 months, Mason said, the site has saved customers $300 million with its daily deals.

It also has its own pilot fish, according to this post on WiseBread. Say you can't use your Groupon discount or you think it's worth more than you paid, you can sell it on sites such as CoupRecoup and DealsGoRound.

The discussion was organized by the Chicago Innovation Awards--Groupon was a 2009 winner--and hosted by Google, which is one of the contest's silver sponsors this year.

Michelin Restaurant Guide Comes to Chicago; Who's Next?

Michelin is becoming more American with its restaurant guides. The tire company just announced it will publish a guide in November for Chicago, its third U.S. city. (New York came first in 2005, with San Francisco the next year.) The dining directories, begun 110 years ago, are based on secret visits by a staff of 90 trained critics, a method that seems increasingly old-fashioned—and costly—as other ratings outfits from the Zagat Survey to Yelp rely on volunteers.

While Michelin executives were in Chicago to promote its latest edition, I caught up with Parmeet Grover, chief operating officer of Michelin’s Travel & Lifestyle unit in North America.

Grover does not have a gourmand’s background. He hired on with Michelin’s U.S. subsidiary in Greenville, S.C., in 1996, after receiving a PhD in engineering from Georgia Tech. He moved into his current role last year. Grover says he’s been a “foodie” from way back, however. “If you go back to Renaissance times,” he told me, “being technical doesn’t prevent one from having other interests that range quite widely,”

Here’s an edited version of our conversation:

Q: With Chicago, the guide will be in three cities in the U.S. What’s the plan for expanding further?

A: Globally, this will be our 26th city. And in the U.S. there are some large cities we’re looking at. You could imagine they’d be in the vein of the ones we’ve already done.

Q: Do you see adding another city in 2012?

A: I can’t comment on that right now.

Q: How has American cuisine changed in the last several years?

A: I think changes in American cuisine represent the changes in our society. If you look at the diversity of the country, it has increased over the last two decades. As a result, there is a lot of fusion cuisine.

But I think we may be onto another important trend, which is using a lot more natural ingredients, locally sourced ingredients. I see this even in Greenville, S.C., where my family is based.

Q: Michelin is doing things the way it’s done for more than a century, sending in trained reviewers anonymously. Aren’t you behind the times now that everybody is doing crowdsourcing?

A: In terms of the wisdom of the crowds, we respect it. But I think what we bring is another perspective that nobody else has. We are using professionals who know cuisine very, very well. What we have developed over the last 100 years is a process that’s worked very well. When we say it’s one star or two stars, whether it’s in London or Tokyo or New York or one day somewhere in Africa, it means the same thing.

Q: So that’s your advantage—you can get consistency because you know who your raters are?

A: Exactly. We are a company of engineers, so we have a process that is followed rigorously. And we never compromise.

Q: Is there any built-in bias in that training, however, that would favor a traditional French restaurant over another?

A: Not at all. I go back to something in the DNA of our company. We have five values, and I haven’t seen too many companies with this fifth value, which is respect for facts. When we go in to rate a restaurant or award the stars, it’s purely objective, based on what is in that plate, what has been cooked that day.

Q: How many times is each restaurant visited?

Ten times sometimes. And it’s not the same person. We have many different people that go, and all of the information is put into a data base and analysis is done.

Q: Your employees have been out eating in Chicago restaurants how long to get prepared for the new guide?

A: It’s been two years now. We take this very seriously.

Q: So I take it you’ve got employees in other cities that we don’t know about doing the same sort of covert operations.

A: That is correct. And what’s funny is that some of the families don’t know either what they’re doing. They need to maintain their anonymity. We are very serious about the confidentiality of it, which is the key to staying objective.

Even at Michelin, everybody has never met these people. My first impression was that they would all be rather heavy-set men. But that’s not true. We have men, and we have women, and they seem to be normal. You wouldn’t be able to guess what they really do.

Meet Google's $700 Million MIT Math Whiz

As my Bloomberg colleague Brian Womack reported yesterday, Google paid $700 million for ITA Software, a 16-year-old company that has provided the flight-booking software for Orbitz since it opened for business in 2001. The acquisition brought back memories for me. I profiled ITA’s founder and CEO, Jeremy Wertheimer, in 2000 for BusinessWeek.com. The MIT PhD was brilliant back then, if still cash-strapped—he came up with the $100,000 to start his Cambridge, Mass., company by maxxing out his credit cards and borrowing from his parents. Today, he’s undoubtedly still brilliant and rich, too.

Click here for the full profile.

Gen Y Unplugs Cable TV

Generation Y has already upset plenty of media businesses with its unconventional consuming habits. Another sector may be about to get smacked—cable and satellite television. Jeffrey Cole, director of the Center for the Digital Future at USC, made that call in his dinner speech for a group of chief marketing officers last night. The dinner was part of a conference in Chicago sponsored by Bloomberg Businessweek.

People in their 20s and younger no longer buy print newspapers, music CDs, land-line phones or watches, Cole noted. (I don’t think they listen to over-the-air radio, either.) Now, Cole said his research has detected that they’re not signing up for cable or satellite TV like prior generations. Instead, they’re watching video on laptops or even their cell phones.

Cole also predicted that most newspapers have just five more years before they’re killed by the Internet. (Cue up Ziggy Stardust.) A handful will survive: New York Times, Wall Street Journal, USA Today, and Washington Post. Women’s magazines will live on, too, since readers buy them as much for the ads as the editorial content. He didn’t give odds for us.

The Designer Behind Top Chef Izard's New Room

Over her 10 years as vice president of design at 555 International, Karen Herold has produced interiors for nightclubs in Las Vegas for Playboy and N9NE as well as retail space for Chanel, Valentino, Armani, and the Dallas Cowboys. She’s proud of every one of them, of course, but she notes that they’re really the taste of her clients, especially the flashy casino venues. Now Herold says she finally has a room of her own.

Actually, the new place, a Chicago restaurant called Girl and the Goat, will be identified with Stephanie Izard, the 2008 winner of television’s Top Chef, who’ll be managing the kitchen when it opens shortly after the Fourth of July weekend. And financially and legally, Girl and the Goat belongs to Kevin Boehm and Rob Katz, a duo who already own three other restaurants in Chicago. But the interior design is Herold’s throughout.

“This is exactly how I wanted it,” Herold says. “I wish I could buy a house right now. I would make it the Goat house. Everything I would have in my house.”

Herold, a 38-year-old Dutch native, showed me around the 150-seat dining room the other evening, as workers were still installing light fixtures. It is purposely anti-Las Vegas—Izard, whose previous restaurant, Scylla, was often described as cozy, and her backers had made “no glitz” a hiring condition. But the space does have some dazzle, which I’ll get to in a moment. (Sorry, no photos yet.)

Girl and the Goat is made to feel comfortably worn, lived in. It is Old World heavy and dark, from the 10-seat communal tables made of thick, weathered oak planks and lit by clear incandescent bulbs in antique glass fixtures to the back bar, which is made of 14 iron fireplace grills from the early 1900s that were sandblasted and fitted in a two-row span. Colors are muted. The seat cushions on the steel-brushed oak chairs are so deep green they look black.

The fireplace grills, which will be backlit when everything is up and running, are one of Herold’s three big statements in her design. Another is a brightlly colored, boozy painting of a girl and a goat that measures 7x7 feet and commands an exterior wall. Izard (the wild-haired girl in the painting) personally commissioned Quang Hong to do the work, based on a smaller one he had done for Scylla.

The other is a pitch-black screen in the center of the room. It’s what’s left of the supporting wall that had bisected the 116-year-old structure. Rather than leave the exposed bricks, Herold decided to encase them with cedar boards—after setting them on fire in a big parking lot to char them and then coating them with resin. Herold says Japanese builders have used this technique for ages, though she had never done it anywhere before.

“It is very bold without being loud,” she says. “I wanted to make strong statements without being in your face about it.”

Until now, neither Herold nor 555 International has had much of a profile in Chicago, though the design and custom-furniture firm has been based in the city since 1988, when it was founded by industrial designer James Geier. Herold, an interior-design graduate from the Institute of Fashion and Design in Amsterdam, hired on in 2000.

In all, Boehm and Katz have spent $1.6 million to create Girl and the Goat. Boehm says it was well worth it. “I always expected it to be really cool and really authentic, but I didn’t expect it to be sexy.”

Steelcase Takes a Desk in the Classroom

I’m sitting next to a desk that could have been mine in elementary school. Yours was probably like this, too: a hard-backed wooden chair on steel legs with a small writing tray bolted to a steel pipe. The one I’m sitting in could hardly be more different, starting with its bright green plastic seat that swivels, and has elbow perches that double as backpack hooks and gives a little when I lean back.

“There just hasn’t been any significant innovation in classroom furniture in I can’t remember when,” says Sean Corcorran, director of product development and marketing for the education solutions group at Steelcase, which designed and made the desk I’m test-sitting. “We see 50-year-old chairs in classrooms today. I think there’s pentup demand.”

Still, I wonder whether the desk will enable Steelcase to break out of the office market and into classrooms. With a laptop-friendly work surface, the node, as it’s called, lists for $599. By comparison, basic desks by market-leader KI start as low as $169. What’s more, I haven’t heard of a school anywhere that’s got extra cash these days. Many, in fact, can’t even pay all their teachers or afford new books.

At a Neocon event in Chicago, Corcorran tells me that in four months of pre-sales, the company has received orders for 50% of the first year’s production. Yet in better times—say, seven years ago when Steelcase decided to branch out into the education market—the order rate probably would have been higher, concedes his boss, Steelcase Group President James Keane.

Schools are mostly submitting try-out orders, buying desks for a classroom or two rather outfitting the entire building. “There’s probably less across-the-board opportunities in this sort of economy,” he tells me. “But we’ve been very happy with the success so far.”

The node is so unusual because, as a newcomer to the market, Steelcase looked not at how classrooms are generally equipped, but at how teaching has evolved. Used to be that teachers stood in the front and drilled rows of students much like a sergeant would address the troops. Today students are just as likely to be learning from one another in groups. Students also need a place for their backpacks and, at the college level for sure, a work surface with room for a laptop and a book.

Steelcase began developing its desk with help from design shop IDEO about a year and a half ago, Corcorran says. The early prototypes, on display at the event at the Tribeca Flashpoint Media Arts Academy, were assembled from crudely cut plywood and old plastic chair seats. Nonethless, they look basically like the final product.

The node comes on wheels, making it easier for students or teachers to roll them into new arrangements. The concave base, made of aluminum, provides an out-of-the-aisle space for backpacks or other gear. Not only does the plastic-molded seat swivel; the work tray does, too. And the 22x12-inch plastic surface can easily accommodate a laptop with space to spare.

One of the bigger changes was to make the seat bigger. Corcorran says Steelcase added an an inch and a half to the width so that today’s heftier students can squeeze in. The desk, which weighs 32 pounds, can support up to 300 pounds. The American classroom has changed.

Gehry's Take Two on LEED Architecture

Frank Gehry asked me to call him. I thought it was to answer questions about how the Great Recession was affecting the next generation of architects. But before we could get to that, the founder of Gehry Partners and an instructor this term at the Yale School of Architecture said he wanted to clarify his comments about LEED building standards. (I posted this blog after Gehry spoke on that topic during a public appearance on April 6.)

Yes, he did say that efforts to win a Leadership in Energy and Environmental Design certification can be a waste of time and money. But he told me on the phone that what he really meant to attack was the posturing around the LEED seal of approval. He’s all for energy-efficient buildings, he said, and has been since before there was an Earth Day, in the late 1960s.

Though he reiterated that he had never designed a building just to gain a LEED tag, he noted, in fact, that his Stata Center at MIT has been awarded a LEED silver from the U.S. Green Building Council.

“I’m not against LEEDs at all,” he said. “I think it’s wonderful. I think we’ve got to do this.” But then Gehry, who acknowledged that he is something of a cranky old man, got back on a soapbox to decry today’s automatic embrace of LEED certification. “It’s become ‘fetishized’ in my profession. It’s like if you wear the American flag on your lapel, you’re an American. That’s what I was trying to say. You get people who are holier than thou. I think architects can do a lot, but some of what gets done is marketing and doesn’t really serve to the extent that the PR says it does.”

With that off his chest, our conversation turned to other subjects including the job market for architects today, which is simply rotten. Gehry said he has 10 “superb” students in his graduate-school class. In previous years, he would have hired a few of them. But this year, with to little to do at his Los Angeles-based firm, he said he can’t. “Some of them will have trouble. And I don’t think they can all afford to have trouble.”

He said the students probably would work for less money, and some would be happy to be unpaid interns. But he said he insists on paying the prevailing salary for entry-level architects, and his partnership doesn’t have the work for more paid employees. For now, he said, the profession is in serious trouble, too. “You just hope it’s going to come back.”

Is LEEDing the Saudi Desert Really Green?

Just in time for Earth Day (natch) the American Institute of Architects announced its Top 10 examples of environmentally benign building designs. The 2010 honor roll includes office towers, schools, and even a prototype of a prefab single-family home designed for post-Katrina New Orleans. It also includes the world’s largest project to be awarded a LEED Platinum designation by the U.S. Green Building Council—the King Abdullah University of Science and Technology in Saudi Arabia.

But after all the hullabaloo my recent blog posts on Frank Gehry generated, I have to ask: How green is it?

KAUST is the first to achieve a Leadership in Energy and Environmental Design imprimatur in Saudi Arabia. (Interestingly, it’s also the kingdom’s first coed university campus.) The 6.5 million-sq.-ft. development, which encompasses 26 buildings on over 9,000 acres near Jeddah on the Red Sea, was designed by HOK, one of the world’s top architecture firms. It’s the eighth win for St. Louis-based HOK since the AIA’s Committee on the Environment began handing out awards in 1997.

HOK pats itself on the back for KAUST’s green touches, such as shading walkways and buildings from sunlight, installing wind turbines and 178,325 square feet of solar panels, sourcing 38% of materials within 500 miles of the Saudi port, and creating an infrastructure that reuses all waste water for onsite irrigation and other purposes. Contractors did two other things on the LEED checklist: They recycled 80% of waste materials and used wood that was sustainably harvested.

That’s all well and good, but the fact is that nearly two-thirds of the tens of thousands of tons of materials needed to construct this desert campus—paint, carpeting, furnishings, wood—had to be shipped in from more than 500 miles away. I don’t know how much greenhouse gas those vessels produced, but I do know that ocean freighters emit a lot. Back in 2007, I wrote in BusinessWeek that, based on a study, they produced more carbon dioxide than 10 of the 39 industrialized nations originally included in the Kyoto Protocol. A revised study finds that that’s still the case.

I asked one of the AIA committee members, Liz Ogbu of San Francisco-based Public Architecture, about how far judges should go in assessing environmental impact. She said the committee discussed whether it was right to award a LEED project in such a remote, resourceless, and inhospitable place. But she said it was precisely for that reason that the committee voted for HOK design. “Not every building can be built in California,” she noted. “There is going to be building going on in Saudi Arabia. For that reason, it’s important to have an example that green building is possible.”

I also asked HOK’s Colin Rohlfing the same question. Rohlfing is sustainable design leader in HOK’s Chicago office and was one of the hundreds of HOK employees on the project. “We had a lot of things working against us from the get-go,” he told me. In an ideal world, developers would build in temperate climates. Here, however, designers confronted a climate like Houston’s, except set in a desert, and coral reefs and mangroves that had to be protected.

“It’s always a dilemma,” he said. “Should we develop in those areas? Should we be going after greenfield developments in such a harsh environment? But if we don’t go after them and win them and try to make them as efficient as possible, some other firm will come in. The king was going to build in that location regardless. We had to make the best of it.”

I have to agree. If Saudi Arabia is going to develop as a nation, it does the world a favor by building to LEED standards. Still, I wonder what Frank Gehry would have to say.

Architect Gehry on LEED Buildings: Humbug

Frank Gehry has never designed a structure that’s achieved LEED certification, and I’d wager that he never will, based on his gruff remarks during a public Q&A on April 6 in Chicago. The 81-year-old also jabbed a thumb, somewhat in jest, in the eye of fellow architect Renzo Piano and museum directors in general, and he described the early stages of creating a design.

Gehry, whose most famous work is the Guggenheim Museum in Bilbao, Spain, was interviewed in the Harold Washington Library by Thomas Pritzker, chairman of the Pritzker Foundation, which awards the annual Pritzker Architecture Prize, and Hyatt Hotels Corp. His family also wrote the check for the Gehry-designed Jay Pritzker Pavilion in Chicago’s Millennium Park. (Hyatt itself recently won a LEED silver designation for a new hotel in Seattle.)

LEED stands for Leadership in Energy and Environmental Design and was created by the U.S. Green Building Council to promote the construction of buildings that are healthier for the earth as well as occupants inside. Developers seems to be tripping over one another to win LEED status these days.

What would you think, Pritzker asked him as they sat in hard-backed chairs on an auditorium stage, if a client said he wanted a LEED-certified building? “Oh, great,” Gehry answered in a high, mock-excited voice, as the audience laughed. Then, back in his regular voice, he dismissed environmental concerns as largely political concerns. “A lot of LEEDs are given for bogus stuff. A lot of the things they do really don’t save energy.”

He also said the expense of building to LEED standards often outweighs the benefits. On smaller projects, he said, “the costs of incorporating those kind of things don’t pay back in your lifetime.”

He seemed eager to resume another fight when the conversation turned to Millennium Park, whose new neighbors include the Art Institute of Chicago’s Modern Wing, designed by Piano and opened last year largely to acclaim.

Gehry recalled daring Piano to relocate the addition so it would directly face Millennium Park and the Pritzker Pavilion. “Renzo, come get me, baby,” Gehry said he told him. Piano did move the annex, which is now linked by a pedestrian bridge to the park. So how do you think it turned out? Pritzker asked.

Gehry replied that from inside the Modern Wing galleries, visitors can’t help but see the stainless-steel ribbons that adorn his pavilion. “He’s gotten better,” he faint-praised Piano, again to laughter. “You know the sibling rivalry between architects. We love each other, but we’re insanely competitive. Even at 81, I still do it. I can’t help myself.”

He suggested that something bold, like his Bilbao museum, would have been a better. But he said right after that building opened, the world’s top museum directors got together in London and, according to a friend who was there, voted never to commission another like it. “I think museum curators and directors like the predictable, so it’s all easy,” Gehry said. “A little bit of laziness, maybe.”

Pritzker recalled being a family vacation with Gehry in India and watched him sketch plans for a new building. Pritzker said the drawings looked like “scribbling.” Gehry said there’s more to building design than that, though he confessed: “I’ve always wanted to figure out to just do the sketch, get paid, and get out of there.”

He said his first step is to build a site model of roughly 10 blocks around the site, to see how his new building night fit in. Then he does a bigger-scale model of two or three blocks. He also walks around the area to understand the community. “It’s a pretty well-informed mind that starts to sketch,” he said. “I maybe do 20 or 30 of these drawings that look like scribbles. But when the buildings are finished and you look at the drawings, a lot of them look like the buildings.”

Gehry said he’s kept these sketches over his career and now has a file cabinet with perhaps 4,000 drawings. I’m sure even one of those stick-in-the-mud museum curators would love to put them on display.

Chicago Mayor's Innovation Answers: Better Schools, Fewer Wars

You may think you know Chicago Mayor Richard Daley pretty well after reading his recent profile in the New Yorker by Evan Osnos, a former colleague at the Chicago Tribune. But even after more than 20 years in office—and even longer in the media—Daley can still surprise, as I found out during a private lunch with him. The lunch capped the latest Chicago Innovation Awards and provided the winners, profiled here on businessweek.com last fall, a chance to tell their stories individually to the mayor. I was there as one of the judges.

Most of the talk was on innovation, naturally. But as we sat at a large rectangular table in an anteroom in Daley's City Hall office for more than an hour, Daley leaned back in his chair to launch into monologues against the wars in Iraq and Afghanistan and the failure of public schools—Chicago's included—to adequately train kids today in technology, math, and science. Among the education fixes Daley said he's contemplating: a fifth year of high school and elite math and science academies for Chicago's brainiest students. He also praised for-profit schools.

Daley had surprised me just the day before the March 26 luncheon. I had seen him at an event at the CME Group, where he met the media to talk up the jobs and technology that the futures-trading giant has created. In the middle of a standard pro-business speech, Daley seemed to have a Tea Party moment. He scolded government for raising taxes and boosting its payroll, saying such moves put too much burden on the private sector and probably don't really help much anyway. Later, I asked him whether his remarks were aimed at President Barack Obama. No, he answered. But he added that the federal stimulus measures had succeeded only in creating jobs in Washington and not in the rest of the nation, where people are still hurting.

At the lunch, Daley seemed most interested in a couple of inventions by firefighters. One helps crews battle high-rise fires by enabling them to attach a pipe to the building's exterior to pump in water from the floor below. The second is essentially a giant shop-vac that quickly sucks away debris to help rescue victims of cave-ins. But he was also intrigued by dot-com startups such as Everyblock.com, Groupon, and Visible Vote. What more could the city do, he asked, to promote more innovation and entrepreneurship? The winners suggested city sponsorship of tech and scientific conferences. Daley, in turn, pushed education as a way to supply employers with the talent they need.

Too many students are graduating high school knowing too little about technology, math, and science, Daley said. Even bright kids come out with too few skills because they get held behind by the rest of the class, he said. Chicago, he said, should have career-tracked schools where nerds wouldn't be ostracized. Daley also related anecdotes about students who scam the system by obtaining Pell Grants to go to community college but then take just one class year after year, spending the rest of their stipends on whatever. (For-profit schools aren't scam-free, as this report in Bloomberg BusinessWeek showed.)

Endless wars are undermining America's competitiveness, too, he said. The reason the country doesn't have enough money for better schools or job retaining, he went on, is that it is spending hundreds of billions a year on war. This isn't what the U.S. should stand for, he added. He also wondered where the public outrage is. Back when his father was Chicago's mayor, he recalled, thousands of people would routinely take to the streets to protest the Vietnam War. Nowadays, he said, there are no demonstrations—people shrug off war and say if enlistees want to go off and risk their lives, well, that's their choice.

He also said he could never talk like that in Washington, or he'd be branded as being politically incorrect.

As we stood in line to help ourselves to the food, I asked Daley what he thought of the New Yorker profile. He said he thought it was fair and that Osnos didn't seem to have it out for him like the local media. Way to go, Evan.

BusinessWeek NEXT blog

Everything prior to this post is extracted from BusinessWeek's NEXT blog.

Debate: Who's the Most Innovative Company of 2010?

Posted by: Michael Arndt on March 08, 2010

We’re a month away from publishing our Most Innovative Companies ranking for 2010, dear readers. Let’s see if your opinion matches those in our survey of top-level execs around the globe. Who do you think will top this year’s list? And who do you think actually deserves to be No. 1? Also, name a newcomer that has earned a slot in the Top 25.

To refresh your memory, here’s 2009’s list. I’ve put an asterisk after companies that were honored in our first ranking, in 2005. The 2010 ranking comes out on April 8.

1. Apple*
2. Google*
3. Toyota Motor*
4. Microsoft*
5. Nintendo
6. IBM*
7. Hewlett-Packard
8. Research in Motion*
9. Nokia*
10. Wal-Mart Stores*
11. Amazon.com*
12. Procter & Gamble*
13. Tata
14. Sony*
15. Reliance Industries
16. Samsung Electronics*
17. General Electric*
18. Volkswagen
19. McDonald’s
20. BMW*
21. Walt Disney
22. Honda Motors
23. AT&T
24. Coca-Cola
25. Vodafone

U.S. Loses Innovation Crown to ... Iceland

Posted by: Michael Arndt on March 03, 2010

Once upon a time—actually it was just last year—the U.S. was the world innovation champion, according to an annual report by INSEAD and the Confederation of Indian Industry. In this year’s study, the nation slumps to 11th place. Perhaps even more surprising is the new No. 1: Iceland.

Soumitra Dutta, an INSEAD professor of business and technology, who oversaw the survey, theorizes that the rankings show that, as in so much else, size matters. But in this case it’s the smaller the better.

He tells me that having easy access to a big marketplace still makes it easier for innovators to profit from their inventions. Would the iPod or the iPhone have been such big hits if Apple had been based in, say, Iceland? But the Internet is turning the entire world into one big market, to which everyone everywhere has access, he says. Also, it appears that smaller, homogeneous countries can unite to support policies, institutions, and infrastructure that promote innovation—in the developed world, at least.

Size certainly makes a difference in the 2010 Global Innovation Index report. The most-populous land in the Top 10 is the Netherlands, with 16.4 million people. It finishes in eighth place. Several of the biggest nations in the developed world cluster just below the U.S. Japan is 13, with Britain at 14, and Germany at 16. Of the so-called BRIC giants in emerging markets, China comes out best, at 43. Trailing are India (56), Russia (64), and Brazil (68).

This year’s report, financed by Canon India and released on March 3, evaluates 132 countries. Researchers used data from a number of sources, including the World Economic Forum, the World Bank, and the UN, to gauge innovation inputs—things such as education and business climate—as well as outputs to quantify scientific and creative advances.

The U.S. drops out of the Top 10 because it isn’t sufficiently providing many of the inputs or what the study calls “pillars of innovation.” It ranks 22 in political environment and 21 in regulatory environment. It ranks 22 in K-12 education, 22 in technology infrastructure, and 24 in exports and employment. “The U.S. is unable to create a coherent public agenda,” Dutta tells me on the phone from India.

So where does the U.S. score best? In market and business sophistication, which includes access to capital and openness to foreign competition and where it rises to second and third.

Iceland, by comparison, falls below the U.S. in market and business sophistication—no surprise, says the report, given the complete collapse of Iceland’s banking industry. But it outshines the U.S. in education and infrastructure. Iceland comes in fourth overall, for instance, in per capita mobile phone subscribers. Its general infrastructure is the world’s best.

Here’s the Top 10, with 2009’s rankings in parentheses:

1. Iceland (20)
2. Sweden (3)
3. Hong Kong (12)
4. Switzerland (7)
5. Denmark (8)
6. Finland (13)
7. Singapore (5)
8. Netherlands (10)
9. New Zealand (27)
10. Norway (14)

Advice—and a Pop Quiz—from Chef Charlie Trotter

Posted by: Michael Arndt on February 01, 2010

If celebrity chef Charlie Trotter loves anything as much as fine dining, it’s parlor games. I got to crash a class trip to his flagship restaurant in Chicago by a group of some 100 MBA students at Northwestern University’s Kellogg School of Management, plus their marketing instructor, Andrew Razeghi. For $100 a pop, they took over the entire restaurant for a four-course dinner (with wine pairings) and inspiration and advice from Chef Trotter, as his staff calls him.

As he went from room to room to dispense his philosophy and answer questions, he teased and taunted the students with quotes, offering a free dinner for two to anyone who could name the source. No one in my room won.

Now you can play along in the office or at home. I’m listing the quotes here—plus one ringer—with the answers at the bottom. In between, I’ll pass along a few of Trotter’s insights. (Sorry, no free dinner prizes.)

1.”Goodnight, ding, ding, ding, ding.”

2. “Do you wish to be great? Then begin by being.”

3. “Make voyages. Attempt them. There’s nothing else.”

4. “Say, was I in here last night and did I spend a $20 bill?”

5. “When the going gets weird, the weird turn pro.”

6. “I’m all about making money. It’s the greatest thing, because it means you get money to spend.”

Here’s Trotter’s quick course on entrepreneurship: Trotter opened his first restaurant 23 years ago. But he claimed he’s never worked a day in his life. Instead, he’s been doing only what he wants—and for himself. “Never work for anybody,” he told his guests. “Only work for you.” He also told them it’s OK, and even smart, to appropriate ideas from whomever you want. But you then must make them your own.

He also urged the MBA students to take a flier. “You’ve got to go do stuff. Be bold. Be ballsy. Too many people are chicken shit. Go do something for five years. You’re young. You can always play it safe later.” Their role model, he said, should be the title character in Werner Herzog’s movie Fitzcarraldo, who madly attempts to haul a riverboat over a mountain in Peru to exploit an inaccessible rubber grove. “It’s a metaphor for what all of you want to do.”

And the answers are:

1. Monty Python

2. St. Augustine

3. Tennessee Williams

4. W.C. Fields

5. Hunter S. Thompson

6. Charlie Trotter

Calatrava Dances onto a New Stage

Posted by: Michael Arndt on February 02, 2010

Last May, Santiago Calatrava unveiled his revised plans for a train station at the site of the World Trade Center in New York. It won’t be completed until 2012, if then. The $3.2 billion project is, nonetheless, still moving ahead, unlike his residential tower that was to be New York’s third-tallest building until it was canceled in 2008. One Calatrava project will be finished before then, however, and it’s for sure: He is designing five sets for the New York City Ballet’sspring season.

He will unveil his stage designs on April 29. The first will be for a new ballet choreographed by Benjamin Millepied (yes, that’s his real name) at the Lincoln Center of the Performing Arts on May 22.

Calatrava sees the work as an honor. He is only the second celebrity architect commissioned by the NYC Ballet to create stage sets. The first was Philip Johnson in 1981. It may also be a sign of the times for him and other “starchitects” who find they have a lot more idle hours these days.

Calatrava is far from jobless, of course. In addition to his transportation hub for a new World Trade Center, he was awarded a project last June to draw up a master plan for a new campus of the University of South Florida Polytechnic as well as a $45 million education building to anchor the site. He’s also working, in fits and starts, on the first of three bridges to span the Trinity River in Dallas.

But his setbacks have been as big as his brand. They include the now-canceled Chicago Spire, which at 2,000 feet would have been the tallest building in the Western Hemisphere and today is nothing more than a hole in the ground.

Calatrava doesn’t want to talk about his business, his spokeswomen tell me. Instead, he prefers to talk about the big picture, about how many great buildings were constructed in hard times. He says we could be in a similar spot today, if people are courageous. Meantime, if you want to check out his latest designs in the U.S., your best option is to go to the NYC Ballet.

On Boeing, Innovation, Competition, and Job Cuts

Posted by: Michael Arndt on February 19, 2010

What’s that old saying, actions speak louder than words? Boeing Chairman and CEO James McNerney stepped onto the soapbox on Feb. 19 to decry the quality of U.S. education, warning that the nation is producing too few STEM graduates—science, technology, engineering, and math—to compete against China, India, and “places in the Middle East.” Borrowing a term, he added in a speech in Chicago to alumni of Northwestern University’s Kellogg School of Management that the U.S. faces an “innovation deficit.”

After McNerney finished his remarks, in which he also challenged the Obama Administration to grant investment tax breaks and push harder for more free trade pacts, I got an email news alert that Boeing had sent layoff notices to another 1,000 employees. And guess what sorts of workers the company is firing? Four out of five are STEM workers in the aircraft maker’s engineering, operations, and technology unit. They’re the latest in a series of layoffs that will exceed 10,000, according to the company.

A Boeing spokesman confirmed the news report. He also told me that me that the new cuts come primarily in IT support. But he said that while these workers are no longer needed, Boeing is continuing to hire STEM-skilled applicants in R&D, and in the U.S.

In his speech, McNerney said: “We face a global skill shortage. The problem is growing acute in the U.S. We face a skill shortage, not a labor shortage.” There may be 1,000 Boeing employees who could come up with a way to solve that problem.

Is Drug R&D in Jeopardy?

Posted by: Michael Arndt on January 06, 2010

The U.S. drug industry, historically one of the most lavish spenders on research and development, ended 2009 with plans to eliminate a record 69,100 jobs. The toll is up 60% from 43,000 in 2008 and more than quadruple the 15,600 in 2004, according to outplacement outfit and layoff tracker Challenger, Gray & Christmas.

Understandably, plenty of scientists are going through the five stages of loss (or soon will be). But the cuts could help one group —outside labs.

Following its $68 billion acquisition of Wyeth, for example, Pfizer is closing 6 of the 20 R&D centers the two companies operated. Pfizer won’t disclose how many research employees will be axed, but analysts say the layoffs could essentially wipe out the bulk of Wyeth’s 6,000-person scientific staff, leaving Pfizer with the 10,000-member lab crew it had before the takeover.

Among other U.S. drugmakers dropping thousands from their payrolls: Johnson & Johnson, Merck, Eli Lilly.

The retrenchment isn’t limited to American companies. GlaxoSmithKline and Astra Zeneca, both headquarterd in London, reduced research staffs in 2009, as did Paris-based Sanofi-aventis.

The layoffs might not slow drug introductions, however, says Kenneth Kaitin, director of Tufts University’s Center for the Study of Drug Development. Increasingly, pharmaceutical companies are outsourcing R&D to universities and bioscience startups, which may have more expertise and work for less money. The recent job cuts will likely hasten more linkups to keep pipelines from running dry, he tells me.

And the World's 2009 Patent Winners Are...

Posted by: Michael Arndt on January 10, 2010

Who are the patent champs of 2009? Samsung and Toyota, of course. But would you have guessed Mondobiotech, a Swiss company that specializes in fermentation?

Thomson Reuters just forwarded to me data on patents awarded by 41 government authorities around the world in 2009, broken down into 12 key industries. The financial info company also listed top recipients in a number of industry subsectors, such as smart media under the overall computer heading.

I know, patent volume doesn’t equal innovation. But all these Excel spreadsheets do suggest where inventiveness is flourishing. By industry, creativity abounds most in computers and peripherals. This sector tallied 226,293 patents last year, or 29% of the total of all 12 groupings. Second is semiconductors with 95,106 patents, followed by telecommunications with 90,867, and automotive with 89,106, or roughly 12% each.

The subsector figures may be less significant, since they represent just a slice of the pie and sometimes a pretty skimpy one at that. But the lists are more fun, because here’s where Thomson Reuters names names.

In smart media, Samsung is tops. It’s also No. 1 in space vehicles and satellite technologies within aerospace, discrete devices within semiconductors, and mobile telephony within telecommunications. Toyota leads in both petroleum fuels and chemical engineering within petrochemicals, and alternative-powered vehicles within automotive.

My personal fave is under the industrial heading called food, tobacco, and fermentation, which I automatically assumed must mean beer and booze. Altogether, this industry received 35,375 in 2009, which puts it ahead of domestic appliances, aerospace, agribusiness, and cosmetics. And four of every five patents in this industry are in fermentation—bottoms up! Turns out it’s not really that kind of fermentation. It’s the kind used to cook up biomedicines, which explains why Mondobiotech of Statts, Switzerland wins.

To close, here’s a Top 10 list to ponder. It’s organics, which account for nearly two-thirds of new patents worldwide in the pharmaceutical industry.

1. National Institute of Biological Science, Beijing
2. Mondobiotech
3. Roche
4. University of California
5. Zhejiang University, China
6. National Institute of Advanced Industrial Science & Technology, Japan
7. Suzhou ANJ Biotech
8. Novartis
9. Abbott Laboratories
10. Kao

Monsanto v. Food, Inc. over How to Feed the World

Posted by: Michael Arndt on January 11, 2010

Anyone who’s seen the documentary Food Inc. knows that Monsanto comes across as a thug. Its bioengineered soybeans, designed to be unaffected by Monsanto weedkiller Roundup, command 93% of the U.S. crop, yet there’s Monsanto in the 2008 movie, heartlessly hauling farmers into court to jack up its market share even further. Monsanto execs declined to comment then. In retrospect, CEO Hugh Grant now says he should have. He might have blunted the film’s impact if he had.

Grant has a different take on Monsanto’s role in agriculture, of course. From his point of view, the company is working on the side of angels, helping to create commodity crops to feed today’s population and the 2 billion more people who might occupy the planet by 2030. He is proud that Monsanto scientists were among the first to have a patented genetically modified plant on the market—Roundup Ready soybeans were introduced in 1996—and he is excited about new efforts to bioengineer wheat and vegetables, too, as well as the next generation of super beans and corn.

I got a chance to hear Grant’s perspective when he swung through Bloomberg’s office in Chicago the other day. (My colleagues at Bloomberg News posted this story on Monsanto’s patent strategy, and its legal fight with sometime partner/sometime rival DuPont.) Grant, 51, a big man with a Scottish accent and a shaved head, was joined by Robert Fraley, Monsanto’s chief technology officer, 56, a former Illinois farm boy who coincidentally wears the same haircut.

Monsanto’s goal within the next 20 years is to create plants that will produce twice today’s harvest. Fraley notes that when he went off to college in 1970, his family farm produced 75 bushels of corn from each acre. Today that average in the U.S. has more than doubled to 160 bushels an acre, and he predicts Monsanto scientists will come up with plants that will yield 300 bushels an acre. Moreover, farmers would use a third less nitrogen fertilizer than they add today.

“This isn’t a Jetson’s scenario,” Grant says.

Monsanto’s scientists employ two methods to devise more productive plants. One is traditional cross-breeding, though Monsanto has computerized much of the process so researchers don’t have to wait for crops to mature to know which combination will boost photosynthesis, say, or make a plant resistant to drought. A quick analysis of each plant’s DNA can tell them instead. The other method is bioengineering, or inserting new genes into a plant. They employ each technique roughly half the time.

One such genetic modification that excites Grant is a soybean that can produce Omega 3 fatty acids which are believed to reduce the risk of heart disease and have a number of other health benefits. For now, Omega 3 is found only in oily fish. This new and improved soybean also would be cleansed of trans fats and other saturated fats and become essentially as healthful as olive oil. Monsanto plans to have this patent-protected seed on the market in two years.

Further out: drought-resistant wheat and—cue the applause—winter tomatoes that taste like summer tomatoes.

Most of this research assumes, of course, that consumers and governments will OK more genetically modified organisms. Grant thinks that they will. Food scarcity has re-emerged as an issue, particularly in Asia and Africa. Brazil, Argentina, Mexico, India, and China have all opened the door to bioengineered crops or research in the 18 months, he notes. Even Europe might be becoming more accommodating, he adds. “Biotech isn’t a panacea,” he says. “But biotech has a role to play. We need more yields.”

This isn’t the story that appears in Food Inc., which is why Grant says he erred by not cooperating with the movie’s makers.

Innovators of the Decade

Posted by: Michael Arndt on January 14, 2010

Who are the most innovative companies of the 2000s? Scott Anthony, managing director ofInnosight Ventures, posed that question on his Harvard Business Review blog. (Actually, he asked for “the disruptors of the decade.”) He published his results today here, after receiving more than 3,000 nominations. Scott separated the top vote-getters into three categories—established high-tech companies, established non-tech companies, and emerging companies circa 2000.

The winners, I have to point out, are all in the Top 10 of Bloomberg BusinessWeek’s Most Innovative Companies of 2009, while many of the runners-up make our Top 25. Here are the disruptors of the decade:

High-tech:
Winner: Apple
Runner-up: Cisco Systems
Other finalists: Hewlett Packard, IBM, Microsoft, and Dell

Established non high-technology companies
Winner: Wal-Mart Stores
Runner-up: Verizon
Other finalists: Dow Corning, General Electric, Goldman Sachs, Ford Motor

Emerging companies
Winner: Google
Runner up: Amazon
Other finalists: eBay, Research in Motion, Facebook, Netflix

Anyone want to call for a recount?

It's Back: Innovation Spending Is Rising

Posted by: Michael Arndt on January 28, 2010

As founder and managing director of innovation consultancy Strategos, Peter Skarzynski meets with a lot of businesses. A year ago, when he made client calls, corporations were mostly talking about cost-cutting. Today, he says, they’re more interested in growth again, and that means an increase in spending.

I caught up with Skarzynski at his office in Chicago. Also there: Doug Schaedler, chief executive of UTEK, a patent-licensing outfit in Tampa that acquired Strategos in 2008. (For a peek at one of UTEK’s own innovative investments, check out PharmaLicensing.com.)

Skarzynski says the shift back to growth mode is occurring almost throughout the economy. There is one exception: banking. He says the turn has been sharpest in commodity industries, such as packaging and chemicals. As the Great Recession deepened, these low-margin sectors were all about layoffs. Now they’re concluding that they’ve cut about as much as they can, and if they want to boost profits, it’ll have to come from boosting sales. That means they’ll have to have new stuff to sell, which in turn means bigger investments in R&D.

He doesn’t mean that layoffs are a thing of the past. Just this week, for instance, Wal-Mart said its Sam’s Club was cutting 11,000 employees, as it outsourced in-store product demonstrations to others. But Skarzynski argues that the reasons behind most job cuts will be different. They’ll stem from changes in business models or from mergers rather than from simply needing to save money to survive.

Of course, Skarzynski is just one person drawing conclusions from what he sees in his own sphere. Do you see something different?

Open Innovation's Secret: It Takes a Crisis

Posted by: Michael Arndt on December 03, 2009

As I was chairing the first day of the Open Innovation Summit today, I was struck by something that many speakers acknowledged: Their companies converted to open innovation—relying on outsiders for their next products or services—only after falling into a crisis. Moreover, the panic struck most around the time of the previous recession in 2001, which suggests that we should start seeing many more open-innovation practitioners soon.

Among those that found religion a decade ago are Johnson & Johnson, Procter & Gamble, and Whirlpool. Others which came to open innovation more recently after moments of doubt are Rockwell Collins and the consumer-products unit of GlaxoSmithkline. As Cheryl Perkins, former chief innovation officer at Kimberly-Clark and now president of her own consultancy, Innovationedge, told us in her presentation: “Often open innovation starts with a burning platform.”

I’ll get into a few observations and quips from presenters at the summit in a bit, after I return to this theme of crisis-triggered conversions. But first here’s a quick description of this gathering: The two-day conference in Orlando is organized by World Research Group and consists of speeches (and requisite PowerPoint slides) from dozens of big name companies and innovation boutiques. Here’s what bloggers tweeted from the talks. Now back to the main story.

P&G turned to open innovation directly because of a crisis in 2000, said Pramod Reddy, associate director of global business development. The consumer-products giant missed its financial forecasts for two quarters in a row, something unheard of at the steady-Eddy stalwart. The shortfalls were a symptom of something larger, of course. P&G was no longer able to generate enough blockbuster products on its own. Today, P&G is widely cited as the role model for open innovation.

Whirlpool came around that same year after top management realized that big-ticket appliances had become a commodity. As a result, prices and margins were in a permanent decline, steepened by the recession. Unlike P&G, it didn't respond initially by opening its portal to product suggestions from outsiders. But it did enlist proposals from all employees. Further, it trained some 3,000 in the innovation process and began collaborating with suppliers. Now, in Phase II, Whirlpool is inviting consumers to help, said Moises Norena, global innovation director.

J&J had been into partnerships since at least 1978, when it founded COSAT, or its corporate office of science & technology. But its main mission, said Robert Zivin, the office's senior director, had been to sprinkle money to research scientists in academia. It was only around 2000 that J&J actually began to "harvest innovation" from these outsiders, as Zivin put it.

The payoff from open innovation can be huge. GSK's consumer-products unit was getting about 20% of revenue from goods invented with the aid of external partners three years ago. That's when the bottom fell out for one of its biggest U.S. brands, Aquafresh toothpaste, said Helene Rutledge, the unit's director of open innovation. "A bad economy is good for innovation," she said. Hard times force companies to cut back—GSK had ordered layoffs at the struggling unit—and that in turn can push them to link up with partners to share the burden.

GSK's goal was to boost its share of externally developed products to 33% in three years. Instead, it hit 50% even sooner than that. Among the open-innovation products is a new form of Aquafresh that turns to foam in your mouth. Rutledge said the idea came from someone in the oral-care business who had background in gel foams like Gillette's Edge, but it never would have hit the market if not for technology that came from four outside partners.

Here are some smatterings from the rest of the Open Innovation Summit:

* Phil McKinney, vice-president and chief technology officer for Hewlett-Packard's personal systems group, said: "Knowledge is becoming a commodity." Further, measuring innovation by comparing R&D spending to total revenue is BS. A better gauge is gross margin.

* R. Lemuel Lasher, president of global business solutions at Computer Sciences Corp., said: "Good management is what kills innovation." Lasher also scolded the tech world for calling customers "users." "They are not the same people that shoot heroin into their arms," he said.

* Russ Conser, manager of Shell's Gamechanger unit: Stupid ideas are often the real winners.

* P&G's Reddy said the company just launched Chinese and Japanese versions of its open-innovation portal, and will translate it into Spanish and Portuguese within the next six months to better reach would-be helpers in Latin America.

* And finally, this from Zivin of J&J: "Early-on innovation is parasitic." Most ideas in business end up as failures, which means they only suck away resources and could kill the host if management isn't careful.