Clusterstuck: Are Industry Clusters Really the Holy Grail?

Image from Stinque.com

Last week's report by the Brookings Institution and Battelle Technologies on the clean economy was greeted with much fanfare.  I even wrote about how it ranked the Greater Philadelphia region (where I live) number 5 in the nation.

One of the key success factors the Brookings-Battelle study points to is the creation of industry hubs or clusters, such as the Greater Philadelphia Innovation Cluster for Energy Efficient Buildings. 

I was pleased to see the reference having been a fan and supporter of the GPIC effort.  (As founder of the business network, Cleantech Alliance Mid-Atlantic, I wrote a letter of support to the DOE for Philadelphia's initial application.)

But then I came across a Washington Post opinion piece by Vivek Wadhwa titled "Industry Clusters: The Modern-Day Snake Oil."   My skeptic bone, which is located just to the right of the funny bone, in case you are wondering, started to tingle.

Wadhwa points to a recent study conducted by Rune Dahl Fitjar, of Norway’s Centre for Innovation Research at the International Research Institute of Stavanger, and Andres Rodriguez-Pose of the London School of Economics and Political Science, which found that regional and national clusters are, in fact, "irrelevant for innovation."

Rather, Wadhwa relates, "the key drivers of innovation in Norway are the communication channels that local entrepreneurs maintain to the outside world and their open-mindedness toward foreign cultures, change and new ideas.  Companies that are 'regionally minded' -- that maintain ties only with players within the same cluster -- are four times less likely to innovate than the globally connected."
 
What do the researchers say is the determining factor for success?  People.

Not just any people: "knowledgeable people who have the motivation and ability to start ventures," writes Wadhwa.  Knowledgeable, risk-taking people who are connected by extensive information-sharing networks.

"The same dynamics at play in Norway give Silicon Valley its advantage," according to Wadhwa.  "It is a giant, globally connected network in which sharing information and risk-taking are the norm."

Rather than patting ourselves on our backs for developing clusters of innovation, we need to focus on people.  And we need to continuously ask the following questions:

• Do we have the right people and are we connecting them in ways that will help them start companies?  
• Are we connecting them with the right mentors and networks and access to financing?   
• Are we getting government out of the way of their success?  
• Are we making the pathways to commercialization clear and efficient enough to encourage repaid growth?

If not, we may be creating nothing more than a government-sponsored enduring clusterf*ck that will lead to nothing more than an academic exercise and more fodder for reports.

LEED, BIM and Smart in the Land of Green Opportunity

I have a guest post today on constructionlawva.com  It starts out like this:

“LEED buildings are great, until the tenant moves in,” the head of a large, international construction company once said to me.  “Once the tenant moves in, the environmental sustainability of the building goes out the window.”The Green Skeptic on constructionlawva.com, Thoughts on the construction landscape from Christopher G. Hill, lawyer, LEED AP and member of the Virginia Legal Elite in Construction Law, Feb 2010

To read the whole article, go here: http://bit.ly/bADZ7R

 

 

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BuildGreen Philly: Prosperity with Sustainability

"No matter how well we develop renewable energy sources, we will not be able to meet global demand," Pennsylvania Governor Ed Rendell said to the crowd gathered at BuildGreen09 in Philadelphia in his opening keynote. "We also need to reduce consumption."

Rendell is a governor that gets it. He understands the economic realities that will drive energy consumption in the future and about a realistic response that includes all sources (including coal and nuclear), as long as can be made clean and with reduced risk. (For coal, he encourages development of carbon capture and storage technologies, to make it cleaner.)

While Rendell gets the economic side, he also understands the limits and boundaries as well. It's not just about finite resources, according to the Governor, but about demand, which will increase as the population increases globally and as economies in developing countries improve and people prosper.

Prosperity with sustainability was the tenor of the two day conference at Philadelphia's Sheraton Center City Hotel (a decidedly unsustainable venue, I might add).

As Dr. Dayna Baumeister, co-founder of the Biomimicry Guild, noted in her fantastic presentation over lunch on Thursday, it is "about learning to live and build on a dynamic, non-equilibrium, water-based, boundaried world." And not only to survive, but to thrive.

Others echoed these sentiments and highlighted the economic opportunity that presents itself right now and that is only at the beginning.

Dennis Yablonsky of the Allegheny Conference on Community Development and former secretary of the PA Department of Community and Economic Development, cited a recent study indicating there is a $30-40B market in green building, which potentially grows to $200B if you add retrofitting of existing infrastructure.

Companies all across the state are being created while older companies are reinventing themselves around the green economy, Yablonsky noted.

There was evidence of this in the panel discussions, especially around product development and research. There you could find companies such as Armstrong, which started as a cork-cutting shop in 1860, as well as new initiatives such as the team of professors from Philadelphia University who are developing construction materials from alkali-activated fly ash, a waste product of the coal industry.

Green jobs were also on the agenda at BuildGreen, with a focus on economic empowerment and the shortage of skilled and unskilled labor the new green economy requires. Education and training are needed, as well as a clear definition of what qualifies as a green job.

Awareness of the existing opportunities is also needed, however, as was made apparent by Mr. Yablonsky's revelation that there are currently 30,000 "green jobs" posted on an online job bank for Southwestern PA. The jobs range from entry level positions to $100K+ executive roles; that's a lot of job openings in an economy that needs employment. Why are these positions not being filled?

Philadelphia Mayor Michael Nutter also addressed the conference, repeating his pledge to make Philadelphia the Greenest City in America. His plan includes goals to reduce city energy consumption by 30 percent and energy costs by 10 percent, representing savings of over $3 million in a city budget that needs every extra penny.

Philadelphia is not alone in trying to glean benefits from the new green economy. Micah Kotch, from the New York City Accelerator for a Clean & Renewable Economy, an incubator initiative of NYU-Poly aimed at stimulating invention, innovation, and entrepreneurship in New York.

"Our goal is to grow an ecosystem of entrepreneurs, companies and local businesses around clean tech and renewable innovations," said Mr. Kotch.

One of their companies is Rentricity, which captures energy from water pressure reduction -- common to any municipal water distribution system -- to spin turbines and create clean electricity.

BuildGreen was convened by the Pennsylvania Green Growth Partnership and hosted by the Delaware Valley Green Building Council, which plans to host the international GreenBuild conference and expo in 2012.

My three takeaways from BuildGreen09:

1.) The transformation of the building sector to adopting green practices is both a great step forward and a great opportunity -- and other sectors, such as financial services, must now follow.
2.) The convergence of talent, resources, and infrastructure in the region is well-positioned to own a significant piece of the new green economy pie, but it still needs to foster and build the financing, commercialization, and innovation opportunities to seize the day.
3.) Biomimicry -- the conscious emulation of nature's design solutions -- is an increasing opportunity for innovation that can lead to sustainable products, companies, and services -- and a better way of life. If only we can "quiet our cleverness," as Dr. Baumeister put it.

BuildGreen 2009 Conference Next Month in Philly

I learned this week that Philadelphia Mayor Michael Nutter will attend the 2009 BuildGreen Conference in his home town next month.

That's a coup for this conference that is the first conference in the region that will convene all green building stakeholders in the design/build, policy, manufacturing, and economic development/investment community.

Mayor Nutter has a lot on his mind right now with his budget woes, but he clearly sees the connection between green building and economic development and its importance to the region and his goal of making Philadelphia the "Greenest City in America" by 2015.

I'll be live blogging from the conference here on the green skeptic.


NOTE: Early Bird Registration is Monday, September 14th.

Where and when: October 14 - 15, 2009, Sheraton City Center Hotel, Philadelphia

For more information: buildgreenconference

e3bank: A new bank built for the green economy

You might think now is a terrible time to start a bank. The banking industry has gone from tailspin to government-owned in the past 8 months.

The collapse of one major financial institution after another -- either through mergers or failures -- has made the very profession seem like, well, something to avoid like swine flu.

But for the founders and principals at a new start-up bank that received its charter this past March, now is the perfect time to start a bank. If, that is, you're starting a bank based on a different value system.

Enter Sandy Wiggins and Frank Baldassarre. Of the two, Frank is the only one who resembles a banker, and that's because he is, and has had an extensive career as a banking professional with such regional institutions as Fox Chase Bank of Exton, PA, and First Financial of Downingtown. Sandy was the charismatic chairman of the US Green Building Council and has three decades of experience in the building industry.

Together, they are launching e3bank, set to open for business this fall and currently embarking on a $30 million private offering to shareholders willing to put up a minimum of $5,000. Their goal is to have a large number of shareholders, most of whom have made a modest investment.

"We don't want to have a single large investor who could call the shots and control too much," Wiggins told me in a recent interview. "We want to be inclusive, so we've made the minimum investment low enough to democratize ownership in e3bank."

So they are seeking a steady stream of small, $5,000-10,000 investors through what is, in part, a social networking campaign, trying to reach more people who understand and believe in the idea of a bank with a triple bottom line.

In fact, according to Wiggins that triple bottom line (enterprise, environment, and social equity) is the single greatest distinguishing factor for e3bank. They will couple that with world-class online banking service that "will be unlike any online banking experience on offer in the US," Wiggins says. "Think about it as Web 2.0 for the banking industry."

E3bank will have a limited building-based footprint. "It won't be your traditional branch bank, more like a resource center," reports Wiggins. "A place for public discourse and information about sustainability. A cross between a comfy living room or local cafe and an Apple store."

They will be few in number and location because, as Wiggins says, "The greenest building you can build is the one you don't build."

E3bank won't just be about atmosphere, Wiggins relates. The bank will offer a range of financial services designed to increase their customer's returns while reducing their customer's environmental footprint. They will also focus on what Wiggins calls "values-based financial incentives," such as interest rates to encourage sustainability choices and providing feedback on customer spending habits.

For instance, the bank will attempt to categorize expenses automatically online and recommend energy efficiency options for customers who have consistently high gas or electric bills.

Their "Green Assist" program is perhaps their most exciting innovation. Designed for residential and small business customers, e3bank will provide an energy audit, fund energy efficient and renewable energy projects, and automatically process all available subsidies, rebates, and tax incentives, as well as connect them with pre-screened contractors in their community.

One goal of the bank is to be a community bank, says Wiggins, "but a community bank of like-minded individuals rather than geography." They'll be coming together around the value system the bank espouses rather than proximity to some branch office.

It's an experiment worth watching. Can a bank tow the triple-bottom line? Other banks, such as Chicago's ShoreBank, San Francisco's New Resource Bank, and some community development corporations among them, have tried for a double bottom line approach. And only one, Triodus Bank in the Netherlands, has experimented with a third dimension, although ShoreBank is attempting to enter the green market as well.

E3bank has the potential to revolutionize the banking industry at a time when the banking industry is in dire need of an extreme makeover.

Ultimately, the goal of e3bank is to support the new green economy and a more sustainable economy and, as Wiggins puts it, his will be the bank for "everyone who cares about a sustainable world."

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Green.Konnect.me Launches B2B Platform for Green Building Trade

"A few years ago I was involved in the design of a green building at Drexel University called the Drexel Smart House," says Jameson Detweiler, CEO of Konnect.me. "Designing the house proved to be very frustrating at times. Finding information about previous buildings and building products, related to sustainability, was a time consuming and frustrating process."

Detweiler's experience was not an isolated case. For anyone embarking on a green building or renovation project, access to quality information is key. Understanding the various certifications and product claims and even finding installers, suppliers, or others who have undertaken similar projects can be an unnerving experience.

"There were so many different types of product certifications, manufacturers all made different claims, and this information was distributed across thousands of sources," Detweiler relates. "To say the least, it was very confusing. This is why we decided to start Green.Konnect.me. We needed a place where all of this information was available, a place for the green building community to both visit and participate in on a regular basis."

Detweiler's Philadelphia-based startup dedicated to reinventing the B2B portal, Konnect.me, announced today it is launching Green.Konnect.me, a community built directory for professionals in the green building industry.

The goal of Green.Konnect.me is to provide accurate and comprehensive information regarding "Products, Projects, and People" in the green building industry.

Detweiler believes "that the greatest advances in sustainability can only be achieved by the transparent sharing of knowledge and ideas."

Prior to founding Konnect.me, Jameson worked as the CEO of Summalux, LLC, an LED Lighting Research Firm, which won first prize in the Laurence A. Baiada Center for Entrepreneurship's 2008 Incubator Competition at Drexel's LeBow College of Business.

I've watched Detweiler and his partners over the past eight months or so as they have developed Green.Konnect.me as part of Konnect.me, which they founded in 2008 to "revolutionize B2B information access and delivery." It's an easy-to-use platform that helps address a critical problem for those interested in green building.

Very exciting to see it launched today.

For more information, check out green.konnect.me

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Energy Use in Buildings Can Be Cut by 60 Percent, WBCSD Study Says

The World Business Council for Sustainable Development (WBCSD) announced the results of a study that shows how energy use in buildings can be cut by 60 percent by 2050, but noted that it will require immediate action to transform the building sector.

The four-year, $15 million research project released its report today in Paris at the Alliance to Save Energy’s EE Global Forum and Exposition. Transforming the Market: Energy Efficiency in Buildings, as the report is known, uses new modeling techniques and provides a roadmap to transform the building sector.

"Energy efficiency is fast becoming one of the defining issues of our times, and buildings are that issue's 'elephant in the room'," said Björn Stigson, president of the WBCSD, in a press release. "Buildings use more energy than any other sector and as such are a major contributor to climate change."

According to the WBCSD, the "project took a bottom-up, market-driven approach to understanding the barriers to lower energy use, based on the most detailed view ever of the current state of energy demand in buildings. Energy use by building type was analyzed for millions of existing and new buildings and projected out to 2050, accounting for differences such as climate and building design."

Researchers used computer simulations to show the market response to various financial, technical, behavioral, and policy options, identifying the optimum mix to achieve transformation for each market studied, according to WBCSD.

The project's report makes six principle recommendations:

• Strengthen building codes and energy labeling for increased transparency.
• Use subsidies and price signals to create incentives for energy-efficient investments.
• Encourage integrated design approaches and innovations.
• Develop and use advanced technology to enable energy-saving behavior.
• Develop workforce capacity for energy saving.
• Mobilize for an energy-aware culture. (Whatever that means - GS)

The full report is available on the World Business Council for Sustainable Development website: EEB Report

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Shari Shapiro On Why Change Has Already Come to Washington

My friend Shari Shapiro, one of the smartest green people I know in the legal community, has an excellent new post up on GreenerBuildings.com (the post originally appeared on her own blog Green Building Law).

Here is the opening paragraph:

Long the city of high crime, poverty and neglect by the federal government which calls it home, Washington D.C. has passed some of the most progressive sustainability regulations in the country since 2006. For example in December 2006, Washington mandated, among other things, that private buildings 50,000 square feet or larger have to submit a checklist of green features by 2009, and meet LEED NC 2.2 standards by 2012. In addition to green building regulations, Washington has enacted comprehensive sustainability legislation, including a Clean and Affordable Energy Act, a Green Summer Jobs bill, a Climate Initiative and stormwater and water quality regulations.

And a link to the full article: Change Has Already Come

Shari also had a great critique of the Obama Stimulus Package earlier this week: Shortchanging the Environment.

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Is It Time to Green Financial Services?

"I'm hoping the financial services sector catches on to the green trend," Frank Baldassarre, president and CEO of e3bank, told the crowd at today's forum sponsored by the Pennsylvania Green Growth Partnership in Hershey.

Green building has caught on in a major way over the past decade. Now, 14 percent of US municipalities over 50,000 in population have programs promoting green development, according to Shari Shapiro, a lawyer with Obermayer, Rebmann Maxwell & Hippel in Philadelphia.

But the financing of those projects hasn't caught up with the building community.

"Until two years ago, I didn't know what LEED certification was," Baldassarre, a former senior vice president with Fox Chase Bank, who is launching one of the first green banks in the country. "It just wasn't something bankers were thinking about."

Baldassarre and others, such as Florida's First Green Bank, Shore Bank of Chicago, and New Resource Bank in San Francisco, are trying to change that.

"Bankers lack the knowledge to go green," says Baldasarre, who referred to "building as the bones and financial services as the circulatory system" of our economic body.

Perhaps the time is coming for the blood running through that circulatory system to turn from red to green.

My 3 Take-Aways:

1. The knowledge gap is a niche worth exploring;
2. There is another emerging niche associated with the real need for a diversity of green financial products and services; and
3. The tipping point is upon us.

-----

Addendum: Something Howard Lindzon (it's Howard's birthday tomorrow, so I'm giving him a shout-out) pointed me to today seems to support the idea of mining this niche. It comes from Roger Ehrenberg of InformationArbitrage.com:

"Investment Banking 2.0 will be the re-emergence of the boutique, the focused, nimble, high-touch firm that was the bedrock of capital formation in the early years of the stock market boom.

"Because these mega-firms being created at the urging of the Treasury are not sustainable. They'll live just long enough for investment banking losses to be absorbed by the commercial bank's larger capital base, after which the best talent will flee for greener pastures."

Greener pastures, indeed.

(Composed on BlackBerry; updated with links 9:29 PM)

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