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Ever since Google released its new browser, “Chrome” last week, it has been the subject of hot debate. People are arguing whether the world needs another browser, whether this new browser is any good, and whether or not this is really innovation. A very interesting post by Scott Anthony on his blog takes the position that Chrome shows signs of classic disruption: easier and faster to run web apps, open source, and free. Anthony makes the argument that Chrome is a disruptive threat not just to Microsoft’s now-dominant browser, Internet Explorer, but even to Microsoft’s other flaghsip products - Office and Windows.

This is much more serious statement than many realize. For some time a lot of people have been predicting that the web browser will supplant the traditional Operating System as the layer for which most applications will ultimately be designed. We now see that this vision has the very real potential of becoming reality. Companies such as Salesforce.com and many others have shown that industrial-strength applications can run in web browsers, and Google’s own applications which compete with Microsoft’s Office suite offer a tantalizing taste of what is to come.

But the browser itself has long been the limiting factor. Among the biggest problems with the current crop of browsers are their poor memory and process management. Sophisticated web apps can choke a browser, and the problems get worse when there are multiple windows and tabs open. Microsoft’s Internet Explorer which is used by 70% of the market has been particularly slow to evolve in this dimension and seems to have been spurred-on mostly by the competition - particularly Firefox. There is little doubt that IE wouldn’t have moved very far without the Firefox threat looming.

I think a lot of people have missed the point with Chrome. Google doesn’t really want to compete in the browser market. I believe that their intention is to move browser technology in the direction it wants to go - toward making browsers a more robust application platform. This is the reason that I would argue Chrome will ultimately turn out to be disruptive even if it never consolidates any substantial market share. Many have argued that Chrome’s new features will not be difficult for the market leaders such as IE and Firefox to adopt and that will obviate any demand for Chrome. I think that this is exactly what Google wants. They are lighting a fire under the IE development team. They may or may not want to be the new king of the browser hill - but they certainly want browsers to be capable of delivering the new generation of applications and services that they envision.

That’s why Chrome is not as disruptive of other browsers as it is of traditional software applications like Office and operating systems such as Windows and Macintosh OSX. When the browser becomes the platform of choice for application delivery, we will be able to get our software over the web, and the operating system I use (currently: Macintosh OSX by the way), will recede into the background. In fact, if I am getting my apps over the web, why should I pay a premium for a commercial OS at all when there are free alternatives that support a modern browser just fine. Chrome is disruptive without specifically needing to disrupt any particular product directly. This is because it is going to change the balance of power between traditional computing platforms and the web-based computing juggernaut on the horizon. I think Chrome will prove disruptive whether anyone uses it or not.

There were not one but two very interesting reports in the past 48 hours coming out of Scotland. The first was a particularly harsh critique of Scottish efforts to commercialize IP from its Universities. Robert Hannah, a partner in account firm Grant Thornton’s technology industry group, laid blame for poor performance on a lack of management expertise, particularly in raising investment. He called for improvements in management education, but didn’t stop there. He went so far as to suggest that Scotland should spend “serious money” to “buy in” management experts from the US “who have done it before.” Hannah’s comments came in response to a report from Targeting Innovation which advocated for more concentrated funding in fewer university spin-outs to improve their chances for success.

The second piece of innovation news was an announcement by Perth-based venture investors Braveheart of a 15-year commercialization agreement with Aberdeen University. The deal gives Braveheart first refusal rights to IP in certain areas, and appears to offer at least £5m over 5 years, with a dedicated fund thereafter that will include other investors. Braveheart also has similar deals with the University of Strathclyde and the University of Edinburgh. The stated objective is the fill the proverbial “funding gap” and accelerate Scotland’s success in IP commercialization. This kind of long-term partnership between investors and universities seems to be getting more popular.

I enjoyed Carl Weissman’s recent article on Xconomy (one of my favorite sites!) in which he talks about (among other things) how venture capital has lost it’s taste for investing in “risky” innovation. There is a lot of truth in what he says, “VCs are demanding that these technologies be ‘de-risked’ before they warrant venture investment, and of course they think this should be accomplished using other people’s money.” But, if it’s true - and I very much think it is - then it begs the question as to why. What has changed? Have VC’s collectively lost their nerve?

VCs are Too Big
One problem is that many of today’s funds have simply become too large to invest in innovation. Bets on disruptive ideas or radical new technologies that are unproven tend to be smaller. Remember that being “unproven” is the attribute that both risk and innovation share - by definition. But if you have a billion-dollar fund, it’s impractical to make investments averaging less than $10m each. The sheer number of investments in the portfolio would be overwhelming to try to manage.

Performance
However, there is a more important problem, and that has to do with returns. The fact is that many VC funds of recent vintage did not perform as hoped. Too many investments that were “disruptive”, “radical”, and “game-changing”, simply turned out to be “game-ending” instead. VC’s have largely responded by moving their investments down-stream to the growth phase. Many have commented, and I think it is true, that VC’s have become just another player in the Private Equity world. That means that they invest in growth not innovation.

“De-Risking” Innovation
But the amorphic nature of the word “innovation” never ceases to amaze me, and these PEs in VC clothing continue to wield it liberally in defense of their post-innovation investments. As Weissman insightfully notes, VCs continue to talk big about investing in “innovations” as long as they have been “de-risked”. This simply means that they want to take the “unproven” out of both innovation and risk. Of course, when you do that all that remains is growth. That’s not innovation and it obviously isn’t risk.

The Funding Gap is Real
The interesting thing is that all of this seems to prove that there is a funding gap after all, which Weissman is arguing doesn’t really exist. He says it is merely an “expectations gap”. Although that may be true, that gap exists in a very important place: the minds of the investors. If there is a gap in their expectations, then I would expect that to manifest itself in their investments - which is exactly what a “funding gap” is.

I think what has happened is that the established VCs have sort-of “grown up” with their investments. I look at it as like an elementary school that changes to being a high school and then a university as their students progress, rather than admitting a new crop of kindergarten-ers. Over time, VCs seem to have lost interest in the fresh new faces. Certainly they invest in new companies, but many of them aren’t as “new” as they may appear. They invest in people they know, people that they have invested in before, or people who have a “proven track record of success”. Those are all acceptable things to invest in, but investing in your friends it isn’t the same thing as investing in innovation.

What Is Next?
I think that this has created a situation that is rife for disruption. Investors willing to make smaller investments at earlier stages are likely discover that the higher returns associated with things that are “unproven” are still out there for the taking. In fact, Weissman may be proof of that. To bolster his argument that there is no funding gap, Weissman provides his own company as evidence that VCs still make early stage bets on innovation, while criticizing other VCs for not doing so. So which is it Carl? Have VC’s mostly moved away from risk and innovation, or are they mostly like you? You can’t have it both ways. My own experience is mixed. I have certainly interacted with a lot of VCs that aren’t bashful about their departure from the rough and tumble world of early-stage venturing. But, I have also met several new VCs over the past year that are talking about filling this gap as a core part of their investment strategy. I think that the funding gap is real (as is Weissman’s “expectations gap”), but that innovation is not dead - it’s just hungry.

I have just added the new Ideanomics Dashboard which is an interactive anlytical tool for exploring the relationships between the traditional economy and the idea-economy. Thanks to Google the whole thing animates and you can even sit back and watch the movie if you want. Please take a look and offer any suggestions you have and I will do everything that I can to make it even better by adding more countries and more indicators. I am particularly interested in ideas on what types of indicators we could find data for that speak to the emergent idea economy. Also, I am interested in hearing your thoughts on other “dashboards” that we could add that you would find interesting and useful. It is clearly a work in progress and I am busy readying new data to add as we speak, so come back often to see progress. Enjoy…

I am fascinated by the idea of “Dark Matter”, a substance which is invisible but is thought to constitute the vast majority of mass in the universe. It cannot be measured directly, but its presence can be inferred by the gravitational effects it exerts on everything around it. This strikes me as being a lot like innovation. Although it is now believed to be the most important driving force in economic growth, economists cannot measure it directly. It is observed primarily for how it appears to pull and push virtually everything else. Economists have devised a variety of ways to measure it indirectly which is one reason we spend so much effort analyzing patenting, R&D spending, and a lot of other things. This is why measurement is so important to progress in managing innovation. Until we can directly measure the most important economic aspects of innovation (such as gaining visibility into the markets for ideas, IP, and innovation) it will simply remain “dark matter”. That’s why I say, if you can’t measure IP, you can’t manage IP.