It may be that TEDMED founder Richard Saul Wurman is the Brett Favre of emcees, or perhaps he’s like Al Pacino in Godfather III, who proclaims in exasperation, “Just when I thought I was out—they pull me back in!”

But after a five-year hiatus, TEDMED has returned this week (opening last night at San Diego’s Hotel del Coronado), and Wurman, who is both the TEDMED chairman emeritus and lead master of ceremonies, stepped back onstage for what must be a familiar role. He is the folksy glue that brings the sometimes-esoteric show back to Earth as leading thinkers in medicine, health care, and life sciences deliver 15- to 20-minute talks about their work and big ideas.

So, for example, after J. Craig Venter, a leader in genomic sequencing and synthetic biology, ended his presentation last night, Wurman took the stage and reassured the crowd by saying, “I’ve heard Craig speak a number of times. And I don’t understand it all…”

The four-day TEDMED symposium, which costs $4,000 per person to attend (and is sold out), follows a format similar to the first conference in Technology, Entertainment, and Design (TED) that Wurman established in 1984. Chris Anderson acquired rights to that TED business in 2001 and Boston entrepreneur (and Xconomist) Marc Hodosh got rights earlier this year to TEDMED and its focus on health care. Wurman told us he had agreed to help Hodosh out this year, and between sessions he often helped the audience by identifying themes they would likely see emerging in presentations to come.

“Maps are also patterns, and patterns are the threads that run through this conference,” Wurman said. “They are the constructive tissue that holds ideas together.” Those emerging ideas include:

—J. Craig Venter, the co-founder and CEO of San Diego-based Synthetic Genomics, said about 21 million genes have been discovered since the first genome was sequenced in 1995—“and over 20 million have been taken from the deck of my sailboat.” (Venter’s sailboat, the Sorcerer II, embarked from San Diego in March on an expedition to collect and sequence marine organisms.) Venter also outlined synthetic biology research that aims to transplant a chromosome from one cell into another cell—and turn it into a different species. Venter says, “I think it’s possible we’ll have the first species powered by a synthetic chromosome by the end of this year, although that’s something I’ve been saying now for two years.”

—Anthony Atala, a urologist and director of the Wake Forest Institute for Regenerative Medicine, showed how researchers are using “smart biomaterials” to patch damaged organs and grow new heart valves, blood vessels, liver, muscle, skin, ears, and even fingers. Still, Atala said, “90 percent of patients on transplantation waiting lists are waiting for kidneys.” He also noted that the organs with lots of blood vessels—the heart, liver, and kidney—are the hardest to grow.

—Bill Davenhall, who leads the health and human services marketing team at ESRI, the Redlands, CA, company that specializes in geographic information systems, argued for the creation of new programs and training in “geo-medicine”—and for ensuring that GIS data can be included in electronic health records. He demonstrated his point with a map that shows geographical areas in mid-Atlantic and Midwestern states where heart attacks occur far more frequently than other parts of the country. Davenhall, who said he suffered a heart attack in 2001, associates environmental factors in the places where he has lived with the higher incidence rate. He grew up with high levels of sulfur dioxide in Scranton, PA, before moving to Louisville, KY, with high levels of chloropene and benzene. He now lives east of Los Angeles in Redlands, CA, which has high levels of airborne particulates, carbon dioxide, and ozone. He told the audience, “Doctors never ask me about my place history. But if I wanted to have a heart attack, I’ve lived in the right places.”

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Qliance Medical Management, the Seattle-based company that doesn’t accept health insurance for primary care medical services, has raised $4 million in venture capital to expand its practice in Washington and to other states around the country.

The financing was led by Seattle-based Second Avenue Partners, and also included New Atlantic Ventures and Clear Fir Partners. Qliance, founded in 2006, has now raised a total of $7.5 million since it started.

We first profiled Qliance back in December. The company is pursuing a simple and disruptive idea to the U.S. healthcare system. It runs what it calls a “direct practice” in downtown Seattle, which freezes out health insurers and deals directly with patients. The patient hands over a credit card, and agrees to pay a $39 to $79 monthly membership fee to Qliance for unrestricted use of its primary care medical services. The model allows Qliance to avoid spending excessive time haggling with insurers, and lets the doctors see fewer patients. That frees up the company’s physicians to spend 30 to 60 minutes with each patient instead of less than 15 minutes for their peers who accept insurance, CEO Norm Wu said in our original profile.

“We see the Qliance direct primary care model as an important transformational option to health care reform that is easily scalable for other communities across the U.S.,” said Nick Hanauer, managing partner of Second Avenue Partners, in a statement. “Their innovative health care model reduces costs dramatically for individuals and businesses while delivering exceptional care and access for patients.”

The Qliance model doesn’t cover all the specialized services that some patients …Next Page »

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Our Seattle compatriots have all arrived in Boston for XSITE. We wish we could say they brought the rain with them, but in fact, Boston has been far wetter than Seattle all month. The week’s life sciences news, however, isn’t quite the downpour you’ve all been dealing with outside.

—Wide-roaming correspondent Ryan McBride took in some sea air while attending the Convergence conference in Newport, RI. Policy wonks abounded, as the health care industry is nervously awaiting changes to federal patent standards, generic biotech drug regulation, and healthcare coverage. Ryan gathered insights on GlaxoSmithKline (NYSE: GSK)’s purchase of Cambridge, MA-based Sirtis last spring from Genzyme (NASDAQ: GENZ) CEO Henri Termeer’s account of a conversation he had with Sirtis CEO Christoph Westphal. For all this and more, check out his report.

—Ryan also profiled PubGet, a Cambridge-based scholarly search engine aiming to provide faster, more useful results than the likes of GoogleScholar and PubMed. Instead of clicking through multiple links to get to the paper, a PubGet search will take you directly to a full-text PDF (assuming your institution has access). PubGet’s just announced that 50 research institutions have adopted its service.

—Marlborough, MA-based Exact Sciences is going back home to where the buffalo roam. The colorectal cancer test maker is relocating to Wisconsin after securing a $1 million loan from the Badger State.

—ImmunoGen (NASDAQ: IMGN), which produces technology to aid the effectiveness of antibody drugs, raised $33 million, after expenses, through a stock offering. The Waltham company sold 5 million shares at $7 apiece.

—Cambridge’s Living Proof, which aims to apply advanced materials science to beauty products, raised $9 million in an equity financing round. The funds came from Polaris Venture Partners, the sole venture backer of the company. Living Proof recently debuted its first product, the hair treatment NoFrizz.

—I-Therapeutix, a Waltham-based maker of tiny hydrogel-based eye bandages, landed $15 million in venture capital during a Series C Financing round. Between this latest news and the recent clearance of its flagship product, the I-Zip bandage, in European markets, I-Therapeutix is sitting pretty. The company hopes to enter the American market early next year, and is currently batting its lashes at the FDA.

—Norwich Ventures sounds like a great boss to work for. The Waltham venture firm loves to invest in medical device companies at an early stage, and unlike other, larger players, doesn’t pressure companies in its portfolio to sell or exit within five years. Hear more about their strategy in Ryan’s piece here.

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San Diego-based IntelliDOT has named James M. Sweeney as chairman and CEO. IntelliDOT provides wireless handheld barcode solutions to hospitals. In a statement, the company noted that Sweeney has founded eight healthcare service companies, including Caremark, a pioneer of in-home infusion therapy, and Cardionet (Nasdaq: BEAT), which provides wireless cardiac monitoring services.

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While San Diego learned yesterday it is the new home of the nation’s first wireless health care research institute, a vision of the sweeping changes that such technologies pose was taking form in a UC San Diego conference room.

The high-level meeting was organized by federal health officials in an effort to help guide the development of one of the hottest areas in health care—the convergence of “personalized” medicine, based on genomic research, with the latest generation of information management technologies. The session included prominent medical researchers, government health officials and executives from Intel, Google, Qualcomm, and Cisco Systems who are currently overseeing IT initiatives in health care.

The U.S. Department of Health and Human Services, which sponsored the meeting, plans to use the discussion as a way to map future funding and research priorities in personalized health. Russ Altman, a Stanford University professor of bioengineering, genetics and medicine, told the group that sequencing individual patients’ full genomes will be available for everybody in 10 to 15 years.

“Genome information will be fundamentally disruptive to providing health care,” Altman said. And because of the enormous data storage needed to analyze genomic information, Altman added, “anybody who is interested in genomic research also is a huge fan of electronic health care databases.”

Qualcomm’s Don Jones told me during a break that electronic health records have become a particularly hot topic since President Obama signed the federal economic stimulus package. The government’s economic recovery plan calls for spending more than $19 billion to help medical facilities throughout the country adopt electronic health records. Jones predicted the most valuable innovation will be the integration of these records with medical diagnostic tests, wireless monitoring tools and analytical software that, for example, can detect telltale patterns that presage a heart attack or stroke.

Jones also led Qualcomm’s support for San Diego’s new West Wireless Health Institute, which was announced yesterday with a $45 million grant from the Gary and Mary West Foundation. The nonprofit research institute is intended to help develop wireless heart monitors and other types of medical biosensors. Jones also noted that wireless health care also will be a prominent theme at this week’s annual CTIA Wireless conference, which begins tomorrow in Las Vegas, NV.

Kevin Patrick, a UCSD professor of family and preventive medicine, told me that startup companies also are emerging with innovative healthcare technologies. Patrick said he was one of several researchers helping Santech, a San Diego startup that is exploring novel uses of the Internet and cell phones to tackle such health problems as obesity and diabetes.

“We recently released the first study in the world on using text messaging to promote weight loss,” Patrick said.

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First of all, the terms “downturn” and “recession” don’t do justice to the current climate, says early-stage tech investor Andy Sack. As he puts it, “This is the seminal event of our lifetimes. This is our World War II. I guarantee I’ll be talking to my grandchildren about the Depression of 2009-10: ‘Make sure you save.’”

Sack was speaking at the MIT Enterprise Forum Venture Lab event in downtown Seattle last night. He was joined by Michelle Jacobson Goldberg, a partner at Bellevue, WA-based Ignition Partners who is on the board of Mpire (maker of Widgetbucks), Visible Technologies, and SEOmoz. The room was packed with scores of entrepreneurs looking for financing advice. “It’s ugly out there, and raising money has never been f-ing harder,” Sack told them.

What’s interesting is that both Ignition and Founder’s Co-op, Sack’s seed-stage fund with Chris DeVore, have made investments in the past 90 days. Founder’s Co-op has made bets on Frugal Mechanic; LookStat, an analytics and workflow-automation startup focused on the microstock photography industry (this was news to me); and a new smartphone company that hasn’t been announced yet. Meanwhile, Ignition announced earlier this week that it has led a $10 million investment in Silicon Valley-based Zenprise, a mobile-management software firm.

Goldberg and Sack spoke for about an hour on their perspective as investors, what startups need to know to get funded these days, and what the hot (and not so hot) areas of investment are. Here’s my top 10 list of takeaways:

10. Valuations are way down. “Anything that’s early, if you used to raise $3 million, you might raise $1 million now,” Sack says. And count on a similar calculation for the valuation, he adds.

9. Investors are seeing more pitches than ever. “There’s been an incredible amount of deal flow,” Goldberg says. To which Sack adds, “Deals are getting done, but more slowly and with a higher bar…Deals getting done really have to resonate with a customer base.”

8. Your next financing is your last. “Everyone wants to see your break-even plan,” says Sack. “Financing risk is higher than technology risk.” And Goldberg adds, “Take the money …Next Page »

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One of the simplest—and most disruptive—business ideas I’ve heard for U.S. health care reform is gaining momentum in downtown Seattle. It’s with a small group of primary care doctors at a company called Qliance, who don’t accept health insurance payments of any kind.

I made a beeline over to the Qliance office after hearing about this in a story Greg wrote a few weeks ago about Nick Hanauer, one of the early investors in Amazon. Hanauer, an investor in Qliance, said health insurance companies despise this idea, and he loves it. So naturally, I had to learn more about what this startup is trying to accomplish from its CEO, Norman Wu.

Here’s the problem they are trying to solve: American insurance companies gobble up about 40 cents of every dollar spent on health care for all the red-tape claims processing that goes on, and for their profits, Wu says. If primary care doctors decide to play ball in this system, the numbers tell an ugly story. They generally need to have a roster of patients 2,500 to 3,500 deep, whip through 25 to 30 appointments with patients each day, allocate less than 15 minutes for each patient, refer them unnecessarily to specialists, and move so fast they can barely remember anyone’s name.

Too much time, and staff energy, is wasted on haggling with insurance companies, and too little time doctoring properly, Wu says. About 90 percent of medical issues can be handled simply by a primary care doc, but these insurance hassles have turned this into a dying form of medicine.

“It’s akin to using your car insurance to pay for a new battery or a set of tires,” Wu says. “It doesn’t make sense.”

Instead, Qliance has set up what it calls “direct practice” which essentially freezes out the health insurers and deals directly with the patients. The patient hands over a credit card to get a recurring monthly membership fee sent to Qliance, for $39 to $79 a month. In return, the patient gets unrestricted use of the primary care service like a customer would get at a health club. If the patient has a fever and cough to get checked out, he or she simply calls to make an appointment, and gets in to see the doctor the same day, for 30 to 60 minutes. The doctor isn’t in such a hurry. He or she only has a roster of 800 patients, and generally books 10 to 12 appointments a day, while also being available for e-mail and phone consultations. The place has unrestricted, 7-day a week access to its physicians.

One thing most people don’t realize is how radically this changes the doctors’ perspective on medicine. The current insurance-based system encourages doctors to run all kinds of procedures and prescribe all kinds of drugs, because that’s how they get paid by insurers. When they get paid directly by the patient, regardless of what they do, the doctors’ perspective on what needs to be done suddenly changes, Wu says.

“They have to order up some procedure so they can justify having spent some time with you,” Wu says of the existing insurance-driven model. “They do unnecessary procedures, order up unnecessary repeat visits, or refer you to specialists. The cost just goes up and up, and the quality goes down.” He adds, “We don’t want to provide an incentive to push things on patients they don’t need. Our customer is the patient, not the insurance company.”

This being health care delivery, there are a lot of complex moving parts. Quite a few tests and procedures, like X-rays, EKG’s, or stitches are included in the Qliance monthly membership, but if a more complex treatment is needed, it can be added as an extra cost. If the patient needs a prescription, …Next Page »

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Redmond, WA-based Micronics, a maker of tools for molecular diagnostics and monitoring, announced today it has closed a Series C financing round led by the Southwest Michigan First Life Science Fund. The latest round, combined with a Series B round raised earlier this year from private investors, brings a total of $9 million in capital to Micronics, whose disease detection and diagnostic products are based on microfluidics technologies.

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Heading deep into the battles of October (hang in there, Red Sox), dealflow has been fairly strong. The Northwest saw plenty of action in mobile, biotech, health care, and seed-stage tech funds in the past week.

—Redmond, WA-based MobUI, a mobile software developer, acquired Bellevue, WA-based Action Engine, as Ryan reported. MobUI also raised new funding, led by GlobalNET Mobile Solutions, a South American wireless application service provider, but no financial terms were disclosed.

—Microsoft (NASDAQ: MSFT) and San Diego-based Scripps Health teamed up with Bay Area firms Affymetrix and Navigenics to study the effects of personal genome testing on up to 10,000 people’s health behaviors. The researchers will use genetic scans to tell participants about their risk for various ailments, and then will track their lifestyle choices and their health outcomes for 20 years. Their personal health information will be kept in Microsoft’s secure HealthVault accounts.

—Seattle-based Dendreon raised $20 million in a stock sale to Azimuth Opportunity, as Luke reported. Earlier in the week, Dendreon (NASDAQ: DNDN) said an interim analysis of a 500-patient study of its drug Provenge for prostate cancer found that it lowered the risk of death by 20 percent.

—Mentor Graphics, an electronics design and analysis firm based in Wilsonville, OR, acquired the Flomerics Group, a U.K.-based maker of fluid-dynamics simulation software. Flomerics will become the mechanical analysis division of Mentor Graphics (NASDAQ: MENT).

—Luke reported that Founder’s Co-op, the Seattle-based seed-stage fund run by Andy Sack and Chris DeVore, raised a new investment round, worth $1.8 million, and announced 12 more limited partners, bringing the total to 14. Founder’s Co-op is a peer-to-peer investment firm in which the partners, all established entrepreneurs, help guide strategy and support the portfolio companies.

—Bellevue, WA-based Monster Venture Partners acquired a controlling stake in BitWine, a startup that lets users share knowledge and get expert advice online. Financial terms were not disclosed, but former Expedia exec Ronnie Gurion is BitWine’s new CEO, and Rob Monster is now chairman of the board.

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It was almost exactly a year ago that Microsoft launched its HealthVault service, a secure online database for users to store and manage their medical records. And in recent months, we’ve reported on the software giant’s increasing efforts in health care, including its new partnerships with prescription drug provider CVS Caremark and Boston, MA-based health startup American Well. Now, Microsoft is teaming up with San Diego-based Scripps Health to study the long-term effects of personal genome testing on health and lifestyle.

The study, which is co-sponsored by the Bay Area firms Affymetrix and Navigenics, seeks to do genetic scans on as many as 10,000 people affiliated with the non-profit Scripps Health system. The scans and analysis will tell participants about their genetic risk for health conditions like diabetes, obesity, heart attack, and certain types of cancer. But the point of the study is to follow what happens after that: will participants change their lifestyle to combat their newfound health risks, and if so, how? The plan is to track their behaviors over 20 years using detailed questionnaires and periodic health surveys. To protect the privacy of users, the identifying information on their saliva samples and questionnaires will be “encrypted and kept in a secure database,” according to Scripps.

What’s in it for Microsoft? Participants will be able to store their clinical and lifestyle information in a Microsoft HealthVault account, and access it or share it with health care providers. “This collaboration is a significant step forward in empowering people to proactively address their specific individual health needs, as well as give clinical researchers access to a broader pool of genetic data to develop new disease treatments,” said Peter Neupert, corporate vice president of Microsoft’s health solutions group, in a statement.

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New York-based ZocDoc, a healthcare startup that helps you find doctors and book appointments online, announced it has expanded its Series A investors to include Jeff Bezos from Amazon.com and Marc Benioff from SalesForce.com. Financial terms were not disclosed. Last month, ZocDoc announced it had raised $3.3 million, led by Khosla Ventures.

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Marijuana Could Fight Resistant Staph

Substances found in marijuana plants may provide a new weapon to fight drug-resistant bacteria, Technology Review reports. Scientists in England and Italy discovered antibacterial compounds in the plants and tested them against six strains of methicillin-resistant Staphylococcus aureus, or MRSA, which causes hard-to-treat skin infections that can be fatal in the very sick. The compounds killed the bacteria, and the most effective of the compounds didn’t have the psychoactive effects of marijuana. Which means it should be possible to clear a patient’s infection without blowing his mind.

The Reason Wine Fights Heart Trouble

Scientists say they may have found the mechanism through which red wine helps reduce heart-attack-related death. As explained by Scientific American, alcohol triggers cells to produce an enzyme that removes the alcohol from the cells. Researchers found that same enzyme also clears away toxic byproducts produced during a heart attack, allowing more heart cells to survive. The researchers hope they can use the enzyme to develop a drug to treat heart problems, and perhaps even fight some other effects of aging in cells.

Warrant Required to Trace Cell-Phone Locations, Court Rules

A federal appeals court has upheld a lower court ruling requiring police departments to get a warrant before they can get records of the movements of cell phone users. Cellular phone companies can tell where a caller is located by seeing which cell towers the signal goes through, and police could use records of that data to trace a suspect’s movements. Ars Technica reports that there’s been no decision on whether to appeal the ruling.

Spy Planes Morph Into Medical Aides

The unmanned aerial vehicles that the military uses to fly reconnaissance missions over enemy territory can benefit civilian medical care. According to New Scientist, engineers have converted the craft to carry medical samples of blood, urine, or sputum, or up to two units of blood, for between hard-to-reach clinics in parts of South Africa and distant medical labs. Use of the vehicles should speed up diagnosis and treatment of diseases such as tuberculosis.

Podcars Provide Alternative Transportation

With 70 million Americans nearing retirement age, the number of people isolated as they lose their ability to drive is expected to increase dramatically. In an op-ed piece in the Los Angeles Times, a University of Southern California professor touts a system she says would provide private transportation for these people, as well as cutting down on pollution and traffic. The system uses podcars—small, four-passenger cabs that travel on a monorail system and, unlike a subway line, are available on demand.

iPhone App Follows Presidential Race

FoxNews and NPR not enough for you to keep up with the race for president? Now there’s an application for your iPhone that will bring you the latest news, as well as biographical information about the candidates, and even let you register to vote, TechCrunch tells us. The application is available from iTunes for 99 cents.

VCs Pour Money into Thin-Film Solar Companies

Companies that make thin-film solar cells are reaping millions from venture capitalists. The New York Times lists Solopower, Nanosolar, AVA Solar, and Miasole as among those getting upwards of $100 million in investments. Thin film panels are cheaper to install than silicon-based panels, but they’re not as efficient at converting sunlight to electricity.

Carpooling Becomes a Web 2.0 Activity

With gas prices rising and more people looking to share rides to work, governments and iPhone apps are offering ride-matching services to link riders with drivers. BusinessWeek tells us that a number of companies are springing up that use Web 2.0 interactivity to do a better job of match-making, with some even offering to verify users’ identity to make the process safer.

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The face of online health care is changing in Massachusetts—and probably for the better. Today one of the state’s leading health insurance companies, Blue Cross Blue Shield of Massachusetts (BCBSMA), announced that it has signed an agreement to integrate with the Google Health platform. It is the first health insurance company to do so.

Google Health, a free service that patients can use to organize their health information online, launched in the U.S. last month with a list of provider partners that includes the Beth Israel Deaconess Medical Center (as we reported here), Cleveland Clinic, Walgreens, and CVS/CareMark.

The integration is supposed to be finished sometime this fall, at which time Google Health will be offered to BCBSMA members. The service will allow members to store and manage their medical records and health info (including insurance claims) in one secure location, download their prescription history from other connected providers such as pharmacies and doctors’ offices, and search for a doctor or hospital online.

You wouldn’t necessarily expect a huge insurance company to be quick on its feet when it comes to adopting technology, but BCBSMA has previously funded the Massachusetts eHealth Collaborative and is a founding member of the Massachusetts eRx Collaborative. The Google partnership should give members “easier and more portable access to their health care information,” said Steven Fox, BCBSMA’s vice president of provider network management, in a statement.

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Think R2D2 meets information kiosk meets Coke machine. That’s the way Michael Greeley, general partner at IDG Ventures Boston, describes (I’d add “photocopier” to his description myself) the roughly waist-high, customized-bandage-dispensing robot on wheels he thinks will revolutionize wound treatment.

And he’s got 25 million reasons to hope the “revolutionize” part comes true. That’s because Greeley’s firm and the California arm of another local venture outfit, Advanced Technology Ventures, are the lead investors in a $25 million Series B financing round announced today by the company that makes the robot—Mountain View, CA-based PolyRemedy (Series A investor MedVenture Associates and new investor Harris & Harris Group also joined the round—and Greeley and ATV’s Tom Rodgers of the firm’s Palo Alto office will join the board). The idea, says Greeley, is that robots can automate much of the heavily manual tasks of preparing wound dressings, in much the same way previous automation technologies transformed other aspects of health care. “There’s a whole wave of robotic surgery, robotic drug dispensing, and this is just now robotic wound care,” he says. “And nobody’s doing it.”

It’s not hard to wrap your mind around the possibilities. Wound treatment, after all, is a sore subject for hospitals and other health care facilities, care-givers, and patients alike. Anything that can make it easier, more efficient, and more effective —as PolyRemedy thinks it can—holds tremendous financial potential.

The core market in this case is the treatment of diabetic ulcers and other chronic wounds that Greeley says afflict a half million people in the U.S. who need treatment each day. This aspect of medical care, which by itself represents what Greeley calls a “huge” market, historically falls to nurses who pull gauze off a shelf and often hand-cut a dressing to fit a patient’s wound—and the IDG ventures partner says it hasn’t changed much in more than a century. “The wound care field just was antiquated. It was out of the revolutionary war,” he says. That, Greeley adds, makes it “poised for automation.”

PolyRemedy was founded to do just that in late 2004 by chief technology officer Oleg Siniaguine, a serial entrepreneur and inventor who has also held senior research or managerial positions at Hughes Aircraft, AZ Corporation, and Moscow University. (The company closed a Series A round, apparently of a few million dollars, the next year.) A key to the firm’s approach is what’s described as a nano-fiber technology that forms the “gauze” of a dressing. Some wounds need to be kept moist, others must stay dry—and some actually need to be moist in one spot and dry in another. In theory, at least, the nano-fibers allow antiseptics and other medicines to be precisely applied to the specific spots where they’re needed. And, says CEO Dan Eckert, “we have the ability to adjust the physical properties of the dressing on demand.”

Here’s how it works, at least in theory. Drop-down menus on the machine’s (it seems more of an automated …Next Page »

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Intel’s Andy Grove is a Silicon Valley legend, Time’s Man of the Year (1997), and the subject of a magisterial biography by Harvard Business School historian Richard Tedlow. He’s also one of the world’s toughest-minded thinkers about competition and innovation, the kind of boss who writes books with titles like Only the Paranoid Survive.

Which is why it’s so surprising that Grove’s recent essay in Portfolio magazine (the slick new business monthly from Condé Nast) is so thoroughly unpersuasive. In the article, titled, “Think Disruptive,” he urges the CEOs of two of America’s biggest corporate juggernauts to take on two of the country’s biggest challenges. He thinks Jeff Immelt, CEO of General Electric, should be “building an electric car and taking on the energy industry.” And he wants Lee Scott, CEO of Wal-Mart, to use his company’s market clout and more than 4,000 stores to deliver medical services and transform the health-care industry. (Wal-Mart has begun experimenting with in-store clinics for services such as vaccinations and cholesterol screening.)

Grove’s message: Why leave disruptive innovation to startups? Why don’t big, successful companies, with vast technological and financial resources, “shake up the status quo and reap big profits” by entering new fields—what he calls “cross-boundary disruption.”

It’s a nice idea, but it strikes me as wishful thinking at best. Why would GE, with so much opportunity in its businesses around the world, and so many headaches from Wall Street (GE shares are barely unchanged from when Immelt took over six years ago), take on a high-profile gamble such as electric cars?

Do any of us think that Wal-Mart, which has had such a tin ear for customer service (not to mention employee relations) in selling mundane products such as laundry detergent and lawn mowers, is poised to make the U.S. health-care system more patient-friendly? “Wal-Mart is in an excellent position to assume the role of the disrupter,” Grove argues. Really? Speaking for myself, the only thing less attractive than a visit to the doctor’s office is a trip to Wal-Mart.

Grove’s one piece of evidence for “cross-boundary disruption” is Apple’s move into digital music, with the iPod, iTunes, and other Steve Jobs innovations. To me, though, the iPod is actually a counter-argument to Grove’s core theme. Apple didn’t develop the iPod just because it sensed a big opportunity in a new field. It developed the iPod because it worried about its creeping irrelevance (bordering on insolvency) in its original field of personal computers. Apple developed the iPod because it had to, or risk going out of business altogether.

As I read Grove’s essay, I thought back to a conference I attended a few months ago featuring a session with Irving Wladawsky-Berger, the recently retired vice president of technical strategy and innovation at IBM, who has been behind so much of what’s gone right at the company over the last 10 years—its enthusiastic embrace of the Internet, open-source software, and innovation on so many fronts. (Irving, who spent 37 years with Big Blue, is now a visiting professor at MIT, among his many activities.)

What made Irving’s session so memorable was the fact that he was so candid. Yes, IBM had engaged in deep-seated transformation and far-reaching innovation, he explained. But to this day he wonders whether Big Blue would have made such big changes had the company not walked to the edge of the abyss. “Can a company reinvent itself,” this legend of corporate transformation asked, “without going through a near-death experience?”

To me, the obvious answer is no. How many examples of truly deep-seated transformation can you cite that did not involve what Wladawsky-Berger calls a near-death experience? These days, there’s Procter & Gamble under A.G. Lafley, who may be the most underappreciated big-company CEO on the planet. Then there’s. . . There’s . . .In the immortal words of the high-school economics teacher in Ferris Bueller’s Day Off, “Anyone? Anyone?”

I understand where Andy Grove is coming from. He looks out at the American landscape and sees huge problems that demand breakthrough innovations if they are to be solved. He looks at his fellow titans of industry and sees leaders with infinitely deep pockets and world-class labs. And he asks the obvious question: Why can’t the latter be deployed to address the former?

The answer is, well, because that’s just not the way innovation in established companies works. They have a hard enough time fixing themselves, let alone fixing society—especially when what ails society is not remotely core to their existing businesses.

Indeed, that’s why we have Silicon Valley, Kendall Square, and other hotbeds of grassroots innovation. Not because big companies can’t do what startups do, but because they won’t do what startups do. Andy Grove, better than anyone, should understand that.

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