Stuff Matters: Genius, Risk and the Secret of Capitalism. Harry Bingham
as it’s compressed. At Mach 5.5, the heat generated is sufficient to melt any normal engine. Bond’s design gets around this problem by using liquid hydrogen to cool the air. In a cunning move, the heat stolen from the air is then used to power other bits of the engine. The result is stunningly efficient. Provisional calculations suggest that the thrust to weight ratio is about fourteen times, or about three times better than regular jet engines and about seven times better than scramjets (another innovative propulsion technology currently in development elsewhere). Private investors began to get interested and funded further work. The European Space Agency has donated money too. By 2012, the company hopes to be well beyond the proof-of-concept stage for every element of their design. From that point on, they’ll be busy with the slow and expensive business of turning engineering drawings into cost-effective, space-going reality.
I don’t know if that rocket will ever fly. I hope it does, but slipping the surly bonds of earth isn’t easy, cheap, or riskless, to put it mildly. I do know, however, that Alan Bond is an extraordinary individual, one of the few authentic geniuses I’ve ever met, perhaps the only one. If SKYLON flies, Bond (who is no spring chicken and may not live to see it happen) will become one of the most famous inventors in world history. If it doesn’t – well, he’ll still be a genius and rocket scientists of the world will always know it.
But his company is not a company. He is not an entrepreneur. He does not, if truth be told, belong in the pages of this book.
To be sure, Reaction Engines is, legally speaking, a limited liability company registered at Companies House. It has a board and sets of accounts and everything that the law requires. But companies are there to make money. Reaction Engines is there to build something amazing. In due course, if it gets it right, it’ll create a huge amount of value. Some people will get rich off the back of it. But none of those involved with it today care about the money. Bond himself doesn’t give a damn. Even the private investors who have part-funded the project are doing so because they want to do something extraordinary, not in the expectation of any near-term return. Investors whose motivations are coldly commercial have stayed away from the project and will continue to stay away until the technology is a lot closer to being proven. A former colleague of Bond’s told him sadly that SKYLON would ‘fly higher and faster’ than anything Rolls Royce could plausibly invest in. That phrase could be used to summarize the position of industry generally towards any genuinely cutting edge research. High and fast is not where money is reliably made.
From high and fast to noisy and slow.
Not long after seeing Bond, I met up with a man called Paul Luen, the CEO and founder of a small, innovative marine safety company, Martek Marine. Like Bond, Paul Luen came from a fairly humble background. Like Bond, he got an excellent degree in a tough discipline (chemistry, in Luen’s case). Like Bond, he ended up knocking around in the kind of companies that could make use of intelligence and drive. Unlike Bond, however, Luen had an interest in making money. He worked in sales, not product development. When the opportunity arose to invest money in the company he was working for, he borrowed £10,000 and made the investment. He worked hard selling gas-detection equipment to industrial users. The company had a handful of customers in the shipping business, but not many; its focus lay elsewhere.
Then Paul noticed that the shipping industry was gradually tightening up its somewhat antiquated safety rules. The new rules would impose higher standards on, among other things, gas detection procedures. Paul believed that the company could develop equipment designed specifically for the marine market, and that it could make a lot of money in the process. His boss didn’t see things the same way and before too long Paul and two of his colleagues had quit to set up in business on their own. They invested £6,000, which was pretty much all the spare cash that they had. They worked for six months on no pay. The company started out with no products, no sales agents, no brand, no finance, and no reputation. It did, however, have plenty of competition. The area that Paul was keen to enter was one dominated by large, established companies, well known to shipping firms around the world.
The tiny start-up had to design and manufacture a range of entirely new products, for a market that had never previously existed, and beat a host of well-resourced competitors as it did so. A ridiculous challenge, of course, and yet one that Paul’s team met with style.
Their first major product was something called Bulksafe, a system designed (literally) to ring alarm bells if water started entering the ship’s hold. Detecting water is not, in itself, a particularly tricky business but, like any vaguely technical product, this one had to meet a whole slew of further parameters. The system needed to be maintenance free. It had to be corrosion proof. It should be able to operate in dusty conditions (because the ship’s hold might, for example, be full of coal). It needed to be proof against chemical contamination. It should be able to withstand tough handling. It had to be something that you could install quickly, cheaply, and without starting to mess around with the ship’s hull. It had to be something that would meet all the new safety regulations and carry a lifetime warranty. When the new regulations were finally published, at the end of a long consultation process, Paul’s team was ready. Ages before its competitors were in position, Martek Marine launched Bulksafe. No other product could do what it did. Orders started to flood in.
The same thing happened with a gadget called MariNOx, a system designed to monitor emissions from marine engines. Within just three weeks of the relevant regulations being published, Martek had MariNOx on the market and, again, its competitors were nowhere. People came to Martek because they had the first available product. They stayed because it also had the best one.
By now, the company has won fistfuls of awards for its innovations and export prowess. Perhaps more to the point, the company has grown fast and profitably, without taking on a single penny of debt along the way. By 2012, the company is aiming to have sales of £20 million and an operating profit of £4 million, the largest single slice of which will be Paul’s. I spoke to the company when panic about the recession was at its highest, but Paul told me that both sales and profits were growing; the only downside was that some of its new product launches would need to be put back by a matter of months.
If Reaction Engines was the perfect example of a highly inventive company, then Martek Marine is a textbook example of a highly innovative one. Its products have all been developed from scratch. It’s always been first to market. It’s always taken and held a position of market-leadership. Yet the most striking thing for me in talking to Paul was simply this: product development was the easy bit. The international bodies responsible for regulating safety at sea had issued consultation papers indicating the likely drift of regulation. Paul and his team looked at options for meeting those requirements. They created a concept and spent time talking to a dozen or more consulting engineers about implementation. They outsourced much of the prototype work and any machining tasks that they couldn’t sensibly take on themselves. And they developed a product.
In one sense that product was entirely innovative because it solved a hitherto unsolved problem. In another sense, they simply took existing concepts and bits of expertise, and assembled them intelligently into one simple-to-use package. The way Paul spoke about it all, invention of this sort is a business process like any other; one that needs thoughtful and attentive management, but no more or less than anything else. Martek Marine doesn’t have a single engineer with Alan Bond’s genius. It never will because it doesn’t need to. What the company needs to succeed is a tenacious grip on what its customers want today or may need tomorrow. The rest of it is simply a matter of management. Indeed, if the company had wanted to outsource its product development – that is, outsource all the genuinely creative work involved in designing a new product – it could easily have done so. Consultancies exist which offer exactly that service. You can find websites where different bidders compete to solve a given product development challenge. Even innovation can be specified, outsourced and put out to tender. Just put ‘product development solutions’ into Google, if you don’t believe me.
If that seems to take all the fun, all the sexiness out of entrepreneurial innovation – well, it shouldn’t. It doesn’t really matter whether an entrepreneur is engaged in a technically led business or not. All entrepreneurship is innovative always. It cannot not be. When Paul and his colleagues started Martek, they started with nothing: three blokes and an idea, sitting