Prairie-Based Disruption

Small firms throughout the region aim to develop disruptive technologies

BY ROB SWENSON

Small, nimble companies throughout the Upper Midwest are scrambling to create the next big thing

Entrepreneurial firms scattered around the Dakotas and other states in the region are among those tr ying to develop “disruptive technologies” – innovative products with the potential to significantly change lives and businesses

Identifying disruptive technologies can be challenging because the impact cannot be fully assessed until products come out But a lot of potentially game-changing processes and devices are being researched and developed in businesses, universities and medical facilities.

Brian Gramm, founder and CEO of Peppermint Energy in Sioux Falls, S D , has been traveling around the Upper Midwest in recent weeks, raising money for his latest business venture, and he’s impressed by what he’s seen and heard from other entrepreneurs.

“I’m really encouraged by what we, as a region, are bringing as truly disruptive technologies,” Gramm says “I think we stack up pretty well to other areas in the country that get most of the publicity ”

His company has moved from product development into the early stages of growth. Peppermint Energy makes and markets what Gramm calls “ a utility in a box.” The company has developed portable, solar generators and has started deploying them in under-developed countries around the world

The company has 10 employees, but a subcontractor builds the portable solar generators

Peppermint’s initial product, the Forty2, looks like an oversized laptop computer. Its name was inspired by “The Hitchhiker’s Guide to the Galaxy,” a multimedia creation in which a supercomputer mysteriously identifies the number 42 as the answer to the ultimate question of life

Opening a Forty2 exposes solar panels that generate power.

The renewable form of energy is stored in a battery that also is part of the unit The device can be used anywhere to power a small refrigerator, fans and lighting 24 hours a day, seven days a week.

“We’re talking about life-changing technology that we take for granted It’s the ability to refrigerate medicine,” Gramm says The devices are being used in more than 20 countries, including New Guinea, Republic of the Philippines and Sierra Leone.

There are many other emerging or technology businesses in the region that also have the potential to be disruptive in their fields. Among them are:

• Nanofiber Separations in Rapid City, S.D. Nanofiber Separations makes tiny, cotton-like fibers out of cellulose The fibers are treated to become sticky Then they can be targeted for use to screen impurities such as viruses or lead from water, air, feedstock or pharmaceuticals The company recently won two awards, including a $709,849 Small Business Innovation Research grant from the National Science Foundation.

• Myriad Mobile in Fargo, N.D. Myriad is a growing company that develops mobile applications for clients For example, it helped the North Dakota State University Extension Service develop the Winter Survival Kit, an app designed to help motorists stranded in winter weather The company has opened a branch office in Minneapolis and has sales representatives in several major cities.

• Sanford Applied Biosciences, formerly Hematech Inc , in Sioux Falls. The company uses cattle to produce antibodies to help people fight human diseases For example, it is working with the Naval Medical Research Center to combat the MERS-Cov infection, which was first reported in Saudi Arabia in 2012 and recently was found in the United States.

• Prairie AquaTech in Brookings, S D , is developing high-protein feed for fish and animals The company uses microbial processes to convert soybean meal and distiller’s grain – a byproduct of ethanol production – into highly concentrated protein feed for animals Ultimately, the fed animals are consumed by humans

Broad Range of Categories

The phrase “disruptive technologies” refers generally to advances in equipment or processes that have the potential to substantially change and improve the way people live or work The term was coined by Harvard Business School Professor Clayton Christensen in his 1997 book, “The Innovator’s Dilemma.”

Christensen categorized new technologies as either disruptive or sustaining Sustaining technology refers to incremental improvements in existing methods and products. Disruptive technology is new and might not even have an immediate use Businesses tend to operate more on sustaining technologies than disruptive technologies, which are a greater departure from normal

In a 2013 report, the McKinsey Global Institute, the research arm of McKinsey & Co , identified different types of technology that could drive transformations in coming years

“Today, we see many rapidly evolving, potentially transformative technologies on the horizon – spanning information technologies, biological sciences, material science, energy and other fields,” the institute reported The company identified 12 general categories of poten- tially disruptive technologies They are:

• Mobile Internet

• Automation of knowledge work

• The Internet of Things

• Cloud technology

• Advanced robotics

• Autonomous and near-autonomous vehicles

• Next-generation genomics

• Energy storage

• 3D printing

• Advanced materials

• Advanced oil and gas exploration and recovery

• Renewable energy

Nanofiber Separations definitely fits the category of a disruptive technology, says Todd Menkhaus, cofounder of the business and an associate professor of chemical and biological engineering at the South Dakota School of Mines & Technology.

Hao Fong, a professor of chemistry and materials science at SDSMT, is the other cofounder of the venture Craig Arnold was brought onboard in March to serve as the company ’ s CEO

“We’re really changing the paradigm in the way filtration separation can be accomplished,” Menkhaus says Nanofiber Separations’ process could lower the cost of drugs and health care procedures.

In addition to the NSF grant it won, Nanofiber Separations recently was awarded $20,000 as the top winner in the 2014 Governor’s Giant Vision Business Award contest sponsored by the South Dakota Chamber of Commerce and Industry.

Last year, another venture affiliated with SDSMT, CalxAqua, won first place in the Giant Vision competition CalxAqua is working to improve the way arsenic and heavy metals are removed from water.

A good indicator of the market potential for emerging products is whether companies are knocking on your door, asking about it, says Joseph Wright, associate vice president for research –economic development, at SDSMT That’s happening with Nanofiber Separations, Wright says

Nationally, to offset reductions in federal research money and to hold down their own spending, companies seem to be relying more on products being developed at research institutions, Wright says

“That’s a trend I don’t see changing in the near future,” he says “Universities are getting smarter at creating mechanisms to move a little bit more at the speed of business ”

Advantages of Midwest

Wright and others point out that states such as the Dakotas generally have strong, pro-business tax and regulatory environments That encourages entrepreneurs to start or expand businesses in the Dakotas

Nurturing a creative business environment can help, too.

The presence of Microsoft Corp ’ s branch campus in Fargo is among the factors that helped technology development in North Dakota, says Jake Joraanstad, cofounder and CEO of Myriad Mobile, a young but expanding company that makes mobile apps Universities and government agencies in the Fargo area have helped Myriad get established and grow, Joraanstad says Fargo-based Myriad has 52 employees, a branch office in Minneapolis and sales people in Chicago, Denver, Kansas City, Atlanta and Los Angeles Its business focuses on helping other companies improve their business processes. “We build the software that helps companies be disruptive in their industries,”

Joraanstad says

Midwestern businesses are especially well positioned to be disruptive in fields related to life sciences and agriculture, says Mark Luecke, managing director and CEO of South Dakota Innovation Partners, a venture capital firm that specializes in early stage investments in research businesses.

“I think we ’ re very disruptive in terms of research, and I think it’s led by research on the I-29 Innovation Highway,” Luecke says, referring to Interstate 29, which runs from Kansas

City, Mo , to the Canadian border and connects with a highway that goes to Winnipeg.

I-29 connects a series of state universities, health care systems and research businesses in the Dakotas, Iowa and Missouri The highway also helps connect similar businesses and institutions in nearby states in the region

Prairie AquaTech is among the emerging research companies along I-29 that is affiliated with Innovation Partners “Prairie AquaTech really has an opportunity to change the way the world looks at prairie food production,” Luecke says Sanford Health, a regional health care powerhouse based in Fargo and Sioux Falls, acquired Hematech Inc. in 2013. The firm, now known as Sanford Applied Biosciences, has been working with cattle for 14 years to produce human antibodies to fight diseases such as the flu, cancer autoimmune disorders and inflammation.

“None are in the market yet They are all in various stages of development and working their way to approval That takes years, ” says Eddie Sullivan, vice president of business development and government relations for Sanford Applied Biosciences.

The history of MERS-Cov infection demonstrates how the fight against diseases is constantly evolving MERS-Cov started as a virus that affected camels. By 2012 it had mutated to the point that it was potentially fatal to people

“The whole point of this technology is to be able to respond rapidly to emerging infectious diseases,” Sullivan says.

Several businesses with disruptive potential have temporarily resided or received training in the South Dakota Technology Business Center, a nonprofit incubator that business organizations in Sioux Falls started a decade ago. Tenants receive access to development help, high-tech connectivity and flexible terms for business space

“Innovation is happening,” says Rich Naser, executive director of the center. “It’s hard for me to know which of these will be disruptive technologies, but with all the activity going on in the region, there’s certainly the potential for some of them to be disruptive.”

Rob Swenson Contributing writer RobSwensonMediaServices@gmail.com