Innovation, KC Style

Thinking that goes beyond boxes . . . and borders.

The pieces of this puzzle seem unlikely to produce a cohesive picture, but take a look anyway: Water treatment systems for individual buildings. Idle-reduction systems for over-the-road trucks. Agricultural data aggregation. Fractional warehouse services. Companion pet pharmaceuticals and pet wearables to measure fitness and activity.

As product innovation goes, those are hugely diverse in the problems they address or service they hope to deliver. But these successful companies, and many others like them, took root in Kansas City and are well on their way to establishing national, even international, client bases that can complete their evolution from startup to spectacular.

High-profile companies like C2FO and Zoloz (founded as EyeVerify), Tradebot and the former BATS Global Markets have been staples of any discussion about innovation in this region in recent years. But the assets KC offers in support of entrepreneurs are being applied in nearly unfathomable ways across a huge range of business sectors and applications.

What constitutes innovation in this part of the country, though, has a distinctly different flavor from what might be considered innovation in tech-happy Silicon Valley, in medical-research centers like Boston or biotech magnets like North Carolina’s Research Triangle.

“Innovation can vary from city to city” in the way it is expressed, says Ryan Weber, president of the Kansas City Tech Council. “But that innovation needs to play to the strength of the region.” One example, he said, came when Dairy Farmers of America—the region’s largest private company, in terms of revenues—partnered with Sprint, the largest publicly owned company, on the latter’s business accelerator, working to diversify access to the region’s innovation culture.

“It was a good example of something that can play to our area’s strengths by partnering with companies around here in unique and different ways,” Weber said. “That’s important because Kansas City may not be the place where we launch the next viral app on a phone; that’s not necessarily our bread and butter. But there are industries that sustain us—transportation, animal health, agriculture—where we are the center of attention, and ag tech is a space Kansas City should own and dominate, because it does play to the strengths of the region.”

A Brookings Institution study that laid out the value of innovation as a driver of economic growth and rising wages also noted that innovation helps improve life expectancy, makes tech more affordable, creates new organizational structures that lead to higher standards of living, and generates more leisure and family time by simplifying household chores.

All well and good, but the nation has a problem: Innovation has slowed in recent decades. Had it maintained the trajectory it held in 1973, the study said, the average wage in the U.S. today would be more than $50 an hour, rather than the low $30-an-hour range.  But it helps to live in a community with assets that can support it. Locally, those include the Kauffman Foundation, Missouri Technology Corporation and even the city’s Economic Development Corporation. Having a business school with the reputation of UMKC’s Bloch School of Management is another, as is access to both the University of Kansas with its Edwards Campus and Kansas State University’s Olathe Innovation Center. Companies like Sprint and Cerner have taken key roles in creating assets for startups, as well.

Success Stories

How does a Kansas City-area company specializing in self-contained water-treatment systems for large buildings become a global supplier? One, by having the right product for the immediate problem. But some regional intangibles come into play at Bio-Microbics, which recently relocated from Shawnee to a building 2½ times larger, in Lenexa. Two of them: Transportation and people.

“We have incredible transportation,” says CEO Bob Rebori. “Highway, rail, intermodal, and that keeps expanding. That allows us to market the fact that we can get our goods to any port in the U.S. quickly, and that gives us the quickest and least expensive route to any port in the world, because we can choose the best locations to ship out of—Houston, Los Angeles, Newark, Charleston, Miami. We pick our route and get the best sailings.”

Less obvious, but just as important, is the people factor. “Kansas City has much more creative ad and marketing talent than people realize,” Rebori said. “Disney came from here, we have the art institute, Hallmark—there’s a lot more talent in the area for creating things that allow us to differentiate ourselves from hundreds or thousands of competitors around the world.”

For Jason Tatge, CEO of Farmobile, an ag tech company in the nation’s agribusiness heartland was a natural fit. “I do think it depends on the industry you’re in, but Kansas City is undervalued in its tech talent, and in big ideas in general,” says Tatge, whose firm is helping farmers to literally create new harvests—and sales—by gathering huge amounts of data about the crops they are growing. “For us, being in the middle of our customers is really important, because we test a lot of stuff, and we’re 20 minutes away from farms, and we use those regularly. That’s a big one.”

He says the Kaufman Foundation, Pipeline and other assets have contributed to the development process and early success for a company that now boasts 61 employees. “There are a lot of places to get help here,” Tatge says. “It’s a great place for building a network. People who have gone before you are quite friendly to help, but I don’t mean with just capital, I mean with helping in
your timing and figuring out how to solve complex problems.”

Another regional asset: many in Kansas City are just a generation or two removed from the farm, where success entailed a dawn-to-dusk work ethic, familiarity with concepts of mechanical engineering or environmental stewardship, and problem-solving skills that are challenged by the hour. “Tons of developers here have roots that go back to the farm,” Tatge said. “We’ve got people recently removed from the farm or are related to folks there, and they are solving a problem that’s pretty big and they can understand it.”

Or take Idle Smart, where co-founding team member Ryan Bennett works to expand the reach of a company focused since 2010 on improving the operating efficiency of the nation’s trucking fleet. Fresh off a deal to secure product placement on a Volvo assembly line, Bennett notes the volume of goods trucked through this region, and what that means for his transportation-focused enterprise.

“There are a lot of major fleets close by to us,” he says. “So it’s simple to connect with big fleets that are core customers. There are 3.1 million trucks on the road, and I believe Kansas City will surpass Chicago to have most tonnage by rail or truck in the next few years. Trucking in general, logistics is exploding, and e-commerce is making everything more demanding. The loads are there for the fleets, and the fleets are buying new trucks.”

This region is also increasingly drawing young talent, with improvements in Downtown, the Crossroads area, and other urban settings that appeal to Millennials, Bennett said. They help fuel the innovative spirit so vital to the company’s long-term prospects.

“Without the innovation, we’d always be stuck where we’re at. We have to keep expanding,” Bennett said, as with a new platform recently introduced that has already bumped revenues significantly. Opportunities with school bus fleets, ambulances, fire trucks and other public-system fleets offer additional promise. “We constantly are looking at how to tweak this and get into new markets,” he said. “That’s how you have to look at innovation.”

Other Challenges

A significant opportunity to wring more from the region’s innovation talent might reside within the public sector, some executives say. In some cases, breakthrough technologies have run into walls with local and state government offices, compelling startup founders to look outside this market for vital revenue-producing options on proven products. One such innovator, who didn’t want his company identified, said years of discussions with public officials in this region had produced dispiriting results, wasted valuable time and yielded “no progress towards any sort of commitment to demonstrate our products. … On more than one occasion, our projects went forward without us, after we had been cut out of the deal we helped create.”

More disheartening, perhaps, was that some of those same public-sector officials would hold that company up as evidence of the region’s embrace of innovation. “We kept getting used as a poster child for how innovative KC is, but for some reason, nobody ever wanted to actually work with us, just use us as a prop for publicity,” that executive said. “We decided, with regrets, to change our focus to clients who would take us seriously, respect our time, and engage us for work.”

In the regional innovation space, things today “are substantially different,” says Toby Rush, who sold Rush Tracking Systems to found one of the region’s most recent big entrepreneurial winners, EyeVerify (now Zoloz). More money is available for start-up and early-stage companies, Rush says, “but the programs and various players are more organized and visible to each other. Before, we were like blind men trying to find our way in the dark, and everyone had their hands in front of them to see who could help where and how.”

Today, he suggests, the view of entrepreneurship and innovation has come into a much sharper focus. But it can be sharper. Innovation leadership from Sprint, Cerner and Dairy Farmers is an important step for the region, says Jeff Shackelford, director of Digital Sandbox, which made its first transportation-sector investment in Bennett’s Idle Smart. But it’s just a start.

“All have been tremendous sponsoring partners, but we need much greater involvement, financial and program support, from our area corporations,” he says. “To build a truly sustainable and diverse local economy, we need to further engage our corporations with our early-stage entrepreneurs and scalable, young companies.”