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FALL 2007

Vol. 08, No. 1


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Machine 2 Machine


gadgets calling gizmos so you can relax

The call came one day last spring when Alex Warner was working at home and taking care of his infant son. Spread before him, awaiting inspiration on a coffee table commandeered as his desk, lay the raw materials for a presentation he was building for a sales pitch to the leading maker of bearings. Fidgeting at his side, 5-month-old Luke proved an indifferent test audience for dad's efforts to land a big, new account for his fledgling company. Then the phone rang. On the other end, a contact Warner had been dealing with delivered a coy message. "Check your email." So he logged on with his laptop and there, waiting in his inbox, was news that could change his life: Pedigree Technologies, an idea he'd hatched three years earlier after a dream job vaporized in the dot-com meltdown, had just been awarded an $8.4 million contract. Warner called his wife to give her the news, and then stopped by his church on an errand. Still elated, he told his priest about the triumph, but remembered to share credit. "God helped me on this one," he said.

Warner's firm will be helping the U.S. Navy combine tiny sensors with wireless networks to devise remote surveillance systems. And that, in turn, could help give Pedigree important visibility in the scramble to exploit the next big wave in computing: machines talking to machines. Really, really small machines, in the technology's most novel form. So-called "smart dust" -- a smattering of tiny sensors mated with transmitters that "talk" over wireless networks -- allows machines to perform useful new services. Pedigree's niche is to focus on machines that require maintenance or systems that require monitoring.

Consider pumps, for example, one of Warner's obsessions. Pumps are mechanical worker bees that toil away in the background, largely invisible and usually forgotten. Until they break down. Failure can mean messy disaster, as any homeowner whose sump pump has stopped in a thunderstorm knows. So instead of walking down to the basement and finding a pool seeping from your sump pump, well, your pump could call your cell phone -- or, better yet, your plumber's -- at the first sign of trouble. Just think about all the pumps out there pumping away, each one a potential failure waiting to happen. In Fargo alone, Warner estimates conservatively there must be at least 50,000 commercial pumps -- a vast market waiting to be tapped.

Just one of many. Anything that must be replenished, monitored or serviced is a good candidate for the kind of techno-solutions Pedigree delivers. It's one of the stories unfolding at NDSU's Research and Technology Park, a hub of research and development of technologies that blend computing, nanotechnology, advanced electronics and wireless communications. Pedigree's startup, in fact, coincides with the evolution of the business incubator at NDSU's Technology Incubator, which opened early this year. The tech park's cluster of companies devoted to smart wireless networks, embedded devices and like technologies is becoming a hub, gaining a foothold alongside the likes of Silicon Valley and Boston. It's all happening on the northwest edge of the North Dakota State University campus, on 55 acres that not so long ago served as test plots for developing new crop varieties.

Alex Warner, who grew up on a farm near Hillsboro, N.D., always dreamed of someday launching his own startup company. He just never thought it would happen so quickly, or so unexpectedly. He had charted another course. After graduating from NDSU in 1997 with degrees in plant science and communications, he served a tech apprenticeship, working with several information-technology companies, including a pioneering Internet service provider in the Twin Cities and a big networking firm now known as NUVO Networks. He roved among sales, consulting and technical operations, working while earning a master's degree in computer information systems while in Minnesota.

His hard work and hustle were rewarded when he was hired by Accenture, formerly Andersen Consulting, a leading global consulting and management firm, and leading player in the nexus between business and technology. "That was very exciting for me," he says. "I felt I had made it." The Accenture job, the attainment of a goal he'd set, would give him invaluable experience and contacts. Warner's plan was to put in about five years of consulting work, then leave to launch his own tech startup. There was just one problem: Accenture's offer, in early 2001, came just before the dot-com bubble burst. Not only did the consulting job fail to materialize, but Warner couldn't find work at other tech firms in the Twin Cities. "We ran into dot-com death," he says.

But Warner, who kept tabs on developments back home, saw signs of new life in Fargo. The announcement that Alien Technology, a leader in "smart tags," would open a design and manufacturing plant, and the rise of Phoenix International, which makes embedded computerized controls for farm machinery, were just two examples that signaled the dawning of a new era. Most encouraging: Alien and other firms locating at the tech park were developing products using "smart tag" technology, which enables tiny electronic chips with wireless transmitters to replace bar codes. Warner realized his experience in networking and communications fit nicely with the technologies being developed at NDSU. Once widely adopted, Radio Frequency Identification, better known as RFID, the formal term for technologies including "smart tags," promises to revolutionize inventory tracking and other tasks. "I thought that's going to be the next stage in computing as things move forward," Warner says.

So he moved to Fargo, where his wife also found work at a law firm, and went to work at SEI, becoming a pioneering account manager for a unit of Microsoft Business Solutions. Moonlighting in his off hours, working in the home office in his basement, he did market research on emerging technologies and what would become Pedigree Technologies, which he established in December 2003. He decided to focus on systems that can monitor and track equipment or other assets. From the outset, he consulted experts at NDSU. Philip Boudjouk, vice president for research, creative activities and technology transfer, put Warner in touch with key people in the field. Engineering faculty lent their expertise, as did students, some of whom became employees. Initially Warner was given space in the Research II building, and then moved into incubator space when the $10.7 million incubator opened.

Family support parallels the incubator's helping hand. Warner's father, Mike, has extensive business experience beyond the family farming operation, including leading roles at American Crystal Sugar and Dakota Growers Pasta Co. Warner senior has been an investor and key adviser at all stages of Pedigree's development. "My father is absolutely essential," Warner says. "That's been tremendously helpful." Warner's family has invested in Pedigree, generously but prudently, without betting the family farm. "We have a practical viewpoint on capitalization," he says. His boyish features belie the strains of starting a company from essentially nothing, and the years of long days and having to perform several jobs at once. Oddly, Warner says, having sacrificed so much time and effort, a huge roll of the dice financially and in terms of his career, give him a surprising serenity. "It's nerve-racking, but at the same time it's liberating. There's something about that ultimate risk that can give you the utmost confidence."

As with the other tenants, Pedigree's digs combine office with lab space. Software and hardware engineers work side by side. The hardware crew's pods are easy to distinguish from their software colleagues: Their counters are cluttered with parts racks, soldering guns, a drill press. All tinker beneath a framed photograph of the laboratory of Thomas Edison, whose many inventions include the light bulb and phonograph. "We call this Menlo Park," Warner says, paying homage to Edison's lab. Other startups occupy similar spaces in the center, which includes shared production space. One innovative neighbor, Appareo Systems, makes devices that generate three-dimensional graphics to allow a user to track and recreate an experience -- anything from flying a plane to piloting a boat. Another Pedigree neighbor, equipment manufacturer Bobcat Co., an anchor tenant at the center, got its start decades ago in a much more primitive incubator: a turkey barn. "What we've created here and hope to build on is an environment for entrepreneurs to create new technologies," says Tony Grindberg, the tech park's executive director. "Alex is a perfect example of what we want to do here. Alex is a risk taker. He's passionate about new technology and starting a company. We've been able to support his vision."

Tenants get a break on their rent and seminars on marketing and other fundamentals. But more than that, they can mix with other innovators, swapping ideas and information. To foster productive interaction, the center holds popcorn socials on Thursday afternoons, a half hour set aside for people to take a breather and mill in the lounge or chat in the hallway. Clustering tech companies that are engaged in advanced electronics, computing, RFID, and related fields helps to cultivate a knowledge base that can, with time, help draw highly skilled people. "Talent is a major attraction for technology companies," Grindberg says. "In today's climate, those that can attract the best and brightest have an edge."

It's fitting that the first test of the software and hardware developed by Pedigree came in the sugar-beet fields that dot the Red River Valley. Warner's years growing up on a sugar-beet farm made him know too well that a farmer's profits can evaporate before harvest. A good yield can degrade into a mediocre crop or worse if conditions -- too much heat or moisture, for instance -- go unchecked. Traditional monitoring involves farmers visually inspecting their fields and consulting data sorted by county -- at best a cumbersome and imprecise method.

But tiny sensors equipped with wireless transmitters can stand watch in the field and send reports on beet temperature, humidity, leaf wetness and soil moisture, beaming messages every five minutes via antennas to the Internet. The experiment two years ago to remotely monitor sugar beets in the field proved the sensor networks' effectiveness, a critical step toward attracting investors and customers. A similar project the next year also demonstrated the efficacy of using wireless sensors in the field, this time to monitor wheat fields for dreaded scab, a fungal crop disease that has cost North Dakota farmers millions of dollars in recent years. Wireless transmitters, attached to stakes in fields, sent their wireless signals, relayed via transmitters, home to the farmer for real-time reports to guide decisions about whether and when to spray fungicides, among other things. Those demonstrations, and another to monitor sugar-beet piles, were important in proving the value of what Pedigree's innovators had devised.

They created an easy-to-use combination of software and hardware. The key is a device called a gateway that allows a wide assortment of machines and computers to communicate wirelessly or via the Internet with one another. "We can talk to anybody's stuff," Warner says. "That's how we built our system. We act as a universal translator. It's almost a system of systems." Before netting the Navy remote sensor-surveillance contract, Pedigree was earning a reputation as one of the early leaders in machine-to-machine innovations, with favorable mentions in the trade press, a new face alongside familiar names such as Honeywell, for its user-friendly wireless sensor networks. Earlier this year, tapped as the founder of a pioneering firm in the field, Warner was invited to speak at a national conference about the technology's potential.

The Navy contract, announced in June, will progress over several years as the sensors and networks are built and field-tested in stages. The announcement can help catapult Pedigree as firms jockey for market leadership in a fast-changing industry. "It's a big credibility builder," Warner says of the Navy contract. "Companies are looking for that." Success will come to those who can make wireless sensor networks that are easy and appealing. For an analogy, he singles out the popular iPod. Apple wasn't the first to sell a portable digital music player, but the iPod became a market mega-hit because of its ease of use and stylish appeal. Google did the same with Internet search services. Warner calls it "crossing the chasm." He wants to be able to cross the chasm with devices that monitor or service equipment for mass markets, such as fuel replenishment systems for convenience stores and pumps. Lots and lots of pumps. Even a small slice of such large markets would be lucrative, especially for a start-up firm with 14 employees, a mix of electrical engineers, computer scientists, sales and marketing staff.

Pedigree now has six or seven commercial customers, including the Navy and a convenience store chain that wants a more efficient way of monitoring its underground gasoline tank inventories. "Some big end users, one large equipment manufacturer," Warner says. "The Navy being the largest customer so far." Product development and marketing preparations have finally progressed to the point that Pedigree can now focus more on expanding its customer base, a niche that likely will include equipment manufacturers that want to provide top-notch field service. "We're at the starting line for attracting our markets," Warner says. Grindberg remembers the early days when Warner was working with just one employee, and has enjoyed watching Pedigree take its first steps. It didn't always seem like a straight path to the Naval Air Systems Command, which awarded the firm its first big contract, to implement the remote surveillance network -- something Grindberg never could have envisioned when the tech park emerged in 2000. He gets moments of vicarious achievement, such as when he recently saw Warner demonstrating Pedigree's technology to a group from Microsoft. "Alex represents a technology that by all accounts did not exist seven years ago," he says. "We grew up together."

Running a start-up is full of alternating emotional highs and lows, Warner says. There are moments when a technical riddle is solved, or when a pitch goes smoothly and the prize feels within reach. But there are the corresponding moments, the times when a client pulls back and decides to wait a while longer. Warner is philosophical when that happens. He says success comes from fostering relationships, and breakthroughs can arrive at unexpected moments. He's still waiting to learn the outcome of the sales presentation he was working on the day the phone rang with news of the Navy contract. The bearing people invited him to stay in touch, and his laptop still holds an enticing image of a national map filled with pump symbols, which Warner sees as future Pedigree customers.

Student Focused. Land Grant. Research University.