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Common Currency: Energy, ag, manufacturing - a dynamic trio

Alan Zemek

Disruptive innovation is generally described as innovation that fundamentally changes the characteristics of a market, creates entirely new markets or unexpectedly displaces established technology for the existing participants in a market.

It is also the kind of thing that keeps CEOs of major corporations awake at night, wondering what or who they overlooked that could kick the stool out from under their carefully crafted business models.

Digital cameras killed off Kodak film and Polaroid. Netflix killed the video rental store, and even big box stores like Best Buy are struggling to stay relevant to consumers who can visit their stores to test out the latest electronic gear without having to buy anything, and then order it online from someone else.

There are two ways to survive when disruptive innovation changes the game - be the low cost producer, or be the most productive value added producer in the marketplace. L.L. Bean still employees 450 people at its manufacturing facility in Brunswick Maine, which produces 1,300 pairs of high quality boots a day.

Niche products are nice, but what if resurgence in American economic pre-eminence was possible by becoming both the low cost producer and the most productive producer in the most fundamental industries of all?

Not all disruptive innovation is healthy, and we have experienced a decade- long calamity as a result of innovation run amok in the financial services industry. But I think we're on the mend towards a more prosperous economy as we rediscover our tried and true friends: energy, agriculture, and manufacturing.

Here's why: For 25 years oil production in North Dakota followed a generally declining trend that reflected the general thinking that oil field productivity declines over time to an ever dwindling level of production.

Then in 2005 North Dakota production doubled. In 2007 it doubled again, then doubled again, and then doubled again. For the first time since the early 1970s U.S. domestic on-shore production of oil and gas is rising and rising fast, and the proven reserves keep getting larger and larger.

In the same time, better fuel efficiency standards and the introduction of blended ethanol fuels are dramatically reducing the demand for gasoline. For the first time in decades we are importing less oil and we are now actually exporting significant volumes of refined petroleum products.

But that is just the start. There is really, really big disruptive innovation going on in the natural gas industry. Hydraulic fracturing and horizontal drilling have unlocked enormous reserves of natural gas that now makes it possible for our first class petrochemical, agriculture and manufacturing industries to have access to high quality energy and chemical feedstock supplies at world-beating production costs.

Even more intriguing, Honeywell and other innovative companies are publishing patents on new methane to ethylene conversion technology that could turn natural gas from a basic fuel source into a high value product for production of plastics. If the process proves commercially viable, it could lower production costs by 40 percent from current technology.

Energy, agriculture, and manufacturing; Welcome back guys! We missed you.

Alan J. Zemek is a Park Rapids area developer and author of "Generation Busted: How America Went Broke in the Age of Prosperity." You can follow his blog, or comment on this article on his website, www.genera