Thomas Friedman recently wrote about America's real edge being its institutions that nurture innovation. Another advantage is the risk-taking culture and the culture of failure.

It used to be one of the most contrarian aspects of the culture of Silicon Valley -- rewarding failure. Entreprenuers who took risks and developed companies that ultimately failed were seen in the positive. People with real learning experiences that ultimately make them better entreprenuers. In risk management, without failures to model you have models doomed to fail.

We still have one big advantage: risk-taking. More than any other developed nation, the United States encourages people to take economic risks, and our renewed culture of entrepreneurialism has brought us a long way in recent years.

But other places are moving in that direction, too. They have a long way to go, but as the rule of law grows and societies learn to see failure (at least the right kind) as something to value, not find shame in, America's lead even here will shrink.

I'm often asked, when visiting other parts of America and the world, why Silicon Valley has been such an economic powerhouse for so long. I tick off key reasons, including a risk-taking culture; lots of investment capital; smart, well-educated people who work hard; and great research universities. To some extent, the nation as a whole shares those qualities.

America isn't losing any of those assets. But the rest of the world, especially Asia, is gaining all of them, and now has a competitive wage advantage to boot.

With crippling virus attacks becoming a regular occurrence every few months and an unceasing barrage of spam, the market harbours great opportunities for companies offering Internet security products and services. This story profiles three start-ups in this space.

Three Silicon Valley computer security start-ups -- Reconnex, PassMark Security and ServGate Technologies -- are among those attempting to carve a niche in one of high tech's hottest areas. Worldwide computer security sales are forecast to reach $45 billion in 2007, up from about $19 billion in 2002, according to market research firm IDC.

Reconnex has designed a hardware appliance to stop leaks and security breaches -- accidental or malicious -- from employees within companies. ServGate has bundled anti-virus, anti-spam and other security features onto an appliance to protect small businesses or branch offices of larger companies from outside threats. PassMark Security has created a personalized icon to assure customers that a bank or e-commerce Web site is authentic, and not part of a "phishing'' scam designed to steal passwords or account information.

All three companies stress the simplicity of using their products, but each faces challenges as well.

``There's definitely an opening'' for a company like Reconnex, said John Pescatore, vice president of Internet security for market research firm Gartner Group. But, he added, companies tend to worry about cracking down on employee behavior less when the economy heats up.

He said verification systems such as PassMarks are a ``cool thing,'' but that they could be more of an interim solution as user-authentication technology evolves.

Pescatore said ServGate faces stiff competition from others, including networking giant Cisco Systems and security provider NetScreen Technologies, which is being acquired by Juniper Networks. But he said ServGate has done well building sales in emerging Internet markets such as China.

Street Smarts: Learning From JetBlue

One day flying JetBlue, I found myself being served by David Neeleman, the airline's founder. When was the last time you met your customers and asked how you could better serve them?

A farmer wants to be able to maximise revenues from the agricultural produce grown. An artisan needs to get the best price for the handicraft made. An SME needs to be able to sell the goods made. Whether it is for the agricultural, non-manufacturing or manufacturing sector, access to markets is one of the key requirements for creating a virtuous cycle of increasing production, employment and incomes. In our discussion, we shall consider market access for three constituencies: agricultural products, non-manufactured products and SMEs.

In India, most farmers sell what they produce via Agriculture Produce Market Committees (APMCs), which have been set-up across India by the state governments. An example is the Maharashtra APMC. Its website provides more info: “The APMCs were established by the State Govt. for regulating the marketing of different kinds of agriculture and pisciculture produce for the same market area or any part thereof. Every market shall consist of: agriculturists residing in the market area and being 21 years of age on the date specified from time to time by the Collector in this behalf, traders and commission agents holding licence to operate in the market area, and chairman of the co-operative society doing business of processing and marketing of agriculture produce in the market area.”

The APMCs run the marketplaces, also called mandis. Considering that the infrastructure exists, it is possible that the marketplaces could be made more efficient via the use of technology. For example, by connecting various local markets together, it should be possible to increase the transparency of pricing information.

Co-operatives can also help in increasing rural incomes by aggregating the supply from a number of small providers. The Gujarat Co-operative Milk Marketing Federation (better known as Amul) has done wonders in the area of milk and its derivative products. There is a need for co-operatives in other sectors also.

To complement efficient marketplaces, there is also the need for a complementary set of services – logistics, storage and distribution, and food processing facilities. This is where opportunities exist in rural India. A recent CII-McKinsey report, appropriately entitled FAIDA (Foods and Agriculture Integrated Development Action) offers some suggestions:

Despite being one of the largest agricultural producers, including in fruits and vegetables, the growth in India's food processing sector has been slower than anticipated. The worth of the Indian food industry has gone up from Rs.3.09 trillion in 1993-94 to Rs.3.99 trillion in 2000-01. As a part of the agriculture sector, the value addition segment has recorded a 7.1 percent growth in the last seven years, compared to 3.1 percent for farm and livestock segment. While overall products like as wheat flour, fruit juices, ready-to-eat foods, soft drinks, pickles and savouries have grown at over 10 percent annually, the growth is over 20 percent in the organised sector for products like pickles, savouries and 'papad'.

According to the CII-McKinsey FAIDA report, if India is to achieve the Rs.5 trillion food processing potential by 2005, it will have to create market driven linkages across the entire chain through partnerships and virtual linkages, rather than do-it-alone or build infrastructure. The report suggests that the success of companies in this sector lies in developing innovative products driven by consumer insights and delivery with quality, convenience and the right price in mind. "A distributed, asset-light manufacturing model and an innovative distribution system are essential elements of this system," the report states.

It adds that while the direction and potential were clear, the pace of change towards realising this potential is uncertain. Direct access to agricultural produce, a level playing field through tax reform and a revised food law are among prerequisites sought by the industry for faster growth of the food industry potential. This would "push growth of key enablers such as retail, reduce market interference and proactively facilitate industry initiatives and exports", the report states.

While mass-market basic foods were expected to remain the largest segment, value-added products like 'rotis' and ready-to-cook/eat products and condiments were also growing rapidly. In addition there was a growing niche market for exotic product categories in addition to exports. "Exports of food products can become a valuable growth driver for the industry, leveraging the historic base, new specialty categories and other areas where India can build a distinctive advantage and a strong brand," the report stated. In addition to manufacturing, the report sees significant growth in terms of input providers, logistics suppliers and retail.

Tomorrow: Market Access (continued)