Geeks have done their share; it is now up to you, business leaders, to innovate!

5 03 2010

Cleantech Gap, Source: Clean Horizon Consulting

In their recently published book “Wired for Innovation,” MIT Professor Erik Brynjolfsson and Wharton lecturer Saunders contend that: “even if all technological progress were to stop tomorrow, business could create decades’worth of IT-enabled organizational innovation using only today’s technologies.” As a society, we all expect technology innovations to bring more progress to everybody, and at a faster pace. However, we rarely reflect on whether our business leaders innovate enough to match the high expectations we have for the technology community. How many times have you heard of a revolutionary technology vs. a revolutionary business plan?

Humor me on this one: should a technology be discarded because its benefits under the current business model does not overweight its costs? or should it be discarded because we could not think of any business model in which its benefits overweight its costs? Let’s take the electric vehicle as an example. In a previous post, I have shown some reserves regarding electric vehicles adoption because the technology still does not make economic sense in the current business models. However, I also affirmed that it could become a reality, today, with a company like Better Place which offers a revolutionary business model. Electric vehicles only make economic sense if you look at the total cost of ownership i.e. car’s price tag + fuel cost + maintenance cost. Therefore, Better Place knew they needed to find a business model that would leverage this challenge as a strength instead of a weakness. Instead of selling you a car, Better Place will sell you kilometers to drive, which translates into charged batteries. Like with a cell phone, you will buy the hardware (the car) and you will choose a plan that best fits your driving needs. Better Place owns the batteries and will provide you with a network of charging stations to recharge them – monitoring your consumption while doing so. cye88sebwgzu CYE88SEBWGZU

The lack of business innovation is actually a pervasive issue in clean technologies as a whole. Everyday in the news, you hear about technology innovations that could potentially become a game-changer. Yet, only a very few of them materialize in your garden or on your roof top. One of the reasons is what Michael Salomon from Clean Horizon Consulting call the “cleantech gap.” The most revolutionary technology within the current business frame will only give you an incremental advantage. Don’t expect game-changing technologies to succeed without the game-changing business models.

I thus expect tremendous growth to come from packaging existing technologies with innovative business models. We are already witnessing the premises of this trend with the Iphone or Google’s Nexus. Those phones use off-the-shelf technology for the hardware but revolutionary business models to monetize the software. Thanks to them, augmented reality and other amazing breakthroughs are just a few algorithms away. Their success also reveals how difficult it will be for existing large companies to compete against self-organizing communities that are not afraid to try new business models.

In large companies, organizational changes need to happen to foster business innovation. Managers and other management consultants are already too caught up in the everyday firefighting and optimization to expect anything revolutionary from them. It would be like asking your R&D researchers to overlook the plant operations while coming up with the new molecules. A solution? Use methodologies like scenario planning to open your business leaders minds and allow them to take a fresh look at a technology instead of force-fitting it into their current mental models. A bolder one? Why not opening a Business R&D center? If you choose to do so, give me a call. I would love to work there!
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