People are like water, they follow the easiest path downstream. If you want to introduce a new product in the market you better make it VERY EASY for the customer to acquire. Otherwise you will find yourself soon out of business.
Perhaps it would be useful to make sure that greentech, as a product, covers the basic principles of commercialization.
How do you make a product “easy to acquire”?
First of all, there should be a group of people which you recognize as your “target market” and they should have a real (or created) need for your product. Second, you have to design a very easy path for their money to reach your account and for the product to reach their house or office (or whatever other place they will need it). Whereas you accomplish this by placing your product in the most visible shelves of the top retailers or by having a super well designed website with a full feature checkout process that accepts all sorts of payment methods. The customer needs to feel at ease spending that amount of money in exchange for that product.
Perhaps you think the aforementioned concepts are very simple and easy to follow, but many greentech initiatives lack these principles (at least according to me!)
Look at “alternative energy” as a product. Is it “easy to acquire”? The short answer is: NO. Is there a group of people that want to “buy” it (target market): YES, count me in! Is it affordable? Right now, NO. Can it reach your home or office easily? Right now, NO.
So, can we change the commercialization strategy for “alternative energy” to make it VERY EASY to acquire? YES, I believe so.
The biggest hurdle for alternative energy is competitive pricing. Neither I nor thousands of others are willing to pay more for our electricity than what we are paying right now. So, should we wait for the technology to become more cost efficient or is there something that can be done now?
IF WE INCLUDE THE CONSEQUENCE OF STAYING WITH OIL AND COAL (THE ENVIRONMENTAL IMPACT, PUBLIC HEALTH, AND PERHAPS A FUTURE ENERGY CRISIS) INTO THE EQUATION, THEN WE SHOULD BE ABLE TO MAKE ALTERNATIVE ENERGY COST COMPETITIVE.
One way to achieve this is by implementing the “cap and trade” system. A central authority (usually government) sets a limit or “cap” on the amount of a pollutant that can be emitted. Companies that need to increase their emission allowance must buy credits from those who pollute less (or “trade” with pollution off setters).
By taxing the pollution and giving incentives to the “problem solvers” we could shift the market balance towards alternative energy, making it easier to acquire.
There are BIG RISKS when the balance of the market is pushed artificially. For example, what will happen if, after implementing the “cap and trade” system, a new more efficient source of energy becomes available? The capital available for new power plants is limited, if most of it is captured by the less efficient method, just because it was available before the other one and it leveraged on the “cap and trade” advantage, then we would have created “false demand”. Eventually, the company with the more efficient product could disappear and the company with the less efficient, but sooner to market, product could become the market leader.
On the other hand, it could be a very long road to mainstream for alternative energy if we don’t put some incentives in place. The possible consequences of this scenario are VERY FRIGHTENING. If we wait for alternative energy to become competitive by itself we could risk a worldwide energy crisis or even worst consequences (depending to which scientist you want to believe).
Like everything in life, there should be a balance. Regulators will need to be very smart and flexible and individuals will have to accommodate certain changes in their “consumer patterns”.
Aside from “alternative energy” there are thousands of products and services in the greentech universe that need help to make them “easy to acquire”. It could be argued that money is always the problem solver. But, greentech (unlike Internet, for the “dot com” boom) is not distributed across the world instantly. Most greentech products are born out of an idea, then they require a proof of concept, then it needs to be tested in the field, eventually it should have market acceptance and finally it needs to develop a distribution network to become accessible worldwide. And, although, this process takes considerable amounts of money, they also require “connections”. The inventor needs to connect with strong management; the company needs to connect with an ideal testing site; then the company needs to connect with the best initial market that will help launch its product; many times the company needs to connect with the available incentives for its product; and finally the company has to connect with the best fitted distributors for its product.
Here in Miami we are launching an initiative, which I hope will tap into this opportunity. Our intentions are to help companies “connect” with management, test sites, market, incentives, and distributors as well as finding available sources of funding for promising greentech products and companies. This initiative is in its VERY EARLY stages, but I have the hope that it will become a model of the types of initiatives that can be undertaken by the private sector in each city.
I will keep you posted of future developments in this area.Until next week, SHALOM!
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4 comments:
Agreed that the user is price sensitive albeit many want to do the right thing.
As to the price signalling, the externalities not being paid by the fossil fuel industry has been helped by the very strong and tenacious lobbies of the carbon club, the coal lobby, the auto industry lobby...
Additional price signalling perversion comes in the other many subsidies that exist. Take for example the military budget to station American warships in the Straits of Hormuz to protect oil shipments. The cost of this protection is borne by the American taxpayer and not by the oil companies whose product is being protected, thus not directly reflected in the price. Additionally Americans are also subsidizing security of product for many other countries shipments providing a subsidy for those countries on the backs of the American taxpayer.
The politicians are like the target market you mention in the article. You have to make it easy for them, pave the road for them and give them the incentive to act. Creating new cleantech jobs in America with American taxpayers money sounds like a better solution than continuing to use taxdollars to promote an industry where the tax dollars are spent elsewhere and the profits are being massively transferred to other countries as a start.
Andrew:
I agree with your comment. There is a Political side to this equation that should also be taken seriously.
Powerful lobby from Oil and Auto (and other well established industries) and political games are big hurdles for a positive outcome. Thanks for reading!
Sami Shiro
From LinkedIn:
On 11/14/08 11:49 AM, Todd Burger wrote:
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Agreed. One problem I see is the rush of money to green innovators without perhaps enough focus on market introduction. For wind and hydro companies, navigating public concerns over siting is essential. Recent experience suggests that green cos. are acting like novices in this process. For solar innovators, the barrier may be more with intermediaries -- product integrators and certified installers. Getting new product introduced in this segment is no easy feat. Knowledge of both residential and commercial construction and what works and what does not is important. If a company thinks it can just partner with Home Depot or Lowes installers and all will be fine, think again. Often Big Box retailers attract the bottom of the barrel in the installer segment. Give them something high-tech to handle and you may be about to see your product's image in the marketplace unnecessarily tarnished.
Sami,
There are a few more consideration to the "connect-ability" of Greentech. The subsidies that Americans pay for petroleum extracted from potentially hostile nations is more myth and hype than fact. The truth is that the monarchies, religious republic and dictatorships purchase US Arms at an fantastic rate. The problem is that they don't purchase much else from U.S.
In colonial times, the economic trick was to supply the sources of raw goods with finished goods of greater value. Net profit in the end. When this equaision is reversed, the true mathematics start to effect the party that has the greater outflow of currency. The only cure is to control the price in a manner such that the raw material is exported in a volume that inhibits rapid fluctuations. Doesn't all of this sound familiar?
Greentech threatens to upset this delicate balance. You can make an argument that the Oil Producers should heavily invest in such new innovations (and they have), but in order to make the kind of progress that changes in the global climate seem to suggest, the modifications need to be made in China and India not North or South America, Europe or Africa.
China and India are not oil rich and even if they were, their populations would quickly consume all that you could supply. What is needed is a rethinking of the switches that form the connections that you previously mentioned. The Government of the US is acting as the guardian of the distribution (trade) routes but I can tell you that China and India would be far more effected by our possible failure at the Harmouse (sp) Straights than New Hampshire or Texas.
How can we get the beneficiaries of or military efficiencies to pay their share of the expense? Greentech requires a massive production capability to drive down the initial cost and push ROI to acceptable levels. There aren't enough Americans on the planet to accomplish such a feat in the next 100 years. We need the Chinese and the Indians to start adopting Greentech and deploying the innovations that they are manufacturing.
The U.S. would do well to employ itself at further employing teachers and instructors to move the technology to the next level. Demand for technology can spill into our communities, but it can't originate here in sufficient volume to make the current economy spring to life.
Practicality says that the Indian and Chinese markets would need incentives to adopt such risky economics. The technology comes out of the West, but the muscle is in Asia. How do we work a deal that gives them democratic economic security while assuring ourselves of our physical security?
I do not know this answer to this question, but I am hoping that forums such as these will help us in America to see the reality of Greentech. We already have the technology. Much of it has been proven in many of our academic institutions, but we also have to recognize the politics of business is power. I may be turning the adage about the 'business of politics being business' on its ear, but my little play on words is still true.
We really do have to hope that the new administration has a deeper insight than the previous one and that the kind of thing that Pickens is trying to accomplish allots for this new radical kind of thinking. In the end, no business can stay in business if it can't satisfy its customers. Investors need to be ready to look at how to recoup investments in intellectual properties that can be deployed as new kinds of factories in very old communities; new kinds of products that can be deployed in those same regions and new forms of clean energy that power those factories.
If the incentives that the new government wants to deploy are going to be effective, they have to encourage American heads of households to send their children to school. In addition the schools have to internationalize their curriculums at the public school through the State U levels. Our goals should be to develop the skills necessary to sell our technologies globally. This means we need to underwrite efforts that identify and prepare markets for our offerings by giving Americans incentives to take the necessary risks anyplace and every time we encounter such opportunities.
That is my take on the issue. I'd love to hear back from you.
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