A History Lesson for the Cleantech Revolution

History teaches us a little-known lesson about innovation: Ideas don’t matter. Good ideas languish all the time.

What matters? Execution. It’s everything—especially, ironically enough, with breakthrough technologies. As the world embraces and demands advances in clean technologies, it’s time to look at what past technology revolutions teach us about the best ways to move clean technology innovations forward.While policymakers in the United States might believe that innovation depends more on ideas than execution, history points to a different lesson. Department of Energy Secretary Steven Chu argued: “Our previous investments in science led to the birth of the semiconductor, computer, and bio-technology industries that have added greatly to our economic prosperity. Now, we need similar breakthroughs in energy.” It was more than spending on science that turned those past ideas into breakthroughs.

While policymakers in the United States might believe that innovation depends more on ideas than execution, history points to a different lesson. Department of Energy Secretary Steven Chu argued: “Our previous investments in science led to the birth of the semiconductor, computer, and bio-technology industries that have added greatly to our economic prosperity. Now, we need similar breakthroughs in energy.” It was more than spending on science that turned those past ideas into breakthroughs.

Examining history offers several best practices for where and how we should invest as we struggle with the challenge of energy security and climate change—and also indicates that policymakers need to shift their agenda and focus when it comes to energy policies. Consider the trifecta of energy revolutions: electricity, the automobile, and the steam engine. Looking at how these life-altering innovations evolved offer simple yet critical insights for how we must move forward.

1. Business models are more important than inventions. Edison’s electric light emerged from his Menlo Park research laboratory in 1881,Yet Edison’s original patent application for the electric light was rejected because—as Scientific American reported at the time—“Edison’s invention was an infringement upon that of John W. Starr, of Cincinnati, who filed a caveat for a divisible light in 1845.”

Knowing this, it is easier to see how Edison’s breakthrough wasn’t the incandescent bulb, it was the business he built around that bulb. Prior to his Pearl Street Station, the market for electricity was limited to those who could afford to buy and maintain entire electric systems. Edison was successful because he built a new business that enabled electricity to be sold like gas — as a utility company.

Technical innovations did not spark the emergence and rapid growth of the electricity sector as we know it. That depended on Edison’s new business model, and its ability to bring investors, customers, and partners together in a way that all could profit.

Business model innovations shape the way clean technologies come to market. Without new business models, emerging technologies in the energy sector must compete directly with old ones—as commodities. To supply utility-scale power, solar and wind must now compete with coal and natural gas solely on cost per kilowatt-hour; in transportation fuels, biofuels must compete with gasoline on cost; and energy efficiency must compete with inexpensive grid-distributed energy. Subsidies change relative costs, but don’t change the game.

New business models are now emerging that enable clean technologies to take advantage of their distinct differences. While heavy regulations and deeply entrenched players are hampering the development of these new business models, companies like Silverspring, IBM, Google and Cisco, for example, are using their technology and political clout to change the game in smart meters. Until we break down the barriers to new business models, science breakthroughs will remain constrained to press releases and demonstration projects.

2. Innovation is about connecting, not inventing. When Henry Ford first introduced his Model T, commercial automobiles had been available for more than two decades, but the market had remained relatively small and more for novelty than function.

The Model T succeeded because Ford and his engineers built a system of mass production that produced a durable and affordable car. It is important to note though that none of the elements of the Ford system were new—Ford’s success—and his ability to go from building 1,500 cars a year to 265,000—came by combining technologies from the bicycles, carriages, granaries, and meatpacking industries and by exploiting the emerging infrastructure of roadways, gasoline distribution, even railroad supply lines. As Henry Ford admitted: “I invented nothing new. I simply assembled into a car the discoveries of other men behind whom were centuries of work.”

Knowing this, to see change on the scale needed to seriously address climate change or energy security, clean technology innovation must be able to scale rapidly and without stumbling. Historically, this can only happen when we are able to connect existing and well-developed ideas, people, and technologies in new ways. Policymakers must recognize that clean technology innovation isn’t always about creating something new; often it is about enabling entrepreneurs and innovators to seamlessly connect what already exists.

The clean technologies that will scale in the next two decades—like wind power or solar photovoltaics—will only have “breakthrough” impacts by scaling up through new combinations of existing production technologies and established distribution, financing, and infrastructure resources.

3. Innovation in action. When James Watt “invented” his steam engine in 1762, steam engines had been in use pumping water from coal mines for almost 75 years. However, Watt’s design cut operating costs by 75 percent and, together with businessman Matthew Boulton, Watt began selling replacements for existing engines in coal mines across England.

While the steam revolution emerged in coal mining, its impact was felt in manufacturing, railroads, and shipping. Watt’s actions—particularly his creation of the separate condensor—enabled the broad spread of steam power by opening the path to build faster, lighter, and stronger engines. Watt, however, fought this spread, fearing the inevitable accidents that came from mixing fire, steam, and the industrial settings. Indeed, for the two decades that the Boulton & Watt Company controlled the patents, little innovation took place and few new uses emerged.

The real impact of the steam engine came when many entrepreneurs were able to work with the technology, and their collective innovations changed the industrial landscape. Building on Watt’s ideas, companies found valued (and ultimately safe) applications for steam power in ways Watt never imagined.

Many clean technology paths remain in the research and development phase as scientists search for improvements to make their ideas competitive in large markets. But history shows the most innovative leaps come from the collective creativity and entrepreneurial spirit of dozens, if not hundreds, of companies actively building and using the technology. It’s called learning-by-doing and learning-by-using, and they’re the most valuable lessons of all.

If history tells us anything about innovation, it’s that progress will depend on enabling the new business models to tap the ideas we already have; that impact will come when we find ways within these new business models to combine old ideas, people, and technologies in new ways; and that the great leaps will take place after these ideas, as businesses, enter the market and tap the collective creativity and entrepreneurship of free markets.

(this post originally appeared at www.kauffman.org/advancing-innovation/a-history-lesson-for-the-clean-tech-revolution)

         

3 thoughts on “A History Lesson for the Cleantech Revolution

  1. I couldn’t agree more, Andrew. American business (and government) have fallen woefully short on execution over the last 40 years. New business models for energy creation have existed for decades now. I was looking through Amory Lovins’ “Soft Energy Paths” recently, and it was a bit of shock to note that he was advocating for a decentralized energy model during the Ford and Carter administrations! Europe is ahead of America in deploying small-scale & residential power generation. With just a little effort, we could begin catching up rapidly. It doesn’t make sense for our government to guarantee billions of dollars in loans to construct one nuclear power plant in Georgia, when that same kind of money could support American manufacture of solar panels and small wind power generators. Our priorities could use a bit of reordering.

  2. Enjoy your work. To me, there is a lot of “implicit” sociology of translation in your writing (a good thing!!). This is Latour and his mates. The ideas have enjoyed some interest in business ed. since Bruno spent some time at the LSE. An ANT version of this piece: good ideas don’t win, powerful allies do!

  3. Andrew,
    I fully agree! The challenge that an entrepreneur like me faces is that investment logic rarely follows the same path. The emphasis for most VCs IS on the IP. The number of VCs and angels that are non-IP focused I could count on one hand.
    Melissa Brandao

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