Wednesday, March 14, 2012

Creating a Future for (American) Cleantech

American efforts to jumpstart the development of a cleantech economy have not been wildly successful to date. While there have been scores of small wins and incremental advances that should probably get more notice, the primary theme has been to place big bets — bets that are starting to turn up sour.

Last year got off to a tough start when Evergreen Solar announced the shuttering of their brand new, publicly-funded, state-of-the-art manufacturing facility in Massachusetts. It was only a few years ago that Governor Deval Patrick poured some $58 million into the company and their much-lauded breakthrough solar technology (String Ribbon). This bid to create local green jobs quickly foundered as the company fell behind commodity Chinese manufacturers, then desperately tried to move production to China, before finally selling itself to a Chinese firm for pennies on the dollar at the end of the year. The Solyndra scandal, of course, was even worse; mere months after an infusion of over $500 million from the federal government that was supposed to fuel a rapid expansion, the company and its much-lauded breakthrough technology (this time, cylindrical CIGS) went belly up, giving President Obama and his cleantech agenda a major black eye.

The simple lesson is that using public money to make big bets on individual companies and their technologies is incredibly risky — especially when China is making similar bets that are orders of magnitude bigger on its companies. By some estimates, China has supported its domestic solar industry with $34 billion in loans; that cash, an ability to rapidly ape western technologies, and the competitive advantages of low-cost labor and limited regulatory restraints allowed Chinese companies to sweep away Western competitor after Western competitor in 2011. Making big bets on emerging technologies and uncertain markets is never a straightforward proposition; doing so in direct competition with much bigger and more sustained Chinese bets is downright suicidal.

How can the United States achieve a better record in the future? By focusing on a straightforward insight: truly transformative industrial changes aren’t driven by technologies replacing technologies, but by systems replacing systems. Our framework for thinking about industry-level systems, which we first described in HBR in 2009 and which draws from Clay Christensen’s work on disruptive innovation, has four components: 1) enabling technologies; 2) business models that successfully commercialize the technologies; 3) value networks, or market ecosystems, that support the business models; and 4) standards and regulations that enable scale. These four elements set the stage for disruptive innovation to emerge, which suggests a more focused approach to national cleantech policy — and a path towards competing asymmetrically with China. Let’s take a closer look at each:

Read the rest at Harvard Business Review.

Josh Suskewicz is a principal at Innosight an coauthor of How to Jump Start the Clean Tech Economy.   Douglas Hervey is a research associate for Harvard Business School professor Clayton Christensen.

 

 

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