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A friend in the industry sent along word of an interesting business model innovation from electric car pioneer Tesla. The company is now offering to send roving mechanics, or “service rangers,” to its customers on house calls as needed for diagnosis, maintenance, and repair work at the rate of a buck per mile traveled. This "geek squad" for cars makes the experience of owning a (still extremely pricey) Tesla more convenient and more secure, and it keeps Tesla from having to build out a nationwide network of service centers. 

Tesla’s cars are pretty wired – a central computer monitors all systems and produces diagnostic reports – which should make on-the-spot service easier. Furthermore, electric cars are much simpler machines than their gas-powered brethren; the powertrain is much cleaner and more streamlined. There is no need for oil, spark plugs, hoses, pistons, etc, so there is less that can go wrong and less need for a full-on garage for many repairs. Finally, unlike the established automotive companies, Tesla is not encumbered by a pre-existing dealer / servicer network and therefore has the ability to innovate its maintenance model in interesting ways like this one.

Taking a step back, this is another in a series of intriguing moves by Tesla to go beyond simply providing a very cool but very expensive electric car to focusing on the customer’s entire experience of use. In addition to this servicing concept, the company has also started providing charging stations to its customers. We have long touted the comprehensive system of electric mobility that Better Place is constructing (most recently in the Harvard Business Review, here) as a key step towards enabling the electric vehicle revolution, and we have issued warnings about Tesla’s strategy of targeting the high end of the market out of the gate. But if Tesla can continue moving towards a Better Place-lite comprehensive value proposition, and if it can successfully launch lower-priced models as it promises, Tesla may find itself making an awful lot of house calls in the years ahead.

Over on the Harvard Business Review Editors' Blog, Gardiner Morris takes a look at the money that President Obama and US Energy Secretary Stephen Chu have been promising to spend on energy research projects and innovations in the energy sector. Morris argues that while this money is necessary, it's not sufficient to get the clean-tech economy up and moving. He cites the recent HBR article by Innosight's Mark Johnson and Josh Suskewicz, "How to Jump-Start the Clean-Tech Economy" as he discusses the need for the systems that will make this sector take off -- the "infrastructure, business models, and regulatory regimes that clean technologies will need. 

In their article, Johnson and Suskewicz write:

Edison didn't just invent a light bulb. He created a coherent commercial system to support it. He designed a technical platform that included generators, meters, and transmission lines; he piloted the project in an ideal test market (lower Manhattan, teeming with enthusiastic early adopters); and he used his clout to get the regulatory support he needed, fighting off the lamplighters' union, among other things. In short, he imagined the business ecosystem his light bulb would need and set about methodically creating it. 

The HBR article itself is still (as of this posting) free at the link above. We invite you to read it and join the conversation: what do you think it will take to get the clean-tech economy jump-started?

• Tide Turns 'Basic' for P&G in Slump, By Ellen Byron - WSJ.com

  Interesting story of how P&G learned to "love the low end" not by introducing a new low-end brand but by the riskier bet of introducing a low-end version of a premium brand.

• A123Systems Awarded $249m Federal Grant, by Sean Sposito - The Boston Globe

  Federal stimulus money finds its way to a Boston-area electric battery company, but the batteries will be made in Michigan. Story notes that another Boston start-up, Boston Power, which had planned to manufacture batteries in Massachusetts, got none of the stimulus money.

• Culture at Netflix | SlideShare.net

  Lengthy slide deck released by Netflix offers insights into its recruiting and talent management, optimized for innovation. Example: "We're like a pro sports team, not a family. Coach's job at every level of Netflix is to hire, develop, and cut smartly, so we have stars in every position."

• Le Whif: Inhaled Chocolate

  Inhaled chocolate -- a new product meant to offer benefits of chocolate without the calories. Illustrates the principal of "de-featuring"!

  
  

• "The Plural of 'Anecdote' is not 'Data' " by Suw Charman-Anderson | Strange Attractor blog, Corante.com

  Illustration of the dangers of data extrapolation for innovators (and everyone else, to). Twitter and online advertising are "pointless" to teens, says a 15-year-old intern for Morgan Stanley. Says Anderson, "the important thing about businesses like Morgan Stanley, and the journalists who write about them, is that they are supposed to be able to tell the difference between data and generalisations."

• "Thinking about 'Design Thinking' " by Fred Collopy | Manage by Designing blog, Fast Company

  Collopy feels that "design thinking is an unfortunate term for describing what designers have to offer to other disciplines, which seems the most common reason for using the term." Instead, he would propose "to invite lawyers, doctors, politicians and business people to design rather than to engage in design thinking...the product of the former is more likely to be perceived as — and to be — an actual design, rather than a plan, a report, an idea, or some other conceptual or intellectual byproduct."

• "Incandescent Bulbs Return to the Cutting Edge" by Leora Broydo Vestel | NYTimes.com

  Epitaphs were written for incandescent bulbs after Congress passed the 2007 bill mandating tough efficiency standards favoring CFL bulbs. Yet as often happens, the new constraint has switched on innovation in incandescent bulbs: "“There’s a massive misperception that incandescents are going away quickly,” said Chris Calwell, a researcher with Ecos Consulting who studies the bulb market. 'There have been more incandescent innovations in the last three years than in the last two decades."

• "The Extraordinaries: Will Microvolunteering Work?" by Linton Weeks | NPR.org

  Describes the new trend of "microvolunteerism." If you have a small chunk of time available, you can volunteer for a small task that can be done via smart phone, such as adding identifying tags to photos and videos for a museum. "Says Jacob Colker, 26, co-founder of the San Francisco-based Extraordinaries. 'We hope people might look differently at that ride on the bus and not just play video games.' "

   

• Retailers Cut Back on Variety, Once the Spice of Marketing by Ilan Brat, Ellen Byron and Ann Zimmerman | WSJ.com

  Will this affect the increased pace of incremental innovation in consumer packaged goods? "In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores by at least 15%, industry executives and analysts say. This is a challenge for manufacturers, who have grown accustomed to churning out incremental variations on popular products to maintain shelf space and keep their brands fresh in consumers' minds."

• IBM Aims for a Battery Breakthrough by Steve Hamm | BusinessWeek

  Article points out the GE, among others, is also making a play in batteries. "Industry leaders have called for just this kind of concerted effort amid concern that the U.S. will miss out on one of the most important technology shifts in history—the switch from gasoline to electricity as the primary power source for light vehicles. The worry is that the U.S. will trade its current dependency on the Middle East for oil with a new dependency on Asia for vehicle batteries. 'We lost control of battery technology in the 1970s,' laments Andy Grove, former chairman of chip giant Intel. 'Battery technology will define the future, and if we don't act quickly it will go to China and Japan.' "

• The 99-Cent iPhone App That Kills Print Journalism by Ray Richmond | The Wrap

  I have it. And it's good enough that it's hard to imagine how a publication could sell online access if it was also available via this iPhone app. Media disruption continues.

• MediaBugs Rethinks Corrections by Taking a Page from Programmers by Zachary M. Seward | Nieman Journalism Lab

  In a move borrowed from open source programming, startup MediaBugs purports to offer an improved, centralized method for media corrections. "Improved" partly because many media sites have no well-defined path for users to point out corrections, nor prominent place to publish corrections for readers to see.

The modernization of our electricity infrastructure – the so called Smart Grid revolution – is underway, and not a moment too soon. As an interesting overview in a recent Wired made clear, the grid was cobbled together in ad hoc fashion over the last century, and is largely one-way, mechanical, and dumb. That’s why a storm in Ohio can plunge New York City into darkness; why, as energy guru Amory Lovins preaches, every electron saved at the point of use offsets the production of three to four times that many electrons at the source (e.g. a coal fired power plant); and why the Department of Homeland Security is so concerned about terrorists targeting our power infrastructure.  In short, our archaic patchwork of a grid is vulnerable, inefficient and unreliable. It is quite damaging economically and environmentally.

Smart Grid – the application of computing and two way control to the electric infrastructure – is the solution, but it is a massive undertaking (the Obama administration has pledged upwards of $40 billion as part of the stimulus package alone). History has demonstrated that infrastructural shifts of this sort tend to be massively inefficient.  Our research suggests that a great deal of this inefficiency stems from the widespread inability of incumbents and start-ups alike to create the new business models required by new markets.

In short, grid modernization will yield immediate gains in control, efficiency, and security – at a considerable cost. We’d like to see that cost offset by the advent of new business models that open up new avenues of growth.

Indeed, Smart Grid promises to enable a number of new business model opportunities. It is widely considered the missing link that will make renewable energy work: the promise of decentralized renewables is blunted by our current grid, as it does little good to have solar panels on your roof if you can’t sell excess energy back to the system. Someone has to design a scalable system that enables widespread deployment.

Another Smart Grid development we’ve been monitoring is demand response. Companies like EnerNOC optimize energy use throughout an opt-in network of office parks and industrial plants. It turns out that as much as 10 percent of the overall cost of electricity – and a similarly outsize proportion of the pollution – comes from just 1 percent of electricity generation. This is because our grid functions in an incremental, as-needed fashion; we operate at just enough capacity at all times. The grid strains and sometimes breaks on hot summer days when everyone turns on their air conditioners at the same time. To meet the excess demand, power companies have to rev up old, dirty, and expensive backup generators. EnerNOC and its peers practice “peak shaving”; they reduce systemic load at critical times by coordinating lower energy usage across their network, which in turn enables power companies to avoid using their most expensive generators.  Everyone shares the savings that result.

We’ve been excited about demand response for some time because it uses an innovative business model to solve a pressing problem. Rather than simply extending the old and expensive model by building a new power plant, we can now manage the grid in a more intelligent and much more cost-effective way.

The utilities analyst at a leading green mutual fund recently pointed me towards an innovation that makes demand response even more exciting. A company called Ice Energy is adding a relatively low-tech piece of capital equipment to the equation (pictured above); they attach a chiller to conventional air conditioning systems in the buildings they manage that freezes water at night when electricity is cheap (and relatively clean). They then use the ice to moderate temperatures during the day, when electricity is expensive. The company claims that air conditioning accounts for 40 to 50 percent of a building’s peak energy use, and that their system can cut air conditioning electricity requirements by 95 percent.

We like this approach because it wraps an innovative business model around existing technology to get a job done. This is akin to Netflix making DVD-by-mail work, rather than focusing on Blu-Ray or digital delivery, or, in another cleantech example, Better Place building a recharging and battery swapping infrastructure that enables electric mobility with today’s limited batteries. Innovative business models that make proven technologies work better are not at the whim of unpredictable technology development and uptake. They are, in other words, the most predictably efficient way to achieve transformation.

Last week First Solar, one of the world’s leading solar power companies, announced that it was buying start-up OptiSolar’s portfolio of impending projects for $400 million. OptiSolar had appeared out of nowhere last year to ink massive contracts with utilities, including a record $550 million deal with PG&E, and seemed poised to become a major player in the industry. I and others wrote admiringly about their differentiated, fully integrated business model – whereas most solar power companies simply make solar modules that they sell to contractors and developers, OptiSolar planned to control their full value chain – they would actually build and operate power plants using their panels.  

• Council on Competitiveness President to Senate Energy Committee: "America Leads in Innovation, but Is Bleeding Opportunities" - MSNBC Wire Services - msnbc.com

  Deborah L. Wince-Smith, president of the Council on Competitiveness, called for "focus" on turning energy research and development into real economic value.

• Firepower of the Lowly Caulk Gun - WSJ.com

  More effective in conserving energy than any green solutions on the market now is measuring where air is leaking into and out of a house and caulking those spots.

• The Music Industry's New Internet Problem - BusinessWeek

  Turns out that a large group of consumers would rather listen to streaming services than buy even mp3s, let alone CDs.

• TaylorMade's Innovation Test - BusinessWeek

  "The only way you are going to innovate," TaylorMade CEO Mark King says, "is if you build chaos into the system."

From MIT's Technology Review: Wilbraham, MA-based FloDesign Wind Turbine has developed a wind turbine that could generate electricity at half the cost of conventional turbines. The company's design, which draws on technology developed for jet engines, circumvents a fundamental limit to conventional wind turbines. Typically, as wind approaches a turbine, almost half of the air is forced around the blades rather than through them, and the energy in that deflected wind is lost. At best, traditional wind turbines capture only 59.3 percent of the energy in wind, a value called the Betz limit. FloDesign surrounds its wind-turbine blades with a shroud that directs air through the blades and speeds it up, which increases power production. The new design generates as much power as a conventional wind turbine with blades twice as big in diameter. The smaller blade size and other factors allow the new turbines to be packed closer together than conventional turbines, increasing the amount of power that can be generated per acre of land. It's plausible that such a design could double or triple a turbine's power output, says Paul Sclavounos, a professor of mechanical engineering at MIT. This design could potentially halve the cost of generating electricity from wind.

Yesterday’s panel discussion at MIT offered what moderator Jim Poterba, former head of the MIT Economics Department and current NBER president and CEO termed “a real treat.”

Bob Solow (MIT) and Greg Mankiw (Harvard), two world-renowned economists who also hold opposing political philosophies, met to offer and discuss their perspectives on the most pressing economic topics the 44th president of the United States has to consider.

The numerous topics included the current state of the U.S. economy, income inequality, healthcare, foreign trade, energy, unions, and immigration. Yet despite pronounced differences in their political views, Solow and Mankiw were aligned in two major points.

First, they agreed that the grievous financial situation needs concerted action right now. The good news is that the U.S. is not experiencing a productivity shock; i.e., no part of our industrial base is destroyed physically. Recovery will thus happen with almost perfect certainty, even if the time horizon is unclear at this point.

Second, both researchers agreed that two sectors of the economy are of much more long-term importance: healthcare and energy. These two fields demand dedicated attention, since they directly affect the U.S. social safety net and national security. These two sectors also show enormous potential for growth.

Even the more conservative-leaning Mankiw recognized that President-elect Obama not only has access to a pool of highly-regarded economic advisors, but that he is in fact very likely to actually listen to these economists – which both Solow and Mankiw can also agree is a good thing.

So, if you are an innovator coping today with the imponderability of the current state of the economy, don’t get entirely caught up in it. Focus on healthcare and energy as two spaces where tremendous opportunities lie ahead.

Yesterday I posted an excerpt from the Oct. 29 Strategy & Innovation feature, The Innovator's Survival Guide. The Oct. 29 newsletter's two shorter articles (both by Josh Suskewicz) cover green issues.

Innovator's Insight: The Red Hot Solar Power Industry offers a disruptive-innovation take on the current solar industry. An excerpt: 

Evolving energy industry dynamics continue to propel solar power up a truly compelling disruptive trajectory. As the signals become increasingly clear that solar will indeed be a significant energy technology, billions of dollars of investment have poured into solar technologies and the pace and scale of innovation has exploded. The money flowing into solar is funding the development of distinct — and soon-to-be competitive — technology classes. All the while, the value chain is maturing as businesses targeted at unique links in the solar power ecosystem spring up and established players integrate backwards and forwards. The industry is still young, and has not yet settled on a dominant technology or business model. That leaves it particularly vulnerable to the current financial crisis. We still believe in solar’s potential, but recognize that the crunch will hinder the industry’s aggressive, capital-intensive expansion plans and could also lead to a reduction in the government subsidies that have supported the industry as it has grown. A shakeout looks inevitable. So, given this convergence of massive opportunity and impending challenge, how can we begin to sort out the legitimately promising businesses from the also-rans? At Innosight, we’d look for two differentiators: disruptive technologies, and innovation efforts focused on the business model.

Innovator's Update: Cleantech Hits A Speed Bump discusses how the current economic downturn might affect cleantech companies and finds that a sound commercialization model is the key to survival amidst tighter capital markets and distracted consumers. Excerpt:

Within the last year we’ve written a couple of Innovators’ Insights on companies participating in various aspects of the clean technology and alternative energy sectors. Given the continued attention paid to all things green, the rapid expansion of the industry, and the deteriorating economic climate, it’s worth a look to see how these companies are faring. First, a March 2007 Insight singled out electric car companies like Tesla Motors for “cramming” new technology into old models, and suggested that Neighborhood Electric Vehicles (NEVs) like Chrysler’s GEM had a better chance of success. Indeed, in the last few weeks Tesla announced yet another production delay, major layoffs, and the ouster of its CEO. Tesla has yet to find firm footing in the face of the age-old challenge of getting new-to-the-world technologies to perform seamlessly at the high end of an established market. All the while, NEVs have been expanding their presence in much less demanding settings like enclosed communities and small towns, and received a good deal of press coverage over the summer as gas prices spiked. Next, in “Going Green Disruptively” from November 2007, we took a look at the rapidly expanding cleantech market as a whole and urged caution because billions of investment dollars seemed to be chasing new technologies rather than new business models. That kind of scenario has played out in too many situations that later came to be seen as bubbles — the Internet gold rush, for example — and given that context, the odds of success for technology investments seemed frighteningly low. The article outlined three potentially winning strategies amidst the general tendency to focus on cramming new technologies into old paradigms. How are the companies cited holding up?

To read these articles, just follow the links above (free registration required). To see links to all of the Oct. 29 Strategy & Innovation articles, go here.

MIT chemistry professor Daniel Nocera (pictured at lower right) and post-doc Matthew Kanan recently unveiled a discovery that may represent a major energy breakthrough: a new compound that promises to enable large-scale adoption of truly decentralized, at-home solar power. The researchers focused on harnessing solar energy, since it enables clean, carbon-free power generation and is abundantly available. In this video clip on the discovery, Nocera puts the promise of solar in context: “In around one hour, the amount of sun that hits the face of the earth is what we use in an entire year globally for our energy.” (See the MIT Technology Review cover story on Nocera's research here.)

Until now, however, solar has been constrained by its inherent intermittency; power is only generated when the sun is shining, and storing any excess power produced during the day has been prohibitively expensive for at-home use. Batteries are costly, and solutions such as compressed air storage do not represent feasible options in small-scale applications. In places where the energy infrastructure allows it, excess power can be sold back to the grid, but this stop-gap solution is still reliant on the relative inefficiencies of our 20th-century energy system.

In contrast, the catalyst Nocera and Kanan discovered represents the crucial new component of a simple, inexpensive, and reportedly highly efficient water electrolysis system with negligible maintenance and replacement costs.

How does it work? Excess solar energy is used to split water molecules into hydrogen and oxygen for separate storage and subsequent re-combination in fuel cells when energy is needed.  As Nocera points out in the video linked above, the researchers are hoping that their discovery will lead to homes that capture solar energy themselves by using their efficient process to convert sunlight into chemical energy for use when the sun is not shining.

While the electrolysis of water is a well-known process, it has traditionally been expensive due to reliance on noble metals and the inefficiencies of oxygen extraction in non-benign environments. The new catalyst that extracts oxygen consists of cobalt and phosphate covering a conducting material such as glass or graphite. These materials are widely available and thus cheap. Placed in water, cobalt and phosphate ions form a thin film on the electrode when a positive potential is applied and produce oxygen gas.

The new catalyst works well in neutral water at room temperature and under normal atmospheric pressure – in contrast to the traditional industrial water electrolysis process. The solution looks to create precisely the benign, inexpensive, and easy-to-set-up environment preferable for at-home use.

Scientists have been able to extract hydrogen from water easily for a long time, but only the simultaneous extraction of oxygen avoids the production of undesired hydroxide. Hydrogen is typically produced using platinum-based electrodes, but Nocera also announced plans for a full system design that includes a replacement for the noble metal, which would decrease the price of the energy storage system further.

Two additional aspects make the technology even more elegant. First, the cobalt and phosphate ions on the cathode exhibit a “self-repair” interaction that allows for repeated use. Second, the inputs – energy and water – ultimately yield energy and water again. Since this water can then be reused, an entire closed-loop system might be within reach.

The impact of Nocera and Kanan’s discovery can only be forecasted at this point. James Barber, professor of biochemistry at Imperial College London, gushes: “This is a major discovery with enormous implications for the future prosperity of humankind. The importance of their discovery cannot be overstated since it opens up the door for developing new technologies for energy production thus reducing our dependence for fossil fuels and addressing the global climate change problem.”

Notwithstanding, as with any emerging technology, this energy storage enabler needs to be vetted in further research and prove its economic potential for scalability. Also, the storage of hydrogen and oxygen and their recombination in fuel cells needs to become safer for reliable at-home use.

Nocera, though, is convinced: “This is the nirvana of what we've been talking about for years. Solar power has always been a limited, far-off solution. Now we can seriously think about solar power as unlimited and soon.”

Indeed, this technology could be the final link in an emerging energy system that includes distributed photovoltaics and fuel cells, electric cars, and new regulation that favors at-home energy generation.  Commercializing this system will be a challenge (though we have theories on the best way to do this – see this article and chapter 5 of The Innovator’s Solution), but true clean energy decentralization, which promises enormous efficiency and environmental benefits, could be closer than commonly assumed.

Highlights of Day Two of the Business Innovation Factory Summit (BIF-4) were a couple of speakers who are using innovation to try to change the world. The day kicked off with the unexpected — a venture capitalist who’s still somewhat bullish. David Berry of Flagship Ventures pointed out that VC optimism in the current economic climate depends on what the fund invests in (technology not so good; better is life sciences and energy, where Flagship invests), how they structure the exits (IPO not so good; M&A better),and where the VC is in their fundraising cycle (not so good if you’re trying to start a fund now; better if you just closed a fund). Flagship has started a company called LS9 that makes a biofuel using e coli as a building block, re-engineered so “sugar goes in and oil comes out that’s chemically identical to what goes into your car – a renewable petroleum that we can make domestically.”

Later, Cat Lainé of the inspired us all with a talk about how AIDG is innovating for people in the “bottom 4 billion,” working to improve lives not by directly eradicating disease with new vaccines, but by infrastructure improvement. AIDG brings renewable electricity and solar hot water to families and agricultural workers in developing countries. The idea is that simple infrastructure improvements have a dramatic effect on quality of life, and set the stage for people to improve their lives. Business incubation and collaborative innovation are the tools AIDG uses to create the environment where small businesses can manufacture, install, and repair simple infrastructure technologies for people who live in $2 to $4 a day.

Other bloggers at BIF-4 posted far more extensively than I have. You can find blog coverage here and Twitter stream here.

Last week the Wall Street Journal noted that light-emitting diode (LED) technology has now reached the point that LED lights will begin to show up more and more in daily life. According to the article, "prices for LEDs on the market today can be more than five times what an incandescent bulb costs. However, the LEDs use about 85 percent less energy and last 30 times longer. They also use about half as much energy and last five times longer than compact fluorescent lights."

The article also offered an interesting look at how LED makers are managing the adoption curve on this promising yet still expensive technology. Quite rightly, they are first targeting commercial and industrial customers whose jobs-to-be-done involve leaving lights on most or all of the time, and have to pay time and labor costs to change bulbs. "Longer-lasting lights that use less energy thus offer them significant savings over time," notes the article. "Then, as sales increase, creating economies of scale and bringing down production costs and prices, the industry will expand its marketing to residential customers in a push that many observers expect will make LEDs the lighting of choice for years to come." The article's well worth reading, as it goes into much more detail about strategies for driving wider adoption of LEDs.

The illustration at top left shows one of the places in the consumer market LEDs have begun appear widely: Christmas lights. In the context of the adoption strategy the article describes, this makes perfect sense — people generally leave their Christmas lights on for long stretches of time and certainly don't want to have to change bulbs often.

We’ve written a number of times [here and here and here] about the emerging industry dynamics that are propelling solar energy up a truly compelling disruptive trajectory. As the signals become increasingly clear that solar will indeed be a significant energy technology, billions of dollars of investment have poured into the industry and the pace and scale of innovation has exploded.  

A terrific recent post on Treehugger.com, a leading cataloguer of emerging sustainability innovations of all kinds, recaps 15 exciting advances in photovoltaics over the last year. The majority of the advances relate to the ongoing conversion efficiency race, as companies and labs working with different base technologies seek to design cells that convert sunlight into power in ever more effective, and therefore cost-effective, ways. Conventional silicon-based solar cells are getting closer and closer to their target of grid parity, at which point they figure to displace conventional sources of electricity without relying on government subsidies and incentives. 

Meanwhile, disruptive thin film-based solar panels are nearing “good enough” efficiency – performance rates at which they become economically viable. Some, led by industry pioneer First Solar, have already reached that point, and have grown astronomically as a result. 

Beyond the efficiency race, the Treehugger post recounts exciting adjacent developments like radically new approaches to mounting solar cells and breakthrough printing processes to mass manufacture them.  

With all these exciting developments, how can we begin to sort killer businesses from the fascinating technologies that will never make it out of the lab? We’d start with a couple of core disruptive innovation principles.

First, we’d like to see innovation efforts directed at the business model as well as the technology. Historically, business model innovations that make the consumption of a new technology easier, cheaper, more accessible or more convenient have been the best predictor of success in an emerging industry. Think of the way that Apple created iTunes to definitively separate the iPod from all the other MP3 players.

Some technologies are different enough from the herd to really lend themselves to new business model approaches.  One can imagine all sorts of avenues for CoolEarth’s solar balloons, for example.  By freeing solar collectors from their rigid mounts, CoolEarth can take the capability to produce clean and renewable power to new contexts, such as the developing world.  

Second, we’d look to ride disruptive waves.  Industry leading silicon-based cells have plenty of headroom to grow, and many of the companies that make them will likely enjoy lots of success in the years to come, but thin film manufacturers are nipping at incumbents’ heels. There are signals that the disruptive wave is picking up steam: SunPower, one of the foremost silicon-based incumbents, received a huge new order a few weeks back from California utility PG&E; significantly, though, they only got a fraction of the contract – the lion’s share went to new thin film player OptiSolar. 

The advantages inherent in the thin film paradigm (flexibility, lower cost manufacturing via reel-to-reel “printing” rather than semiconductor fabrication) will assert themselves as technologies approach economic viability. Thin film will exert more and more cost pressure on conventional solar, and could also open up new markets that silicon-based cells just can’t reach.  

Meanwhile, the next disruptive wave after thin film is beginning to gather, as so called organic solar cells being developed by companies like Konarka make their way into initial foothold applications. 

So, how should one monitor an explosively dynamic, fast moving, ascendant yet bubble-prone field like solar? Try to spot developing waves, watch carefully for signals that disruption is underway, and all the while pay special attention to companies that innovate with their business models, not just their technologies. 

Stuttgart is “going green.” The German city recently signed a letter of intent with Ultra Motor to implement an infrastructure to support eco-friendly scooter-bikes. Launch is expected in 10 months and the idea is catching on; according to BusinessWeek, Ultra Motor is currently in negotiations with 12 other major European cities.

Driving this effort is Ultra Motor’s new A2B Light Electric Vehicle (LEV) — a scooter-bike with a conscience. The tagline even has an anthropomorphic ring to it: “The heart of a bicycle. The soul of a scooter.”

Experience LEV technology: Hop on a comfortable seat surrounded by a lightweight, aluminum frame. Enjoy as much exercise as you choose by pedaling or cruising at 20 mph. Want to ride further? The standard range of 20 miles can be extended to 40 with the addition of a lithium ion battery pack. New technology provides one-third more force than electric motors; helpful when ascending hills or darting through traffic. A dashboard indicator signals energy remaining. Dwindling charge? Simply plug in.

Current customers of the A2B vehicle include commuters, students, employers, fleets, and local authorities. However, through our lenses, jobs define the marketing strategy and are linked to attributes:

Social job: “Have a positive impact on the environment”
The A2B is a zero emissions mode of transportation, powered by a lithium ion battery. The vehicle efficiently functions at approximately one-tenth the running cost of a gas-powered scooter.

Emotional job: “Allow me to enjoy my commute”
The rider is able to enjoy the outdoors and a quiet ride. The extended driving range provides freedom and the vehicle is easier to handle than a gas-powered scooter. Modular storage options are also available.

Functional job: “Provide a way for me to reduce transportation costs”
Savings are self-evident — no gas required. The A2B model is currently available in 20 states across the U.S. for about $2,200. In Stuttgart, a monthly subscription will cost $23; a mass transit pass costs $84.

In the spirit of business model innovation, Ultra Motor is exploring new networks of transportation, one of which will be utilized in Stuttgart. The “LEV City Initiative” outlines this potentially disruptive system featuring charging stations; purchase a subscription, locate a station, swipe your card and enjoy the ride.

We applaud Ultra Motor for encouraging consumers to “go green” in new ways. Learn more from the source at www.ultramotor.com. You’ll notice as the website loads, the screen cleverly notes: “Charging up.”

Statements like “the Dell, Wal-Mart, or Southwest of new industry x” always get us excited because they indicate that an entrant has shifted the focus of innovation efforts from the product to the business model.

Not that there’s anything wrong with technology-based product innovation – it is, of course, essential. But it is also a gamble; pursuing product-driven innovation alone means that you’ll be entrenched in a fierce competitive battle because it is relatively easy to frame a challenge in technological terms. Changing the basis of competition by innovating the business model – as Dell did with PCs, Wal-Mart with retail, and Southwest with air travel – has historically increased the odds for breakthrough success.

That’s why it caught our attention when Fortune’s Green Wombat blog labeled Berkeley-based solar start-up Sungevity the “Dell of solar energy.” Solar power has been red hot, aflame with technological advances and billions of dollars in investment. Getting business model innovation right in this context promises enormous success.

Has Sungevity gotten it right? For starters, their tagline, “faster, easier, affordable solar,” is as close to Disruptive Innovation 101 as you can get. As loyal readers of this blog know, disruption is fueled by companies delivering on speed and convenience, ease of use and de-specialization, cost and accessibility. Doing so removes barriers to consumption, enabling large swaths of consumers who were otherwise locked out of a market to participate – non-consumers, in disruptive innovation terms. And there are certainly a lot of nonconsumers of solar power…just think of all the unused rooftop real estate out there.

Sungevity is looking to put solar panels on those barren roofs. The company is a solar installer; they take the panels produced by giants like SunPower, Evergreen Solar, and BP Solar, affix them to rooftops, and connect them to the grid. This final step in the value chain has, predictably, been beset by inefficiency and variability up until now, because it depends on all too human factors like the availability of good installers who know what they’re doing.

The flock of solar installers that have emerged in recent years are seeking to centralize and simplify this complex and potentially frustrating process. Economies of scale give any company a natural advantage over the independent contractors they compete with, but Sungevity’s clever web-based interface is what really sets the company apart.  The company asks visitors to their site to enter their home address, and then uses software and satellite imagery to come up with customized quotes that outline what a solar power system would cost and what it would produce. This estimate makes the system planning process quick and easy by obviating initial site visits from a contractor.

Crucially, moving the quotation process to the web figures to lower the bar for potential customers who are not yet intent on installing systems. Instead of taking time out of the day to accommodate a sales visit, people can simply plug in a few numbers online. There’s no commitment, no investment, no contractors marching around on your roof who’ll be disappointed when you tell them that you’re not yet ready to commit to laying down $10,000 for the panels.

In addition to mapping out a custom-designed system for your rooftop, the nifty Sungevity site also projects install costs and lifetime energy and cost savings. The site produces images of your house decked out with solar panels and then allows you to enter a credit card number to make the purchase on the spot. In the words of CNET’s Greentech blog, the customer-friendly web interface “reduc[es] a complex sale into a quick online exchange.”  As easy as customizing and purchasing a PC, right?

Innovative service-oriented business models like Sungevity’s that are just now emerging will spur the development of the solar power industry, enabling it to maintain its blistering pace of growth while reaching more and more of mainstream America. When you factor in other clever business model innovations such as solar financing and the cost reductions and efficiency improvements that will emerge from the technological arms race underway in the industry, the picture starts to look very sunny indeed.

Environmentalists, high-tech entrepreneurs, and political opponents of oil-rich nations have long dreamed of the disruptive potential of renewable, clean, and abundant solar power. Impelled by rising global energy prices, an increasing understanding of the geopolitical instability wrought by petrodollars, the initial effects of climate change initiatives such as the Kyoto Protocol, and advances in photovoltaic technology, the solar market is finally taking off. Venture capitalists are pouring money in, Wall St. has sent shares of solar stocks skyward (see SunTech Power, SunPower, Evergreen Solar, Energy Conversion Devices) and governments (Germany, California and more) are committing billions of dollars of public money to solar projects. This trend is observable as far north as grey, chilly Boston, where my local supermarket has installed solar panels on its roof. This is certainly a recipe for significant market growth, but is it a disruptive threat to the global energy industry? Despite massive growth, the fact remains that solar is still expensive and inconvenient. It costs 5-10x as much as standard electricity in the US and requires special installation of delicate, clunky, and often-ugly modules on rooftops or in open spaces. The most optimistic forecasts foresee a minor slice of the world?s energy coming from photovoltaics over the next few decades, up from the current figure of .01%. And at the end of the day, solar power is competing against some of the richest and most powerful companies in the world. That said, solar does meet certain disruptive criteria: the technology has developed in niche markets that value unconventional performance metrics (spaceships, remote villages, highway signs, eco-conscious architecture, hand-held calculators, and, lately, countries looking to minimize their carbon tax bill); in its largest potential market ? remote unelectrified regions ? solar power will compete against nonconsumption; and incumbent energy companies have long dismissed solar as too small of an opportunity for their consideration. So keep faith, environmentalists, high-tech entrepreneurs, and political opponents of oil-rich nations; disrupting the world?s biggest market takes time. Even if solar is not an imminent threat to the oil companies and power plants, it may well be on the verge of disrupting specific niches like roofing tiles, window glass, and batteries in which it can provide "good enough" performance. Next-generation thin-film photovoltaics integrated into building materials will enable structures to automatically and passively generate energy, and building photovoltaic capability into portable electronics (or rechargers of portable electronics) and textiles such as computer cases, clothes, and military tents will obviate the most expensive form of electricity generation in the world ? conventional batteries. This is the classic Disruptive Innovation pattern described in The Innovators? Dilemma: as disruptive technologies gain footholds in more and more niche markets, opportunities for innovation multiply. The ensuing tide of sustaining innovations will make solar power increasingly competitive with incumbent forms of energy generation in the years to come. Solar is marching upmarket, promising widespread disruption.