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Giving Birth to a New Clean-Tech Industry: the Theory Behind the Headlines

By Mark Johnson, Josh Suskewicz

As the oil keeps gushing out into the Gulf of Mexico, the urgency to move to a clean tech economy mounts—just as it did when, in the wake of another oil spill off the coast of California, Richard Nixon established the Environmental Protection Agency back in 1970. Since then, progress has been frustratingly slow; the country's enthusiasm has waxed and waned, as have the fates of numerous clean tech start-ups.

There's a predictable reason for this pattern, and a way to escape it. Establishing a truly sustainable clean tech economy means not just inventing new technologies, but establishing an entire new industry. And there are rules for how new industries form.

As our colleague, Harvard Business School professor Clayton Christensen has explained, new industries founded on new technology platforms tend to be complex and expensive at first, as it takes the combined efforts of an organized group of highly skilled people to commercialize a breakthrough. So much is uncertain, so much unknown, that achieving success requires a high degree of centralization; organizations needs to control all the pieces of the puzzle so that they can optimize the offerings through careful, proprietary coordination. Think of how in the early days of computing a company like IBM built entire mainframes, from the casing, to the chips, to the software. Since the industry was in its infancy and relatively little was understood about its underlying technologies and their interactions, the world-class scientists and executives at IBM needed to collaborate on all aspects of product design to deliver to market a top-notch, fully reliable offering. IBM was so good at this that it leveraged its expertise to achieve 70% share of the computer market throughout the '60s and '70s.

As time passes, though, the game changes. Once out in the market, the fog shrouding new technology platforms and their underlying business models begins to lift. Industry norms and standards emerge and eventually expertise becomes commoditized; you no longer need to hire a team of PhDs to figure out how all the various components of a technological system work together because the interactions are already defined. When this happens, an industry begins to decentralize; companies focus on optimizing specific components within a system, become world class in their niche, and then begin to disrupt the centralized, integrated providers through the delivery of more convenient, accessible, and cheaper products.

Read the full article on Environmental Leader

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