ClimateTech: system innovation (versus point solutions)

What are the “valleys of death” for ClimateTech?

For new technologies, surviving the so-called “valleys of death” is a requirement for reaching scale and implementation in real-world environments. Traditionally, the term “valley of death” has referred to the stage of a startup’s life where the company has proven its technology but is not yet profitable, where the risk of running out of funding is highest if the startup is not successful. However, the term has been expanded upon to more accurately capture other high-risk stages of a startup’s life when funding is most critical - and when it is most difficult to secure:

• Technological Valley of Death: Innovators struggle to gain funding for technologies that may have proof of concept or have been demonstrated in a controlled environment, but need further testing and refining in order to prove that the product can be viable to market.

• Commercialization Valley of Death: Between the phases of demonstration and full commercialization, this valley of death occurs when technologies are proven but require more capital to deploy fully and scale in complex real-world environments. This is a critical challenge for ClimateTech.

Using NASA’s TRL to cross the valleys of death

NASA’s Technology Readiness Level (TRL) was originally created in the 1960s to evaluate space technologies. Today, TRL is used to quantify or measure the level of maturity in the development of technology on a scale from 1 to 9. The higher the rank, the more technically developed and qualified the technology is. 

• TRL 1 to TRL 3: Lower stages of TRL outline basic technology research, feasibility research, and the initial stages of development. 

• TRL 4 to TRL 6: Through the middle stages of the framework, technology is fully developed, then demonstrated in certain environments.

• TRL 7 to TRL 9: Higher stages see the technology’s systems created, tested, and launched, finally entering operations.

TRL guides scaling technologies through the Technological Valley of Death by outlining the stages required for an idea to transition from basic research to proof of concept. However, the system test, launch, and initial operation are the highest level of NASA’s TRL. While this is a critical part of demonstrating technological viability to secure funding, it is just the beginning.

Complex real-world deployment

For ClimateTech, which has to interact and effect change in the context of a systemic complex world, overcoming the Commercialization Valley of Death is much more difficult:

• Mastering hardware, software, and infrastructure: The opportunities for tomorrow’s green champions need to harness breakthrough innovations in electric vehicles, storage, renewable energy, and regenerative technologies which often combine software, hardware, and infrastructure to produce and operate actual physical products and ecosystems.

• Different capital requirements: Transformational green technologies often require new innovative infrastructure, which typically carries costly, longer-term, and riskier initial capital. While specific market opportunities and reinforcing resilience undoubtedly create some incentive, long-term investment horizons and effective policies are necessary for critical green technologies to reach scale effectively.

• Public policy alignment: Public-private partnerships and alignment are required for the successful commercialization of transformational ClimateTech. This challenge can be exacerbated given the extent of interrelationships and the nature of ecosystem partners, which need to be aligned for systemic deployments at scale to achieve impact and mass adoption. Integrated solutions for deeply complex problems, such as the energy transition, are neither simple nor inexpensive to implement at scale in our complex real-world environments.

• Ecosystem cooperations: Significant collaboration and coordination across emerging ecosystems and actors. This may include “coopetition,” where competitors are increasingly cooperating within ecosystems.

Commercial viability amidst complex emergent ecosystems

ClimateTech has to provide solutions that address more than specific customer pain points. A startup offering consumer or enterprise applications, software, or technology is often simply relying on customers to purchase and use their applications, which can be relatively self-contained. However, our greatest challenges require systemic transformative change, not isolated linear solutions. 

For the energy transition and decarbonization, founders, businesses, and investors must consider a broad set of stakeholders, partners, and complex ecosystem interactions, raising the bar for viability. Achieving commercial viability throughout the system is critical for effecting change at a systems level. Complexity operates at many levels in mitigating and building resilience to climate change. The climate problems themselves are complex, the broad set of possibilities multiply that complexity, and the environmental solutions can be uncertain.

To avoid the “Commercialization Valley of Death,” ClimateTech has to problem-solve, then deploy, interact, and scale in an emergent manner in the context of a hyperconnected systemic real world.

Complexity demands system innovation, not point solutions

The industrial, mechanical, and technological world often relies on specific expertise and technological solutions. Conversely, the emergent and interdependent ClimateTech constituents cannot rely on predetermined resolutions with a clear understanding of outcomes ex-ante. The mysteries of the Amazon rainforest, which is in constant flux, where species become extinct, weather patterns change, and which will be affected by an infinite number of interactions between its parts, are more complex than simple point solutions. There are few straightforward relationships in these environments, which complicates any potential solutions.

Crossing the Commercialization Valley of Death for ClimateTech could create positive inflection points. These beneficial tipping points can help achieve critical mass for system innovation and technologies offering pathways to reducing emissions and supporting the energy transition. However, achieving this is no simple task, and it can’t be done by any one individual, organization, or technology. Embracing this challenge requires a collective, collaborative, adaptive, and resilient approach that harnesses the levers for change to drive system innovation.

Business model-as-a-system (BMaaS) to drive transformational change?

Business models-as-a-system (BMaaS) may be better able to respond to the multifaceted complex interactions of today’s broader ClimateTech. BMaaS are fluid, dynamic, and emergent ecosystems that blur boundaries between industry players. They deliver value to and align with diverse stakeholders, able to sustainably leverage network effects and technologies to evolve. BMaaS can also work collaboratively to address systemic challenges.

Part of Tesla’s advantage may have emerged because the company leverages its ecosystems better than its competitors. Tesla vertically integrates more parts of its wider production supply chain, having a hand in designing the look of the vehicle, manufacturing the battery, and developing its own software. The value of a car today lies in the battery and intangibles such as the brand, design, and software. This allows Tesla to then partner smartly for system innovation, relying on the remainder of its supply chain ecosystem for the parts that other parties are better suited to complete. Tesla’s loyal customers are also a major source of innovation. Open innovation and users create value for themselves and Tesla’s software. Tesla emulates a collaborative open-source strategy regarding intellectual property within its ecosystem. According to Musk, “Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.”

Could Tesla’s BMaaS be its secret sauce? As Honda joined Ford, GM, and others in adopting Tesla’s electric vehicle charging technology, Tesla seems to have reached a virtuous inflection point in scaling its charging technology across complex ecosystems involving software, hardware, and infrastructure. Tesla’s BMaaS offers a systemic approach, in flux and interdependent, creating synthesis and emerging newness.

Ecology of cities & green urbanization: pathways to carbon mitigation

Most, if not all, cities that have been developed after the advent of the automobile have their infrastructure centered around cars and roads. As the need for individual vehicle ownership may be reduced by viable alternatives for intercity travel such as cycling, autonomous commercial vehicles, passenger shuttles, and fast rail, the urban landscape may be reinvented. Regenerative infrastructure and cities that incentivize a symbiotic human-environment relationship could drive large changes in the appearance of our urban structure. These greener and smarter cities would be designed with the environment in mind, including cycling lanes, sustainable city lighting, and green buildings.

Cities themselves could be a key driver to achieving sustainable futures, with opportunities for collaborative innovations between the public and private sectors:

• Ecosystem collaborations need to be carried out across fields: Smart city digitalization, next-generation energy systems, connected transportation systems, green mobility and infrastructure… None of these innovations operate in isolation. They all intersect, combine, and could become self-reinforcing.

• City-level initiatives offer an outsized return on investment: An IEA report outlines how investments in city-level initiatives (including smart street lamps, self-cooling buildings, and smart electric car chargers) “can provide the biggest carbon-mitigation return on investment and accelerate inclusive clean energy transitions.” Green transportation should support the cities’ infrastructure, starting with electric smart cars, high-speed rail, and next-generation zero-emission aircraft.

These shifts could result in greener, cleaner, and smarter mobility, with new models emerging beyond the extractive individual ownership of the vehicles, and integrating the full ecology of the city. To do so requires conquering the Commercialization Valley of Death.

Climate represents extremely complex challenges that require us to look at how systems are interconnected, with an appreciation of the dynamics, behaviors, and interdependencies of the many different nonlinear drivers. As billions of dollars are invested to enable regenerative transformation, there are new opportunities to develop innovative solutions to support mitigation, adaptation, and resilience. Avoiding the valleys of death is a prerequisite to effective change toward sustainable futures.

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