Disruptive Innovation for Environmentalists

Posted by Michael Keating

disruptiveInnovationHeadHow to identify the game-changing ideas and technologies that will replace outdated businesses with better, smarter, and more sustainable alternatives

"If I had asked my customers what they wanted, they would have said a faster horse." -Henry Ford

One hundred years later, Ford's customers are asking for greener SUVs, and that is what Ford is giving them. Whoever gives Ford's customers a whole new greener way of getting from A to B will become one of the great business legends of this century and will remove a huge barrier between us and a environmentally sustainable future.But who among the many entrepreneurs, executives, advocates, and inventors working on "greener" transportation will it be? Can we predict which technology will do for automobiles and their emissions what the automobile did for horses and their manure? One place to look for clues is the work of scholars who analyze the progression of technology and the businesses built around them. Harvard Business School Professor Clay Christensen studies what he has termed disruptive innovations-game-changing technologies and strategies that put entrenched and dated business models out to pasture. His research shows that not all innovations are disruptive, just as our experience tells us that not all "green" technologies are really sustainable. We can use his theory to tell the difference between those innovations that merely help a company maintain its current business model and profit margins (e.g. speedy horseshoes), and those that do the same job as the incumbent technology, but better, cheaper, or in a way that is available to more people.This exercise in forecasting isn't just for bragging rights fifty-some years from now. Especially on issues like climate change and species loss, the indicators are consistently pointing in the direction of us heading for a global catastrophe. Moreover, in Washington, D.C., and in countries and companies around the world, hundreds of billions of dollars are being allocated to addressing these problems. Some of this money is going to greener SUVs and their environmental milquetoast cousins in electricity generation like "clean coal," and some of it is being bet on more ambitious technologies. Even a slightly less cloudy view of the future could make a huge difference to our planet and our pocketbooks.Disruptive Innovation for EnvironmentalistsOver the past several decades, and in a large part due to the innovation boom driven by computing, we have seen disruptive technologies and business models enter the marketplace and displace large, highly profitable incumbents. The classic cases are well-known: Mobile phones, at first expensive, unreliable, and conspicuously pretentious devices, eventually disrupted land lines as their price, quality, and size improved because the could be used almost anywhere; desktop printers disrupted copy centers due to their convenience; small Japanese cars disrupted big American gas-guzzlers due to their low cost and efficiency. Disruption does not necessarily mean extinction as anyone who still has a land line at home or at work knows, but it does mean decline and marginalization of the disrupted technology. Executives of traditional telephone companies and American automakers are acutely aware of this.The environment enters the picture because environmental issues are changing the marketplace. With change (such as concern about air pollution and global warming) comes demand for innovation (like energy from non-fossil sources) and opportunities for disruption (distributed solar power, for example). These shifts in demand can shift the criteria on which a customer chooses a product, and not just in big polluting industries that are most closely associated with environmental concerns. Some of the most environmentally innovative companies are in apparel, retail, financial services, and construction. But not all of these companies are responding to environmentally driven marketplace shifts in a disruptive way, so not all of these green innovations will help us make meaningful progress toward a sustainable future. For a sense of what scale of progress should be considered meaningful, see earlier paragraph on looming global catastrophe.The theory of disruptive innovation asserts, in part, that as businesses establish themselves in a profitable market, they tend to focus mainly on innovations (such as engine horse power) that help them maintain and increase profits from their best customers, without focusing other customers' needs on avenues of improvement (like miles per gallon). When there is a change in the marketplace (like an oil crisis or global warming), this creates an opening for other firms to introduce products and services that are cheaper (if less profitable), and/or compete on a different basis (MPG instead of HP), capturing customers who may never have had access to a product before (think mobile phones in parts of the world that have never had land lines) or simply don't need all the features of an expensive product and are happier with something good enough (like a little Kia instead of a Cadillac).Disruptive innovations have the effect, in the long term (and sustainability is specifically concerned with the long term), of displacing established businesses and technologies. In that a given innovation can be either disruptive to a business or can help to maintain it, depending on how it is used, it isn't always obvious, when looking at a given innovation, whether it is disruptive, and whether it will make a long-term difference to the environment. We have to look at the business model of how it is being applied, by whom, and to what end.Let's begin by examining a popular technology for improving the sustainability of transportation: The hybrid gas-electric powertrain. The best-known implementation of hybrid technology is in the Toyota Prius. The Prius uses its batteries, regenerative breaking, and electric motor to improve the range the car can achieve on a single tank of gasoline and thereby the environmental impact of operating it relative to a similar, conventional automobile. However, the Prius is still 100 percent gasoline-powered, unless it is modified by a third party so it can be plugged in. In this way, the Prius is a just a greener version of a regular car, helping Toyota and its partners in the fuel industry maintain their current models of doing business, not disrupt them.Next year promises quite a different take on the hybrid in the form of the Chevy Volt. General Motors actually rejects the term hybrid for the Volt's powertrain, because the Volt will be an electric car first, with an on-board gasoline engine for charging the batteries that run the electric motor, the only motor in the car that will directly drive the wheels (the Prius can be driven by both its electric motor and gasoline engine). Most importantly, the Volt can be plugged in, so it never has to use gas. The gas tank and generator are included in the car to extend the range afforded by the batteries, not the other way around.If GM successfully introduces this vehicle it will in fact be a disruption of the incumbent fossil fuel-powered transportation industry of which they are such a big part. However, it is unlikely it will be disruptive enough to change the nature of transportation as much as the introduction of the automobile did. And of course cars are the source of many problems beyond emissions, so we need to keep looking for a champion among the many other contenders, from bikes to buses to aircraft to video conferencing.By examining other common green technologies using the lens of disruptive innovation, we can learn whether they are truly sustainable technologies, or if they are just green luxury, or even greenwash. Subsequent pieces in this series will consider different types of solar power, different forms of agriculture such as organic and local, the age-old paper versus plastic question, and the value of green building. Some green technologies may literally save the world, but the faster horses of the green technology world will have little meaningful environmental benefit-and so will have the double negative effect of diverting resources from genuinely sustainable, disruptive innovations, and of making the people who purchase them feel as if they are doing their part for the planet, when in fact they are not.

Michael Keating is Business Development Manager at The Open Planning Project.