What cleantech should know about chasm crossing

If there’s really a significant gulf, as onetime marketer Geoffrey Moore put it, between selling to early adopters and the majority of technology buyers, what does this mean for companies in cleantech?

The technology adoption lifecycle and the chasm

The chasm model holds that there’s a big difference between what companies need to do to effectively sell technology products to early adopters and what they need to do to sell to the early and late majority of the technology adoption lifecycle (source: Joe M. Bohlen, George M. Beal and Everett M. Rogers)

 

In the mid-90s, I was a senior consultant at the venerable Silicon Valley strategy consultancy Regis McKenna Inc. (RMI). The firm is credited with innovative marketing and business insights that helped put Intel, Apple, Electronic Arts, Microsoft, 3COM and many other tech companies on the map. It was an important company recognized for doing important work (valley lore holds that founder and author Regis McKenna’s business cards once bore the title “Himself.” If true, it was before my time.)

One of our methodologies, based on the technology adoption lifecycle—itself based on work by Iowa State University tracking the purchasing of seed corn, of all things—became known as the chasm model, which Geoff Moore—then a partner at RMI, now a venture partner at Mohr Davidow—expanded on as the basis of his now-seminal Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. I didn’t overlap at RMI with Geoff. But my office was down the hall from his.

Twenty years later, I still find myself trotting out the same chasm model we used at RMI to help our cleantech clients today understand the non-intuitive changes that need to take place to most effectively introduce their clean technology products to mainstream markets.

Here’s a summary of what we at Kachan & Co. share with clients and how the chasm applies to cleantech.

Technology adoption lifecycle and chasm primer
One of the technology adoption lifecycle’s key insights is that the different constituents of the lifecycle adopt innovation for different reasons. Early adopters are technology enthusiasts looking for a radical shift, where the early majority simply seeks productivity improvement. Early adopters hope to get a jump on competition, lower their costs, get to market faster, have more complete customer service or get some other similar business advantage. Those in the majority of the market, however, want to minimize discontinuity. They want evolution, not revolution. They want technology to enhance, not overthrow, established ways of doing business. And they don’t want to debug someone’s product—they want it to work properly and to integrate with existing technology.

The chasm occurs because the majority of the market wants references from other customers like them, but all that pre-chasm vendors can offer are references to early adopters. Companies trying to cross the chasm run into trouble because they’re essentially operating without a reference base, trying to sell to a market that’s highly reference oriented.

Bridging this gulf is awkward, because if they’re to be successful, companies must adopt new strategies just at the time they’re becoming most comfortable with ones that seem to work.

The only reliable way to exit the chasm is to target a niche market on the other side made up of pragmatists united by a common problem for which there is no known solution. These pragmatists are motivated to help the new technology cross the chasm if it is packaged as a complete solution to their problem.

Moore uses the D Day metaphor for how to do this, and it’s apt. An invasion force, comprised of a company and its allies (the product), must establish an early beachhead niche market (Normandy), from which to take additional market segments (France) with a view to liberating the whole of the market (i.e. Europe). The metaphor argues that an overwhelmingly superior force concentrated on a highly focused target worked in 1944 for the Allies, and is equally relevant in high tech. It argues for laser-focused market segmentation, focusing 100% of a company’s sales and marketing budget on one, initial, small segment if it’s to be successful in the wide majority market.

Why is this counter-intuitive and hard?

  • Niche marketing feels like leaving sales on the table – Companies that are sales-driven and lured into selling to any market segment miss the opportunity to build momentum and authority in their strategically chosen segment
  • Everyone wants to be a big fish, but not in a small pond – Being a market leader is every company’s objective. But no company wants to be known of as king of a small hill. Even though conquering successive small hills leads to mountains.
  • Not all features and benefits may be required – For companies that have invested time and money developing a deep product, focusing on just one small niche and a subset of their features can feel insulting to engineering. Crossing the chasm means making decisions that are best for a narrowly defined customer, not for your product’s bragging rights.

What’s the relevance of all of this to cleantech? Are there chasms to cross? Absolutely. There are plenty of examples of clean technologies and companies to which the chasm metaphor applies, and for which learnings abound… or should:

Chasm crossing done well in cleantech
Some companies and industries appear to be doing things right.

  • Most resource sharing companies (e.g. car and bike sharing, tool sharing, etc.) all seek to be global powerhouses. But most of them, like P2P car sharing companies RelayRides, Spride and Getaround, start hyper-locally, then branch out to neighboring regions. Their segmentation is geographical, leveraging success in one locale to one nearby.
  • Vendors of EV charging, V2G, alternative fuel conversion, fuel additives and other related automotive technologies have appropriately targeted specific commercial vehicle fleets, often in their own backyards, as beachheads, and wisely don’t seek wide consumer adoption. Yet.
  • A123 Systems leveraged an initial modest focus on lithium ion batteries for power tools. The strategy succeeded, and A123 today is now known for its cell and full power solutions for transportation, the grid and commercial applications, and now employs more than 2,000 people worldwide.

At risk in cleantech chasm crossing
There are also companies and sectors in cleantech that would benefit from an understanding of the power of a well-defined target segment as path to the larger market they seek.

In all cases, the companies or sectors below would be best advised to focus more clearly on a specific initial beachhead segment. And then craft a whole product (first introduced by Theodore Levitt in The Marketing Imagination, and co-opted and used ad nauseam by us at RMI and now at Kachan & Co.) to best meet the expectations of that beachhead segment better than any other alternative on the market.

  • Geothermal equipment providers could stand to embrace chasm theory. Still stuck in relatively geeky early adoption, geothermal companies (and not just utility-scale providers like Ormat, U.S. Geothermal and Polaris, but companies with consumer and commercial-grade geothermal equipment like Trane, Carrier and Water Furnace) should focus better on segments for which their proposition is most compelling and target a single, self-referencing industry so as to leverage it to related segments.
  • The tech world is littered with the remains of mobile and stationary fuel cell companies that failed to achieve meaningful commercial traction in any specific segment. Even customers of Bloom Energy, perhaps the highest profile of the lot today, are all over the map: FedEx, Wal-Mart, Staples, Google and eBay. Interestingly, in fuel cells’ quest for widespread market adoption, at least one company now claims to have a volume deal with one of the top battery makers in the world (see description of Tekion, near the bottom of this here) – will it leapfrog past segmentation?
  • Tesla Motors is the poster child of EV startups. Its Roadster was classic early adopter candy. But will the company’s forthcoming Model S sedan allow it to cross the chasm by focusing on a specific market segment? Will Tesla implement all the non-intuitive whole product elements expected by its new, more mainstream customer (including delivery in quantity in reasonable timeframes?) Or will the company mistakenly rely too much on its Roadster experience and early customer resiliency and be relegated to an interesting footnote in the history of transportation?
  • Many still scoff at marine power, but breakthroughs can eventually be expected. Geographic segmentation for marine power makes most sense. Tidal and wave power developers, if they aren’t already, are advised to set up where there’s already critical mass for these technologies at the European Marine Energy Centre in Orkney, Scotland and focus all their work in the North Atlantic, working with Scotland as their narrowly-defined beachhead. It’s impractical to try to do expensive, far-flung installations of unproven marine power equipment away from the critical mass of support infrastructure, as Finavera and PG&E discovered trying to get their wave project in Humboldt County past the CPUC.

The chasm between early adoption and mainstream uptake is a formidable and unforgiving gulf. It typically goes unrecognized. So companies in cleantech are indeed advised to mind the gap.

Which market segments should cleantech vendors seeking mainstream adoption pick over others? In which single, narrowly-defined basket should they place their eggs? Beachhead segmentation is one of the highest-risk, lowest-data decisions a company will ever make. We at Kachan & Co. have developed methodologies to help cleantech companies make these decisions and minimize their risk.

My alum Geoff Moore, in books subsequent to Crossing the Chasm, introduces other metaphors like “bowling alley,” (co-opting one of RMI’s segmentation methodologies), “tornado,” “main street” and others to help businesspeople understand marketing precepts. But it’s the chasm he’ll be best remembered for. Cleantech companies and investors that don’t already own a copy of this book should. Those interested in details of more of the methodologies we used at RMI are encouraged to pick up The Regis Touch—one of Regis’ earlier, now-overlooked but surprisingly still relevant books. The examples in both books are so dated they’re distracting, but the methodologies in both are still sound.

Originally published here. Reproduced by permission.

Back to the Future

As posted previously, one of the big challenges the cleantech community faces is the reliance of many pivotal technologies on rare earth minerals that are mainly located in China and increasingly subject to supply curtailment.  Neodymium is of particular concern for so-called permanent-magnet motors and generators.

In response, a number of companies are seeking alternatives to neodymium-based permanent magnets.  According to this recent article in The Economist, Toyota (NYSE: TM) is believed to have exhumed an AC induction motor designed initially the brilliant/mad (take your pick) scientist Nikolai Tesla in 1888.

This is yet another example of cleantech innovations that resuscitate long-lost ideas discarded way-back-when for a certain reason and re-examining them in light of improvements and advancements that had been made in the intervening period that can eliminate the challenges heretofore thwarting their successful development.

In this particular case, the advent of semiconductors and microcomputer-based controls enables modulation of the induction motor’s speed at thousands of times per second — something that Tesla could only have dreamed about.

I spoke in June with Joe Kovach, the head of the newly-formed Corporate Technology Venture group at Parker Hannifin (NYSE: PH), who said that one of his priorities was to mine some of the company’s old overlooked intellectual property that had been essentially discarded due to then-infeasibility and view those prior discoveries through the lens of the spectrum of technologies that are now available today.

I suspect that lots of progress can be made in the cleantech space if more of us were to similarly go back to the future.

Solar Parking Canopies – Serious Power, Cool Shade

It takes a lot of electricity to run Dow Jones, one of the world’s largest publishers and information providers. Dow Jones is now generating 3.6 MW of its own electricity with Solaire Generation Solar Parking Canopies. Solar parking structures allow organizations to reduce their utility bills, get more control of their own electricity generation, convert asphalt heat islands into attractive demonstrations of sustainability, and protect employees, customers and their cars.

I met with Solaire Generation CEO Laurence Mackler here at the Intersolar conference and exhibition being visited by over 22,000. Mackler explained that he founded the business because it made economic sense for his customers. They run the numbers and approve projects. Solaire is completely focused on parking structures with a patented dual-incline roof, the main surface south sloping for greatest efficiency. All Solaire parking structures use PV panels, not thin-film, to capture enough sun in the constrained space of the structures.

Increasingly, customers are also including solar electric car charging. Johnson and Johnson included 5 Coulomb Technology charge points in their 1.1 MW Solar Parking Canopy which uses SunPower panels. General Electric has a new Solaire parking structure that includes a number of the new GE charging stations.

The Arizona VA Hospital is installing 2.9 MW of solar panels from Kyocera and REC Group covering several parking lots. To research this article, I meet with Dr. Angiolo Laviziano, the CEO of REC Solar who is managing all aspects of this solar project.

The installation will add to a 302 kW single-axis tracker mounted system that REC Solar. Following the angle of the sun through the day, single axis systems are often 30 percent more efficient than fixed panels. Dr. Laviziano states that REC has 4.1 MW of added solar parking under contract from other VA Hospitals.

Like many organizations, the VA Hospital considered locating the solar panels on its roofs. This approach would have been more expensive; a uniform surface was not available due to rooftop located air conditioning and other equipment. Solar parking had the added benefit of giving employees and patients shading parking, instead of exposure to the blistering Arizona summer sun. Highly visible, the solar parking provides a positive public image which is often lost when solar is installed on roofs of high buildings.

REC Solar CEO Angiolo Laviziano is now expanding business for his 600-employee firm. REC plans to partner with several makers of electric charging equipment. Customers are expressing a growing interest in including electric car charge points in their electric parking structures. The least expensive time to install charging stations is when the power electronics, panels, and other equipment in being installed for the solar power, parking lighting, and other electric demands.

An informal REC survey of early adopters of electric cars, such as the Nissan Leaf and Chevrolet Volt, showed that these drivers also use solar power. Another 50 percent are interested in solar power. Angiolo is a perfect example of an early adopter of both. Years ago, he converted his Subaru to be an electric car using added lead-acid batteries in the trunk. He charges his car with his REC Solar system, a highly efficient two-axis system. He is the only owner I’ve met of an all-wheel drive electric car and certainly the only one who charges with a two-axis solar system.

Thousands of Parking Spaces Now Solar Shaded Globally

California State University Bakersfield (CSUB), Dr. Horace Mitchell and Sun Edison LLC, a leading worldwide solar energy services provider and a subsidiary of MEMC Electronic Materials (NYSE:WFR), co-hosted a “Flip the Switch” ceremony to commemorate the activation of the 1.2 megawatt (MW) solar parking canopy located on the CSUB campus.

The oil industry is one of the world’s biggest users of electricity. Saudi Aramco, Saudi Arabia’s national oil company has covered 4,500 parking spaces with 10 MW of thin-film CIGS solar from Solar Frontier, a company in which they are a major investor. Nikolai Dobrott, a Managing Director with Apricum estimates that the nation of Saudi Arabia may need as much as 30GW of added electricity in this decade, currently using natural gas, oil, and diesel for virtually all power generation; solar is an attractive form of diversification.

Solar developer Belectric is managing the solar project at Saudi Aramco’s headquarters in Dhahran. Over 120,000 CIS (Copper Indium Selenide) photovoltaic modules cover 4,500 parking spaces at the North Park offices parking lot, sheltering vehicles from the desert sun.

Automakers Massively Deploying Solar Parking Structures with Electric Car Charge Points

Envision has made its business focus to offer pre-configured and custom solar parking structures. Many offerings are designed to be attractive, converting asphalt urban heat islands into beautiful urban forests. The structures were originally designed by Envision founder and architect Robert Nobel.

In 2010, General Motors selected Envision to install its CleanCharge™ solar powered electric-vehicle (EV) charging stations integrated into EnvisionTrak™ tracking Solar Trees® at prominent GM locations.

Renault is not only working with Better Place to put 100,000 Renault Fluence electric cars on the streets of Israel and Denmark, it is also implementing a world record 55 MW of solar parking structures at various manufacturing facilities.

Whether an organization is providing for patients, students, or employees, solar parking structures are creating clean energy, shaded electric car charging, and attractive urban forests.

Home Energy Management: Premature Jocularity

One of the hottest cleantech investment segments in recent years has been home energy management (HEM).  HEM technologies enable households to remotely and/or more wisely manage their energy use, enabling lower consumption for equivalent (or better) quality of life:  climate control, lighting, entertainment, cooking, etc.

In the space of just a week or so, two of the leading information technology giants — Microsoft (NASDAQ: MSFT) and Google (NASDAQ:  GOOG) — announced last month that they were pulling the plug on their in-house HEM efforts — efforts that had been launched with great fanfare not long ago.

As reported in such postings as this one and that one and (more humorously) yet another one, Microsoft’s Hohm and Google’s PowerMeter will be discontinued due to lack of customer uptake. 

At best, HEM is an idea before its time, dependent upon smart meters and other so-called “smart grid” technologies to enable a lot of the highest-value functionality of HEM.  At worst, HEM is an idea whose time will never come — simply because most households simply don’t care that much about energy — and won’t spend a lot of time to save a few bucks on their energy bills, preferring to spend that incremental hour playing a video game or surfing social media. 

I’m inclined to the latter interpretation:  while energy management for commercial/institutional buildings can/will be a big deal, simply because the value at stake is significant and building-owners have sufficient profit-motivation to take action to improve financial results, energy management for homes will be a tougher play, due to constrained budgets and limited customer mindshare and appetite for taking action to save relatively few dollars.

Regardless, HEM continues to attract big bucks from outside investors.  iControl Networks just fetched over $50 million from such tech stalwarts as Cisco (NASDAQ:  CSCO) and Kleiner Perkins, and Siemens (NYSE:  SI) invested in Tendril at almost exactly the same time as Microsoft and Google announced their abandonment of HEM.

So, what does Google and Microsoft know that the others don’t?  I’m not exactly sure, but I can say with confidence from first-hand observation and experience that a lot of investment capital that is often referred to as “smart money”…isn’t.

Time will tell if any of these investments generate good returns, but the past and present hype about HEM feels premature, if not unwarranted.

Google’s 70 Charging Stations for Employee’s 100 EVs

Google, Inc. has deployed more than 70 Coulomb Technologies charging stations at its worldwide headquarters in Mountain View, CA. Over 100 employees who own electric cars use the charging stations. The stations (EVSE) are also used by the company’s growing car sharing program for Googlers (GFleet), which includes Chevrolet Volts, Nissan LEAFs and Toyota Prius Plug-in Hybrids.

Many employees bought their own electric cars after using LEAFs and Volts in the GFleet. Employees who use transit get GFleet priority.

With plans for 250 more charging stations on its campus, and a goal to make 5 percent of its campus parking EV-ready, Google’s installation is the largest workplace charging installation for electric vehicles in the country. Much of the charging is done with renewable energy, including Google’s solar covered parking. No coal power is used in charging vehicles. Google has invested over one billion dollars in renewable energy, accelerating development of 1.7 GW of RE.

“By investing in new, green transportation technologies, Google is making a significant contribution to reducing our own greenhouse gas emissions,” said Rolf Schreiber technical program manager, Electric Transportation, at Google. “Our EVs and charging stations are part of our broader green transportation system that includes biodiesel shuttles that Googlers use to commute to work instead of driving their own cars. But we’re only one company among many, so we hope our green transportation initiatives serve as a model for other companies to incorporate sustainability programs into their own workplaces.”

 

Google manages its charging stations via the ChargePoint Network, the world’s largest network of charging stations and EV charging applications. The following workplace charging features are available through Coulomb’s ChargePoint Network:

· Controlled access: Via an online portal and smartcards, customers can control who accesses their charging stations (employees or guests), to control costs, eliminate electricity theft, and optimize station use.

· Measuring performance of green initiatives: Online station management provides tracking and reporting of energy usage, greenhouse gas and gasoline savings data. Reports are displayed by graphs that can be filtered by day, week, month, station attributes and energy usage/GHG range. Customers can also export their station data and combine the data with other system for further corporate sustainability analysis.

· Network Operations: The ChargePoint Network provides 24/7 station network monitoring to ensure network services are always available, Over the Air (OTA) station software upgrades to accommodate future advancements without onsite service, and the ability to tie into energy, building and other business management systems.

· Driver Services: Customers have access to the ChargePoint Network’s 24/7 driver telephone assistance, e-mail or text message driver notification alerts for charging session interruption or charging completed, and individual driver portals to customize notifications, track their energy usage and greenhouse gas savings, view charging history, and have access to the largest network of public charging stations in the world at www.mychargepoint.net

· Cost-saving utility programs and incentives: Charging stations contain utility-grade meters and the ability to communicate with other smart grid systems, enabling demand response, time-of-use pricing, and other smart grid programs provided by local utilities.

The company has been working over the last several years to deploy and experiment with new green transportation technologies.

· In 2007, Google launched RechargeIT, an initiative aimed at accelerating the adoption of electric vehicles.

· Google’s biodiesel campus shuttles use the latest clean diesel technology, reducing emissions 80 percent over engines from just a few years ago.

· Placing solar panels on buses to provide pre-cooling without having to run the engines.

· More than 3000 Googlers ride a shuttle bus to the company’s Mountain View headquarters every day.

· Google’s ChargePoint workplace charging system encourages more and more employees to commute using electric transportation.

Google’s transportation initiatives save 5,400 tons of CO2e emissions this year. Google is just getting started.

Google makes innovative use of electric vehicles and charging stations. For employees, Google took an early lead in converting Toyota Prii (yep that’s the official plural of Prius) to be plug-in hybrids. Then Google installed beautiful solar covered parking including charge stations so that electric cars can be charged with sunlight.

At its headquarters, Google is now showing us how to charge hands-free.  No plug. No cord. Using Evatran Plugless Power’s inductive charging system, one of Google’s maintenance short-range EVs parks in close proximity of the charger and charging begins. The Evatran unit is Level 2 (7.7 kW, 240V at 32A). The light EV was converted to use the inductive charging.

Google is also conducting other important pilots including testing the new Toyota Prius Plug-in, not a conversion, but the 2012 model from Toyota. Soon, Google will be testing the Honda Fit Electric  and other plug-in cars. Several Google founders drive Tesla Roadsters. Google founders Larry Page and Sergey Brin are Stanford University grad student “drop-outs.” They don’t regret the decision to make changing the world a priority over getting their PhDs.

Oil: Releasing Reserves Means Increasing Market Pressures

On June 23, the head of the International Energy Agency (IEA) announced that IEA’s 28 member countries had agreed to release 60 million barrels of oil in the next month from their reserves “in response to the ongoing disruption of oil supplies from Libya.”

These extraordinary powers had been exercised only twice previously:  after Iraq’s invasion of Kuwait in 1990, and in the wake of Katrina in 2005.

What is odd, though, is that the prior two cases were invoked as oil prices spiked in the face of immediate unforecasted supply curtailments.  However, in this instance, the Libyan supplies have been off the market for months, and oil prices had been falling for several weeks in a row.  So, what gives?

I would like to think that there is a good reason for this action, but I can’t find it yet.  And, neither apparently can a lot of petroleum market analysts.  See, for instance, this blog.

Among others, a June 24 research report by Deutsche Bank (NYSE: DB) entitled “Emergency? What Emergency?” concludes that the move is politically-motivated primarily by the Obama Administration to drive down gasoline prices and improve voter sentiment as the peak summer driving season approaches.  Others have opined that the Obama Adminstration was targeting oil speculators as “bad guys”, and wanted to hurt them the most — in their wallets — by causing their trading positions to suddenly and dramatically turn negative.

Now, I don’t understand the way the IEA works.  I wouldn’t think that the U.S. would be particularly influential in a multi-lateral NGO based in Paris.  

And, if they powers-that-be are going to the well this summer to support political needs of the Obama Administration, won’t they have to do the same next summer too — right in the middle of the 2012 Presidential campaign?  Are they that stupid to think they’ll only have to shoot this bullet just once?

While it doesn’t seem that the “emergency” release of oil stocks is warranted by market conditions on their own merit, what we don’t know is what really happened at the last meeting of the Organization of Petroleum Exporting Countries (OPEC) on June 8, just two weeks in advance of the IEA’s surprise move.  By all accounts, the meeting was a debacle, with Saudi Arabia (long OPEC’s main player) seemingly losing control of the cartel.  Given that there was apparently a lot of communication between the IEA and Saudi Arabia and that Saudi Arabia was supportive of IEA’s move, the political aim of the oil release may be more to buttress the Saudi government than the U.S. government. 

Because, if the Saudi government falls, as others in this Arab Spring have, it is generally assumed that power will be assumed by Wahabbi forces that won’t have much reservations about shutting off the oil spigots — and the world economy will be in a world of hurt when Saudi oil supplies are withdrawn.

To the extent there’s any consensus among energy pundits, it’s that the release of strategic oil reserves is yet another indicator of a future of increasing oil prices.  With increased government meddling in the oil markets, producers will be reluctant to make major investments in marginal fields or breakthrough technologies to enable opening new production horizons.  This can only put upward pressures on oil prices and oil market volatility.

All in all, it seems to me that this release has little good long-term effect or benefit on the energy industry, with some considerable harm to it.  And, it may well be a harbinger of tougher times ahead. 

As Gregor Macdonald puts so well in his posting “The Dark Side of the OECD Oil Inventory Release”, the “release of inventory is confirmation that the era of permanently constrained supply is now very much with us. Because industrial economies are simply machines that convert energy inputs into useful work and services, [the] action is also a reminder that the dream of higher growth in conjunction with lower oil prices is now a backward looking view, a nostaglia for a past that’s no longer possible.”