The Role of Constraints in Low-Carbon Innovation

Climate change is the global innovation challenge of our time. That was the theme of a Green Innovators in Business Network “Solutions Lab” in Cambridge, MA, last month co-hosted by C2ES, EDF, Innocentive, and others. Dr. Andrew Hargadon, a leading expert in technology management and author of “The Business of Innovating,” articulated for participants the enormous scale of innovation needed to achieve a clean energy economy. “Low-carbon innovation” is about dealing with new problems—carbon emissions, skyrocketing energy costs—that emerge from traditional solutions for making our economy work, such as for transporting goods or lighting our buildings. Transforming energy-consuming activities to emit less carbon requires that we deploy new technologies that will work with conventional behaviors, and develop entirely new behaviors.

Applying new technologies to old behaviors
Developing new technologies that would improve the way we use energy every day requires a long-term and patient outlook for business innovators. It is difficult to be profitable over the course of a technology’s adoption. It can take years or even decades for users to accept something new and for the technology to be cost-competitive with existing solutions.

Companies participating in the Solutions Lab noted these challenges: For instance, the trajectory for efficiency and cost improvements of Alstom’s power plant technologies spans decades. At Dow Chemical (12:30 in the video), it took nearly 6 years to bring to market its POWERHOUSE solar shingle—which performs like a conventional roof shingle while also generating solar electricity—from when the idea first originated in its building and construction group. These and other new technologies must be able to reach thousands of power plants or millions of rooftops, or they simply won’t be effective at reducing carbon emissions or be competitive with existing solutions.

Making such long-term bets on technology development is difficult when innovators have little certainty today about what end-users will need in an unpredictable future. In order to capture the significant “low-carbon” technology business opportunities, leading companies are finding innovative ways to effectively manage that uncertainty. In fact, low-carbon innovation can be driven by uncertainty, particularly when companies find it in their interest to develop solutions that would avoid future environmental regulation or risks.

But—as Lab participants pointed out—innovation is more often driven by constraints, such as market barriers, government regulations, physical limitations or even a CEO mandate. Constraints help identify a problem, generate creativity among business innovators and motivate a company to make dramatic leaps. Their specificity helps create action steps toward possible solutions.

These points echoed similar arguments made at C2ES’ business innovation conference by Bob Kumpf from Bayer and Paul Narog from 3M (at 18:18) that “necessity is the mother of invention” and “creativity loves constraints”—whether they be natural, market or policy-related.) During C2ES’s research into low-carbon innovation, many companies cited government regulation—such as a carbon price or industry performance standards—as a helpful constraint for prioritizing innovation activities and investments.

Developing entirely new behaviors
But, then again, not all innovations are born from constraints. Apple’s iPhone, for example, has influenced user behavior for telephone, music and online connectivity more than responding to market or user constraints. Can business innovators similarly shape the way we use energy? Unfortunately, developing entirely new behaviors for traditional activities like driving or building homes is a lot harder than in industries with a much shorter history and faster innovation cycles. Unlike innovations that can be rapidly introduced and can rapidly fail (allowing innovators to quickly move up the learning curve), innovations in vehicles or power plants have to perform reliably and safely no matter what. And, one of the most intractable challenges for changing user behavior in these areas is a persistent lack of understanding about the consequences of using high-carbon energy inefficiently, and the range of available alternatives.

To keep moving the low-carbon innovation process along, we need to help motivate and guide innovators by defining the rules, parameters and constraints for achieving the clean energy economy. The next 20 years will be decisive for U.S. business innovators to capture the lead on clean technology development, and speed is critical.

This blog post is part of the Center’s larger initiative focusing on low-carbon innovation. Meg Storch is a Markets & Business Strategy Fellow at C2ES.