Starting a new renewable energy business is a tough call. After only a few months of angelhood, I’ve already come across at least two dozen pre-revenue wind, wave and solar power technology companies. Each one offers its own version of “we’ll make it cheaper and our business model will thrash the competition”. Each one (so far) has been accompanied by insufficient understanding of the real issues with new technology adoption; inertia and technology substitution.
By inertia, I mean the natural tendency of customers to continue to buy what they were buying before. The latest version perhaps, but it takes a determined effort to engender a paradigm shift in purchasers’ attitudes.
The perennial myopia of the focused inventor leads to a lack of awareness of alternative ways of achieving the same goal. Just because you think you have the best widget, others won’t necessarily share your view. There are always technology substitutes that will be equally valid in the mind of the customer.
I spent nearly half an hour on the phone today, trying to help an entrepreneur to realise that a more thorough approach to competitive analysis was vital. A proper understanding of direct and ‘class’ competition should lead to a much more realistic strategy and a firmer basis for competing.
In each of these renewable energy markets, and at each level of power generation, there are now between a handful and tens of companies already selling their wares. It’s the challenge of the prospective new entrant to convince investors that his approach is rigorous and likely to succeed.