We look to new and rapidly growing companies to identify leading themes in sustainable innovation. We talk to the people at these entrepreneurial companies; we talk to the investors who fund them; we talk to the incubators, accelerators and development agencies that nurture them; we talk to the existing corporates who may be challenged by them or find opportunities in them. In talking to all these people, we like to cover the ABCs: attractiveness of the market, business models and competitive landscape.
We see four macro trends that cut across the entire landscape.
1. Data, data and more data…
And more importantly the horsepower to make use of it. Starting with the sensors, communicating via new protocols and bandwidths, to cloud-based machines applying algorithms, finding meaningful patterns and finally communicating back to the assets and owners to improve operations and predict where to deploy resources. Some call this trend AI. We expect interest to move from general AI platforms that can do anything to those focused on applications demonstrating consistent benefits in their areas of expertise.
2. Changing ownership
People like to own stuff. With increased information and reduced transactional friction, this is changing. Why own an under-utilized asset when it can be paid for on demand? The evolution from taxis to ride hailing, and eventually to autonomous fleets, is one example of efforts to maximize assets’ utilization. The flip side is the decentralization of energy. Why pay for access to a public resource when the job can be done more efficiently by a dedicated private resource, selling excess back to a wider pool? Distributed energy resources are a good example of this.
3. Sustainable sustainability
Moving deeper into the detailed business activities that make up a supply chain to find pivotal intervention points that create long term impact is relevant across all industrial activities. The pattern is for a group of participants (buyers and sellers) impacted by the supply chain to agree to work toward shared goals, identify actions around the intervention point that could become an industry solution, and deploy prototypes in order to learn and test against predefined metrics. With results in hand, recruiting corporates to scale these alternative solutions is an easier progression toward systemic sustainability. These efforts seek external innovation to impact climate change, biodiversity, water scarcity, food supply, energy independence, urbanization, waste, decarbonization and other areas that are relevant to each supply chain.
4. The corporates are back in town
Large companies frequently invest in their own internal R&D and dedicated development efforts. A growing trend is to seek innovation from external sources: funding VCs, supporting accelerators and creating internal ventures teams. This cycle is swinging toward direct engagement where corporates staff teams with people who understand their business, internal processes and future strategic goals as the starting point for systematically identifying and collaborating with entrepreneurial companies who can contribute to growth. These companies partner with groups across the ecosystem to support these goals, and bring some of the activities in house where they align with these goals. VCs are engaging corporates by providing access to deal flow, sharing market knowledge and co-investing. Commercial accelerators are teaming with companies to manage thematic problem-oriented cohorts. Corporates will become important partners, not just exit strategies.
The Global Cleantech 100 provides leading indicators in these chaotic times. To find innovation and growth, keep an eye on them as well as on the changing market dynamics.