Why Size Matters

The director of the MIT Energy Initiative explains why blending big-company culture with entrepreneurial innovation is the challenge that leaders must learn to meet.

In the world of the MIT Energy Initiative, which was established in 2006 to promote innovation in the energy field capable of transforming the global energy system, multinational companies rub shoulders with young entrepreneurial operations and try to figure out how to work together.

MITEI, as it’s known, works on technology research with individual member companies ranging from ENI [S.p.A., the Italian-based oil and gas company], to Chevron Corp.

MITEI is headed by director Ernest J. Moniz, a professor of physics and engineering systems and a leader in policy studies on the future of nuclear power, coal, natural gas, and solar energy. Moniz served as Under Secretary of the U.S. Department of Energy from 1997 until January 2001. At DOE, he had oversight of science and energy programs and served as the Secretary’s special negotiator for Russian nuclear materials disposition programs.

“The number one overarching issue, which does pose business opportunity, business risk, and a need to rethink business models, is carbon constraints,” says Moniz. “As you know, 85 percent of our energy is fossil fuel. Fossil fuel equals carbon. Controlling carbon goes to the very core of the way we currently supply energy.”

But bridging the gaps between the large companies that have the ability to scale up new ventures and the small companies that are blazing some of the new paths is not easy. Moniz spoke about the challenges with Michael S. Hopkins, editor-in-chief of MIT Sloan Management Review.

You’ve been talking recently about the ways that dealing with climate change presents a real cultural challenge for large energy companies and the ways they need to think about business models.

Here’s the essential question: How can major international oil companies capture effectively the fruits of the entrepreneurial culture — which typically does not exist inside those companies in the same way it does around Kendall Square? How can they capture that in a way that they can scale it to be material in their business?

We want them to succeed, because who else has the capacity in terms of resources, supply chains, and customer bases to ramp up these new technologies so as to impact climate change in a relatively short time? That's the business model innovation we need. And it’s not easy.

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1 Comment On: Why Size Matters

  • anna.ashmore | March 7, 2012

    Quote from the article:
    “Here’s the essential question: How can major international oil companies capture effectively the fruits of the entrepreneurial culture — which typically does not exist inside those companies in the same way it does around Kendall Square? How can they capture that in a way that they can scale it to be material in their business?”

    These questions don’t really make sense? I have worked for most of the major oil companies in Houston, Dallas & Calgary and answering these questions will not give any insight to the real issues. The large companies all rely on smaller much more entrepreneurial companies to perform services…if those companies can do it cheaper. Entrepreneurial leaders & companies must frame their offerings as cheaper, more compliant with government regulation & providing more safety…to be considered a more material solution…and cheaper usually wins here.

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