Think about the challenges involved in combating climate change, and issues like international cooperation, public opinion, public policy and technological innovation may all come to mind. But there’s another key topic that may not occur to you quite as readily — and that’s a business challenge.
In an interesting talk earlier this year at a conference put on by the MIT Enterprise Forum, Ernest J. Moniz, who is both the Cecil and Ida Green Professor of Physics and Engineering Systems at MIT and director of the MIT Energy Initiative, made the point that we will need not only technology innovation and policy innovation to achieve a low-carbon future — but also business model innovation. The business model challenge, according to Moniz? The cultural mismatch between entrepreneurial energy startups and the needs and scale of the established energy sector. Energy, explained Moniz, is a big, highly capitalized, commodity business featuring very efficient supply chains, very established customer bases, extensive regulations and complex politics. “That is the system in which we now need to innovate, scale and scale fast,” he noted.
Historically, 50 years is the characteristic time scale for a major change in the energy mix, Moniz said. However, he added, “we don’t have 50 years” if we are serious about mitigating the climate risk we face. Figuring out the secret to matching the entrepreneurial culture of energy innovators successfully with the culture of the established energy industry is, according to Moniz, a “missing piece” that is really important if we are going to succeed.
Moniz expanded on those thoughts in an interview with MIT Sloan Management Review editor-in-chief Michael S. Hopkins. Moniz observed:
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 [in Cambridge, Massachusetts]? 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.