Part 5: Sneaking In the Planetary Benefits (or why customers matter most for climate action)
Chapter 1 of The Climate Startup Playbook from Third Sphere
Two decades ago, working on climate mostly meant working on renewable energy like wind, solar, or nuclear. At this time, understanding customer behavior was relatively straightforward. Regular conversations with utility management, regulators, and their investors would tell you most of what you needed to know. You could understand preferences and then model their purchase behavior, shaped heavily by the need for competitively priced alternatives to coal and natural gas. Even more unusual, most utilities don’t really have customers as much as they have “ratepayers.” So there wasn’t really a need to understand the customer’s customer, as would be more common in B2B business forecasts.
Today, the universe of customers for climate solutions, has expanded to include all of us. And, despite clearly positive intentions, most of us are not buying climate solutions. We’re buying more nutritional food or more fun and convenient transportation. It’s not that we don’t care about climate — it’s very clear we do — but the vast majority of us aren’t willing to give up too much or pay a premium to get climate benefits.
Many of the most impactful startups are not directly selling climate solutions but are simply disrupting incumbent offerings that are long overdue for a re-imagining. If you look at the big three human systems that need to decarbonized — transportation, construction, and industrials — these have had some of the lowest innovation rates when compared to say consumer electronics, finance, retail, communications and media. No surprise that these sectors are now served by today’s large tech companies. Startups taking on these incumbents are aided by 20 years of acceleration in everything from sensors and batteries to machine learning and the Internet of Things (IoT), as well as ubiquitous internet connectivity and manufacturing capacity that can produce billions of devices. Also, it’s never been easier for customers to discover new products and services.
But there is something else. It’s been a while since new players have revisited assumptions about what customers want. One-, two-, and three-wheeled transportation is a great example. Survey folks who have replaced car trips or gas-power mopeds and you’ll likely hear a list of reasons that include -
easier parking
no traffic
cheaper to charge vs buying gas
cheaper vs car ownership
additional exercise
quiet
There’s even research showing how car shedding makes people happier. Very few customers mention GHG emissions, which is surprising since avoided transportation emissions are one of the key benefits we all get from these transportation decisions.
It’s true that public sentiment has been shifting quite quickly — there is concern about climate change and a growing majority of people agree that something must be done. Governments must act. Businesses must act. But individual action, well, that’s complicated. At least one thing is very clear — there are more early adopters.
More early adopters
Early adopters are the heroes of technology disruption. They might be annoyed with the incumbent or maybe they can already imagine a better way. Or they simply have a specific application that’s not well served by existing approaches. Or they just want to be first to share with their friends. The best startups tend to have a deep understanding of what customers want, while the rest of us remain blissfully unaware of an emerging opportunity. This is one of the really fun parts of working with early stage founders.
Now there is a similar, growing group of early climate adopters, willing to take a risk or pay a premium. They may be responsible for reducing GHGs in the supply chain for their business or they might be taking more individual actions. Many understand that their actions will help drive adoption among their peers as they directly demonstrate and share their experience.
These customers won’t directly drive a large impact; however, they’ll kickstart new insights about everything from customer acquisition to new design. In the case of hardware, these customers are essential if we want to start moving down the cost curve, which in turn will open the door to more prospective customers. We’ve seen this playbook before — it happened with mobile phones and more recently with Tesla’s Secret Master Plan.
Beyond price
If you go back two decades in tech, one Steven Jobs was planning to massively disrupt computing with a new device that we’d meet in 2007, called the iPhone. Apple was targeting consumers and this resulted in a lot of poor predictions about what customers might do. Microsoft CEO Steve Balmer reacted dismissively to the iPhone announcement. The most common devices in use at the time were the Blackberry and Nokia. Balmer, who already had a deep understanding of business customers, surmised that the iPhone would never catch on. His reaction had nothing to do with technology (the iPhone worked beautifully) and everything to do with cost to business customers. The device was simply too expensive. Why would anyone with the money to buy a mobile device choose one that didn’t have a keyboard? How would it make sense for businesses?
Balmer’s error lay in failing to consider that consumers might soon demand phones equipped with cameras and large screens; that software developers would find multiple uses for such cameras and enhanced screens like GPS navigation and media consumption; and that their use would spawn entire new businesses like social media. Within just a few years, the largest players in the smartphone space disappeared — there is almost zero chance you’re reading this on a RIM (Research In Motion) or Nokia device.
Key Takeaways: Understanding what customers want is an essential requirement if we want to unlock planetary benefits. Expect to be surprised by what drives planet positive product purchases. Ultimately, price matters, so we need to understand cost and learning curves.
