The urgent need to transition away from carbon-intensive energy sources has become increasingly clear, as delays in the past have shortened the relevant timeframe. We cannot afford to slowly implement emerging climate technologies. Despite the declining costs of such technologies as wind, solar, building management and geothermal, it is not guaranteed that they will quickly replace the need for fossil fuel energy. Even with increased public- and private-sector investments in new green opportunities, rapid scaling is not guaranteed.
Scaling is different. Emerging companies that have new technologies often assume that scaling and exponential growth can be managed in the same way as when they were in startup mode, which can be a costly mistake. Rather than quickly expanding operations within five to seven years, per their business plan, these companies may end up spending a significant amount of time addressing operational and leadership gaps that should have been identified and addressed prior to scaling. This can turn scaling into snailing and prolong the time required to achieve impact to 15 years or longer.
Climate tech companies must restructure and reorganize to meet the challenges of scaling and effectively implementing new technologies.
According to projections from the World Resources Institute, climate tech needs to undergo a huge, rapid increase of the rate of implementation across many sectors. Here’s an example of what we need to speed up to achieve the 1.5 degree C target by 2030:
- Phase out coal power generation six times faster than historic replacement rates, equivalent to retiring 925 average-sized coal power plants for many years while ensuring clean energy sources replace the displaced coal energy without disrupting vital services.
- Improve energy intensity of building operations five times faster than current rates for commercial buildings and seven times faster for residential buildings. The built environment is a major consumer of materials that contribute to carbon emissions, such as cement, aluminum, steel and plastic.
- Expand public transportation systems at rate that’s six times faster than we are going, including lightrail, metro buses and rapid transit networks across the highest-emitting cities in the world.
The availability of funding is not the main issue for scaling climate tech. Governments have committed billions of dollars to the sector, venture investment has grown 40 times in the past decade, and 83 climate tech unicorns are valued at over $180 billion. However, ample funding and high valuations do not guarantee timely and successful commercialization and implementation.
The current challenge for climate tech companies is restructuring and reorganizing to scale and effectively implement new technologies. As Jigar Shah, a cleantech entrepreneur and now head of the U.S. Department of Energy's loan program, stated, "The money is there, but where the world has not caught up is in creating the projects."
Snailers are unprepared scalers. Snail-scaling comes from lack of preparation. Leaders are unprepared for the different roles and challenges they will take on. Brian Chesky, co-founder of Airbnb, said, "During scaling, you have a completely new job every six months. It’s like if you were a pro bowler, then became a pro football player, then a pro hockey player."
Scaling not only requires the ability of leaders to adapt to changing roles, but also to address strategic and operational transformations. Achieving higher growth rates in new markets requires shifts that impact all aspects of the enterprise. For example, leadership needs to upgrade to an organization capable of producing, selling and delivering larger volumes of the product or service across new markets while maintaining quality. Processes need to be strengthened and standardized to support the demands of scaling. Furthermore, leadership must become ambidextrous to manage both the current operations and lead the scaling initiative.
For the unprepared, scaling can be a daunting task.
Smart scaling
FIRE is a four-step diagnostic I developed and refined over the past 10 years working with companies and accelerators around the world. It assesses a company’s Fit, Ingredients, Recipe and Execution and prepares the team for scaling by identifying and addressing potential issues before they impede growth. Conducting a FIRE assessment prepares an enterprise for scaling quickly, effectively and efficiently.
1. Fit: Is the "job to be done" the same in the target markets?
Being aware of market realities can prevent being blindsided during scaling. Disney's failure to understand the cultural differences in France when it opened Euro Disney (now Disneyland Paris) in 1992 is a prime example. Despite its success with theme parks in California, Florida and Tokyo, Euro Disney’s opening faced cultural clashes, financial difficulties and marketing mistakes. Attendance and revenues were exceedingly low and Disney initially incurred colossal losses. In a humbled posture, it was forced to adjust its approach to accommodate the unique needs of the French market. After these changes to the "job to be done," Euro Disney became one of the most visited attractions in Europe.
This lesson is important to remember when scaling climate tech companies. There can be significant differences in user needs, regulatory environments and competitive ecosystems in different markets, and what works well in one market, region or country may face critical new challenges when expanding.
2. Ingredients: Are the operational pieces ready for scaling?
This includes doing a sanity check the entire business model, including:
- Is the value delivered by the technolo
Read More
