HBR asks How to Jump-Start the Clean-Tech Economy and points out that initially-inferior technologies penetrate markets all the time. It also notes that inventing a new product alone may not be enough – a complete system may have to be initiated. There’s more we know though, that Govt and firms could and should be leveraging.
The experience-curve has been well-understood for half a century, and is now so axiomatic that tech-product innovators now simply incorporate its impact every time they launch new products – see below. Numerous clean technologies are way back at the start of their experience curve and have a very long way to fall in cost, but their promoters and Govts are nowhere near exploiting the experience curve in most cases to drive that process.
Companies leverage the experience curve in various ways – e.g. under-pricing products early on, to stimulate the production output that will drive the very cost-reduction that will make the product profitable. Given that Govts are claiming they want to drive clean-tech, it’s curious then that they are not doing much that they could to accelerate this process.
It’s not just some qualitative idea that things get better and cheaper with ‘learning’. Put simply, unit-cost of new technology products fall in cost by a characteristic percentage – typically 15-20% – every time total cumulative production doubles. Photo-voltaic solar cells have been following this curve for 20 years and we can see them penetrating sector after sector as they become affordable for different applications. Govts don’t seem to be doing anything to help trigger and accelerate these experience curves, investing instead in early-stage R&D for numerous, dubious technologies, rather than driving forward others that are already proven. And many such innovations, being developed by VC-funded small enterprises, have little appreciation of this mechanism and nothing like the necessary resources to make it happen.