One of the things I’ve always loved about startups in emerging markets is the ability to go from zero to sixty almost immediately. When you get that feeling of the pavement rolling underneath your feet, the temptation to take the early market lead can be very compelling. But is it always a good idea?
Back when I was running Carbonetworks, it was an interesting time. Global carbon trading was just taking shape and there was little debate around climate change; the whole world seemed headed towards a new and very large global market. The company, at least in it’s very early days, was intended for companies to monetize carbon emissions via trading and later, energy savings. It was an interesting time; companies didn’t know much about carbon but knew they needed to do something about their CO2 emissions. Similarly, investors in Silicon Valley also knew they needed to do something about it as well. At the time there was only two or three carbon management vendors in the world, and Carbonetworks was one of them.
So we embarked on an education of our market, our potential clients, and investors. But in doing so, we also educated our competitors. Of course we knew this, but it was a trade-off we had to make; a balance of educating the market in order to connect with clients at the expense of alerting and educating competitors and their investors. When the better-funded competitors did arrive on the scene (they always will), things got more difficult, but not in the way you might think.
Cleantech, by definition, is a sprawling collection of technologies, IP, and services that is almost impossible to define because of its overlap with adjacent markets. For instance, is data center energy efficiency cleantech or IT? The answer is both, of course; and that’s what makes Cleantech a difficult market to address. You wind up with a mix of experts and laypersons, all vying for the same face time with the customer - a customer who has their own challenges finding the right person for the job. In their search for differentiation, new competitors invent value props that they may see in the market, but based on problems customers really aren’t experiencing (Marginal Abatement Cost Curve, anyone?). Things get noisy very, very quickly - and this was our problem in the early carbon/energy market. Lots and lots of noise. Rather than trying to shout louder than your competitors, sometimes you just need to stand up, shut up and listen.
A lot of entrepreneurs have opted for growing their startup in “stealth mode”. I’ve seen this approach succeed but also fail spectacularly - if you’re going stealth, you need to ensure you have something special (stellar management team, unique access to customers, etc) to replace the market exposure you’re giving up. For well-heeled management teams, stealth is a great option. But for the entrepreneur who doesn’t have access to these resources, it can make things much more difficult. On the flip side is the company that carries the banner for the market, but runs the risk of leading too early and bleeding IP to the market.
However there is a middle road, where you let your customers define your leadership position. In Cleantech and other complex markets, there is often no one-size-fits-all solution. Customers need as much help as you do navigating through the buzz. The key is finding their core problems and finding solutions to those problems. Sounds simple, but it’s not. In our data center example above, it depends on who the customer is. If its the CIO, s/he’s likely not going to respond directly to energy savings as it’s usually not core to their mandate, whereas performance is. If it’s the sustainability person, it’s unlikely they have the IT or implementation expertise to appreciate the technical advantage of your solutions. So as a vendor, extra diligence is required to define the problem and how you’ll help solve it. This is what’s going to lead you to closing deals in Cleantech, not pushing your firm as the next market leader.
So when should your firm take the lead in an emerging market? Only your customers can tell you that. Let your sales numbers speak for themselves.
Michael is the former CEO of the Global Reporting Initiative, Carbonetworks, and other sustainability organizations. He has been an advisor and CEO in sustainability for almost 20 years, and writes about technology, sustainability, and social innovation.