Building Innovations for the Green Economy

Building Innovations for the Green Economy

Interest in entrepreneurship within the green economy is exploding globally yet many people believe the opportunity can only be maximized by big companies-that those poised to succeed have capabilities they lack. But the big companies really just had one thing in common in the beginning: They made innovative products.

As the world becomes more complex and the problems caused by climate change become more urgent, the need for innovation will only grow. Entrepreneurs need ways to iterate their way toward the best innovations quickly. Innovation in the green economy is not limited to technology. It can come in many varieties including technology, business processes, business models, and markets.

(Watch this explainer video of the green economy>>>)

Understanding Innovation

Innovation has become an increasingly clichéd term, but it has a simple definition:

Innovation=Invention + Commercialization

(Edward B. Roberts, "Managing Invention and Innovation," Research Technology Management 31, Vol. 1 Jan/Feb 1988)

The definition was later modified to:

Innovation=Invention * Commercialization

(Bill Aulet, "Disciplined Entrepreneurship," Wiley & Sons 2013)

I prefer the modification from addition because innovation is not a sum of innovation and commercialization, but a product (multiplication). If there is invention but no commercialization (commercialization=0), or commercialization but no invention (invention=0), then there is no innovation.

The invention (an idea, a technology, or intellectual property) is important, but the entrepreneur does not need to create the invention. With time, inventions become readily available as technology becomes commoditized. However, the capability to commercialize an innovation is necessary for real innovation.

As an entrepreneur, you serve primarily as the commercialization agent.

How do you go about this?

1. Research-based Local Innovations

IIED (International Institute for Environment and Development) research has found that less than 10% of funding committed under international climate funds to help developing countries take action on climate change is directed at the local level.

IIED's analysis identifies a range of barriers preventing crucial finance from reaching local communities. These include:

  • Some multilateral development banks and UN agencies are less able to finance small-scale projects directly, due to higher transaction costs.
  • No priorities are being set for the funds to reach institutions on the ground, and
  • There are concerns over communities being able to manage large amounts of finance.

Africa lags in agricultural productivity and energy access. The duality of the abundance of natural resources and the need to grow these areas means there is a massive opportunity to develop these sectors sustainably. Entrepreneurs create real value by focusing on local market opportunities they can dominate.

(Watch this video to know how to do market research in your local areas>>>)


2. Capture Early-adopters by Quantifying Data

As an entrepreneur, you need to quantify the unique value you bring to your target customer and understand how to translate that value into profit.

In common usage, climate change?describes global warming—the ongoing increase in global average temperature—and?its effects on Earth's climate system. Innovations that are set to win in the green economy will demonstrate how they reduce global warming using data that is reliable and quantifiable.

The need to quantify is becoming increasingly visible in the carbon credits market. Multinational corporations such as Nestlé and Shell are shifting their focus from investing in carbon offsets to implementing programs and practices that directly reduce greenhouse gas emissions within their supply chains and operations.

This change aligns with a broader trend of companies distancing themselves from credits that merely claim to prevent emissions, especially as awareness of the difficulties in verifying the real environmental impact of these projects increases. This development opens new doors for entrepreneurs who can quantify their value to early adopters.

(Watch this video on how to find early adopters>>>)

Entrepreneurship can be chaotic, especially in new opportunities like the green economy. However, innately unpredictable situations require a systematic framework that allows you to reduce your risks and maximize your strengths by identifying and addressing areas that you can control. By focusing on local problems and being able to quantify the impact of their innovations, you can unlock new opportunities in the green economy.

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