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We’ve written a number of times [here and here and here] about the emerging industry dynamics that are propelling solar energy up a truly compelling disruptive trajectory. As the signals become increasingly clear that solar will indeed be a significant energy technology, billions of dollars of investment have poured into the industry and the pace and scale of innovation has exploded.  

A terrific recent post on Treehugger.com, a leading cataloguer of emerging sustainability innovations of all kinds, recaps 15 exciting advances in photovoltaics over the last year. The majority of the advances relate to the ongoing conversion efficiency race, as companies and labs working with different base technologies seek to design cells that convert sunlight into power in ever more effective, and therefore cost-effective, ways. Conventional silicon-based solar cells are getting closer and closer to their target of grid parity, at which point they figure to displace conventional sources of electricity without relying on government subsidies and incentives. 

Meanwhile, disruptive thin film-based solar panels are nearing “good enough” efficiency – performance rates at which they become economically viable. Some, led by industry pioneer First Solar, have already reached that point, and have grown astronomically as a result. 

Beyond the efficiency race, the Treehugger post recounts exciting adjacent developments like radically new approaches to mounting solar cells and breakthrough printing processes to mass manufacture them.  

With all these exciting developments, how can we begin to sort killer businesses from the fascinating technologies that will never make it out of the lab? We’d start with a couple of core disruptive innovation principles.

First, we’d like to see innovation efforts directed at the business model as well as the technology. Historically, business model innovations that make the consumption of a new technology easier, cheaper, more accessible or more convenient have been the best predictor of success in an emerging industry. Think of the way that Apple created iTunes to definitively separate the iPod from all the other MP3 players.

Some technologies are different enough from the herd to really lend themselves to new business model approaches.  One can imagine all sorts of avenues for CoolEarth’s solar balloons, for example.  By freeing solar collectors from their rigid mounts, CoolEarth can take the capability to produce clean and renewable power to new contexts, such as the developing world.  

Second, we’d look to ride disruptive waves.  Industry leading silicon-based cells have plenty of headroom to grow, and many of the companies that make them will likely enjoy lots of success in the years to come, but thin film manufacturers are nipping at incumbents’ heels. There are signals that the disruptive wave is picking up steam: SunPower, one of the foremost silicon-based incumbents, received a huge new order a few weeks back from California utility PG&E; significantly, though, they only got a fraction of the contract – the lion’s share went to new thin film player OptiSolar. 

The advantages inherent in the thin film paradigm (flexibility, lower cost manufacturing via reel-to-reel “printing” rather than semiconductor fabrication) will assert themselves as technologies approach economic viability. Thin film will exert more and more cost pressure on conventional solar, and could also open up new markets that silicon-based cells just can’t reach.  

Meanwhile, the next disruptive wave after thin film is beginning to gather, as so called organic solar cells being developed by companies like Konarka make their way into initial foothold applications. 

So, how should one monitor an explosively dynamic, fast moving, ascendant yet bubble-prone field like solar? Try to spot developing waves, watch carefully for signals that disruption is underway, and all the while pay special attention to companies that innovate with their business models, not just their technologies. 

Stuttgart is “going green.” The German city recently signed a letter of intent with Ultra Motor to implement an infrastructure to support eco-friendly scooter-bikes. Launch is expected in 10 months and the idea is catching on; according to BusinessWeek, Ultra Motor is currently in negotiations with 12 other major European cities.

Driving this effort is Ultra Motor’s new A2B Light Electric Vehicle (LEV) — a scooter-bike with a conscience. The tagline even has an anthropomorphic ring to it: “The heart of a bicycle. The soul of a scooter.”

Experience LEV technology: Hop on a comfortable seat surrounded by a lightweight, aluminum frame. Enjoy as much exercise as you choose by pedaling or cruising at 20 mph. Want to ride further? The standard range of 20 miles can be extended to 40 with the addition of a lithium ion battery pack. New technology provides one-third more force than electric motors; helpful when ascending hills or darting through traffic. A dashboard indicator signals energy remaining. Dwindling charge? Simply plug in.

Current customers of the A2B vehicle include commuters, students, employers, fleets, and local authorities. However, through our lenses, jobs define the marketing strategy and are linked to attributes:

Social job: “Have a positive impact on the environment”
The A2B is a zero emissions mode of transportation, powered by a lithium ion battery. The vehicle efficiently functions at approximately one-tenth the running cost of a gas-powered scooter.

Emotional job: “Allow me to enjoy my commute”
The rider is able to enjoy the outdoors and a quiet ride. The extended driving range provides freedom and the vehicle is easier to handle than a gas-powered scooter. Modular storage options are also available.

Functional job: “Provide a way for me to reduce transportation costs”
Savings are self-evident — no gas required. The A2B model is currently available in 20 states across the U.S. for about $2,200. In Stuttgart, a monthly subscription will cost $23; a mass transit pass costs $84.

In the spirit of business model innovation, Ultra Motor is exploring new networks of transportation, one of which will be utilized in Stuttgart. The “LEV City Initiative” outlines this potentially disruptive system featuring charging stations; purchase a subscription, locate a station, swipe your card and enjoy the ride.

We applaud Ultra Motor for encouraging consumers to “go green” in new ways. Learn more from the source at www.ultramotor.com. You’ll notice as the website loads, the screen cleverly notes: “Charging up.”

A front-page article in yesterday’s Wall Street Journal illustrated how important it is to periodically revisit the assumptions behind an idea.

The article described how several years ago, the head of Sacramento’s regional planning agency started to push developers to concentrate growth in defined areas rather than furthering suburban sprawl. The argument hinged on lowering pollution and fostering economic development.

Of course, with the price of oil shooting up, today the idea looks remarkably prescient.

I wonder, however, how many planners rejected similar ideas because they couldn’t imagine people making living decisions based on the cost of commuting, and how many now wish they started dusting off those rejected plans when signals emerged suggesting that circumstances had changed.

On the other hand, sometimes circumstances change in ways that undermine ideas that once seemed credible. Consider Motorola’s daring, and ultimately doomed, venture to provide satellite-driven mobile telephony.

Read the rest on Scott's Harvard Business blog, Innovation Insights.

The GM Volt blog posted an interview yesterday with Chevrolet brand manager Ed Peper in which he discussed work Innosight is doing with GM for the Volt launch. When asked, Do you have a plan on how to educate the public to understand the car since its so unique in order to make it more readily salable? he answered:

"We're actually doing a lot of work right now to understand in general who the consumer is for this product. We're working with a group that’s based out of Harvard and there a company called Innosight. What their working with us on is developing a jobs-based positioning for Volt. Which means what are the jobs that Volt really needs to handle for the consumers that buy them. On an emotional level, on a social level, on a functional level, what are the jobs that this vehicle must perform and must do well. Were in the process right now. We’ve done a couple of focus groups. We have a lot of data that you and others have provided us. And its going to help us from a marketing standpoint, what things should we talk about, what things shouldn’t we talk about. And how to we best present the category buster. How do we present this in such a way that consumers who are interested will know this is the first of its kind and this will be the best of its kind and it will be the only one of its kind when it hits the market place in 2010."

Statements like “the Dell, Wal-Mart, or Southwest of new industry x” always get us excited because they indicate that an entrant has shifted the focus of innovation efforts from the product to the business model.

Not that there’s anything wrong with technology-based product innovation – it is, of course, essential. But it is also a gamble; pursuing product-driven innovation alone means that you’ll be entrenched in a fierce competitive battle because it is relatively easy to frame a challenge in technological terms. Changing the basis of competition by innovating the business model – as Dell did with PCs, Wal-Mart with retail, and Southwest with air travel – has historically increased the odds for breakthrough success.

That’s why it caught our attention when Fortune’s Green Wombat blog labeled Berkeley-based solar start-up Sungevity the “Dell of solar energy.” Solar power has been red hot, aflame with technological advances and billions of dollars in investment. Getting business model innovation right in this context promises enormous success.

Has Sungevity gotten it right? For starters, their tagline, “faster, easier, affordable solar,” is as close to Disruptive Innovation 101 as you can get. As loyal readers of this blog know, disruption is fueled by companies delivering on speed and convenience, ease of use and de-specialization, cost and accessibility. Doing so removes barriers to consumption, enabling large swaths of consumers who were otherwise locked out of a market to participate – non-consumers, in disruptive innovation terms. And there are certainly a lot of nonconsumers of solar power…just think of all the unused rooftop real estate out there.

Sungevity is looking to put solar panels on those barren roofs. The company is a solar installer; they take the panels produced by giants like SunPower, Evergreen Solar, and BP Solar, affix them to rooftops, and connect them to the grid. This final step in the value chain has, predictably, been beset by inefficiency and variability up until now, because it depends on all too human factors like the availability of good installers who know what they’re doing.

The flock of solar installers that have emerged in recent years are seeking to centralize and simplify this complex and potentially frustrating process. Economies of scale give any company a natural advantage over the independent contractors they compete with, but Sungevity’s clever web-based interface is what really sets the company apart.  The company asks visitors to their site to enter their home address, and then uses software and satellite imagery to come up with customized quotes that outline what a solar power system would cost and what it would produce. This estimate makes the system planning process quick and easy by obviating initial site visits from a contractor.

Crucially, moving the quotation process to the web figures to lower the bar for potential customers who are not yet intent on installing systems. Instead of taking time out of the day to accommodate a sales visit, people can simply plug in a few numbers online. There’s no commitment, no investment, no contractors marching around on your roof who’ll be disappointed when you tell them that you’re not yet ready to commit to laying down $10,000 for the panels.

In addition to mapping out a custom-designed system for your rooftop, the nifty Sungevity site also projects install costs and lifetime energy and cost savings. The site produces images of your house decked out with solar panels and then allows you to enter a credit card number to make the purchase on the spot. In the words of CNET’s Greentech blog, the customer-friendly web interface “reduc[es] a complex sale into a quick online exchange.”  As easy as customizing and purchasing a PC, right?

Innovative service-oriented business models like Sungevity’s that are just now emerging will spur the development of the solar power industry, enabling it to maintain its blistering pace of growth while reaching more and more of mainstream America. When you factor in other clever business model innovations such as solar financing and the cost reductions and efficiency improvements that will emerge from the technological arms race underway in the industry, the picture starts to look very sunny indeed.

The ongoing "greening" of the corporate world is a wonderful thing. As our industrial titans shift towards sustainability our environmental footprint decreases, consumption of finite resources becomes more rational, and we all get exposed to fewer toxins and chemicals.

The move towards sustainability also provides an instructive live case study of market evolution and innovation; as "green quickly becomes an essential performance characteristic in all sorts of products and businesses, companies are scrambling to innovate in order to take advantage and differentiate themselves from their traditional competitors, or if someone else has already done so, hop on before getting left in the dust.

The underlying phenomenon driving the emerging importance of sustainability is growing consumer awareness of the problems posed by unsustainable practices and products. This renders sustainability increasingly valuable to more people in more contexts (and, it should be noted, environmental regulations like fuel efficiency standards and carbon taxes cement such perceptions in law, forcing the economic calculus to account for externalities the market might otherwise ignore).

Taking a step back, all products and services can be thought of as aggregates of performance attributes I like coffee, for example, that is hot, strong, fresh, affordable, fairly traded, and sustainably harvested. When any performance characteristic becomes increasingly valuable others necessarily become relatively less valuable, be they price (e.g., people are willing to swallow the premium for organic food), convenience (theyll go to the one Whole Foods in town rather than the market down the street), reliability (they ditch the brand theyve trusted for ages in exchange for a new green product from a company theyve never heard of), or even quality (theyll settle for scratchy but 100% post-consumer recycled tissues). Understanding the impact of the increasing importance of sustainability in any given context is critical to projecting the nature and extent of the "green revolution and the best ways to innovate in response.

Disruptive innovation often takes place in these sorts of situations, when the dimensions of performance shift, when, for a variety of reasons, the market reassesses the value of specific characteristics in a product set. Those that figure out how to deliver the right set of performance characteristics succeed, while those that fail to do things differently just fail.

Consider consumer products giant Cloroxs recent behavior: last fall they purchased leading natural products company Burts Bees for $925 million, then perhaps more interestingly in this context, earlier this year they unveiled Green Works, a new set of eco-friendly and Sierra Club-endorsed products touted as "the first line of natural cleaners developed by a major consumer products company.

Clorox recognized that the market landscape had shifted, that more and more consumers were valuing green product attributes, and they adapted accordingly. That recognition enabled it to apply its corporate muscle and know-how to the challenge. It can reach into its pockets and swoop up an emerging competitor Burts Bees but it can also marshal its scientists to create compelling green chemical formulas for new products, its sourcing and manufacturing capabilities to harness economies of scale and bring down prices, its channel relationships to place sustainable products in Wal-Marts and supermarkets everywhere, and its market researchers and marketers to understand and reach mainstream consumers.

In short, Clorox can deliver products that meet the sustainable performance threshold (they are all natural, biodegradable, recyclable, not tested on animals, and so on) but that also adequately satisfy more traditional performance metrics like efficacy, affordability, reliability, and accessibility. As long as it understands the true market need and tailors its business model and product set accordingly, Clorox has the chance to outpace many of the startups and pure plays that make up the green products market today.

So what are the lessons for big companies looking to navigate market shifts such as the emerging importance of sustainability? Early adopters are the canaries in the coal mine watch them closely in order to understand the new dimensions of performance they prize and the tradeoffs they are willing to make. A close reading of their evolving performance tradeoff profiles will clue you into the nature and extent of underlying shifts in the relative valuation of distinct performance attributes. Then, look at the thresholds for mainstream consumers how acutely do they feel the shifts that are motivating early adopters? What are the barriers that stand in their way today from consuming in the same way as the evangelists? You just might find that big company resources and capabilities, applied intelligently, can innovate around those barriers by, say, getting affordable and effective all-natural and sustainable cleaning products into Wal-Mart.