Climate Technology Program | In Brief No. 3 Connecting Green Technology Entrepreneurs: Implications for Public Program Design What is the role that connections can play in helping green technology entrepreneurs innovate and scale up in developing countries, so as to inform the design of new public sector programs? Based on a review of the recent literature and 14 case studies of different programs, public programs aimed at supporting green technology entrepreneurs should: (i) place the entrepreneur at the center of the innovation process; (ii) seek to cement peer-to-peer connections at the local level (e.g. by setting up networks of entrepreneurs); and (iii) help entrepreneurs connect to supranational networks and technology brokering platforms at the global level. Find the case studies in the report “Connecting Green Technology Entrepreneurs: Implications for Public Program Design” at www.infodev.org/publications. Introduction The “open innovation” model In light of growing concern related to climate change, local entrepreneurs are critically needed to develop businesses appears promising for green supporting climate mitigation and adaptation efforts in developing countries. In contrast to the traditional invention- technology businesses in oriented approach to innovation, the potential exists to help these entrepreneurs scale rapidly through “open innovation” developing countries strategies featuring technology brokering and networking. The “open innovation” paradigm – whereby firms attempt In the invention-based approach, enterprises typically invest to bring to market innovative products or services without heavily in research and development (R&D) to be the first to heavily relying on in-house R&D investment – offers a develop and commercialize new ideas. They subsequently reap promising option for “new to market” firms in the green monopoly profits through commercialization of these ideas and sector in developing countries. It critically relies on the claim intellectual property rights (IPR). However, this approach establishment of connections among the various stakeholders may be challenging in developing countries given the high in the innovation process (firms, financiers, potential clients) costs involved and weak IPR enforcement frameworks, and with a view to develop products or services directly attuned often being first to market in the green sector does not require to market demand and to build social networks involving radical invention. 1 For these reasons, an innovation strategy entrepreneurs both at the local and global level. giving prominence to technology absorption and adaptation Firms engaged in open innovation strategies take market of existing business models may represent an alternate, less demand as a starting point, without locking themselves into capital- and time-intensive pathway to help green firms grow any particular technology, then scour the horizon for the right in developing countries. technologies and business models to address such needs, so as The World Bank Group’s Climate Technology Program to approach financiers with realistic business plans and profit- undertook a literature review and an analysis of 14 case studies making opportunities. This puts a strong premium on the firms’ of different programs spanning more than 80 countries to ability to identify business needs and establish connections understand how public programs could best support green with potential markets very early on in the innovation process. firms to scale. This research offers the following insights. See figure 1 for a comparison of the closed and the open innovation model. 1. In this brief, “green sector” refers to businesses aimed at contributing to reducing nega- tive environmental impacts or addressing the consequences of various forms of pollution. Figure 1. Closed innovation vs. open innovation Closed innovation Open innovation Corporate ethos Only invented here Best from anywhere Role of customers Passive recipients Active co-innovators Core competency Vertically integrated product and service design Competitive differentiation and collaborative partner management Scope Economies of scale, with products and services Economies of scope, with individualized solutions optimizing end built around core competencies customer value Attitude toward IP Own and protect Trade and commercialize Role of R&D and Design, develop, and market in-house Optimize performance of owned assets through both in-house and operations inventions external development Source: Adapted from RADJOU, N. (2004) Innovation networks. Forrester Big Idea. Forrester Research, Inc. In Brief No. 3|Page 2 Public interventions should aim at program does not try to provide its final audience, namely the innovative firm, with the resources it needs, but rather seeks to building up networks of firms connect it to them through relevant networks. By associating firms within networks and putting in place open innovation In the open innovation approach, strong networks become platforms between local firms and global stakeholders and key to encourage innovation by connecting people, allowing clients, the program may help lower initial investment costs, for knowledge transfer, sparking new ideas, and promoting speed up the delivery of new products and services to market, collaboration. Participating firms can leverage networks and scale up the adoption of new-to-the-context business by engaging in “technology brokering” strategies, whereby models. they seek to adapt existing technologies or create new combinations of products and services to innovate in the Such an approach may meaningfully help green technology same or other sectors. To this end, internal work incentives entrepreneurs overcome the market failures that they are and reward structures need to be aligned with the objectives particularly likely to face on both the demand and supply sides of identifying new combinations of old ideas by collectively in developing countries. Evidence suggests that it is especially pooling knowledge and experience. For example, the the case for small and medium enterprises (SMEs), which often sustained participation in overlapping networks with other have a deep knowledge of local green technology needs but peers provides entrepreneurs with the opportunity to typically lack the ability to access the global technologies, exchange ideas on current market trends, and to find possible capabilities, and resources required to address these needs. collaboration opportunities on products and services. Importantly, such an approach can also be cost effective and highly scalable (see figure 2 below for the percent growth in These observations suggest that public intervention in network activities of selected programs). support of green technology firms in developing countries should foster networks of firms, following a “connective model” approach to innovation policy. Under this approach, a Figure 2. Rapid Expansion of “Connective” Network Models (percent growth in network activity) Climate-KIC Digital Green Quirky 2014 2013 2014 2013 2014 2013 2012 2012 +232% 2012 +153% +118% +165% +155% +211% Source: Climate-KIC annual reports; http://digitalgreen.org/analytics; http://quirky.com In Brief No. 3|Page 3 The organization of firm networks In this respect, the analysis of 14 case studies offers insights into which of these connections can be deemed critical to involves setting up multiple innovation processes in green technology in developing countries. See figure 4 and 5 for details of the case studies. connections Regarding (i) people , the case studies point to positive To encourage and nurture the developments of networks, externalities stemming from bringing together stakeholders key connections need to be established among (i) people, (ii) with diverse backgrounds. They also suggest that mentoring ideas, (iii) products, services, and business models, and (iv) programs, including informal interactions between “seasoned” transactions; attention should also be given to developing entrepreneurs and new ones, provide a most valuable a sense of (v) community to ensure the sustainability of contribution to the growth of new firms, and to the creation these connections ( figure 3 ). Each of these represents a of social networks. Finally, they show that engaging in open specific component of the entrepreneur’s journey toward forms of innovation activities requires a versatile workforce market access and engagement, and forms a set of program that may rely on external connections to succeed. components or “building blocks” that practitioners can add or The routine circulation of (ii) ideas within open networks substitute as context requires. has been found conducive to innovation processes. The case studies suggest that the organization of events fostering peer- to-peer interactions plays an important role in this respect, Figure 3. Five different types of connections especially as events entice more actors to join discussions. The continuous process of interactions among firms and other actors within well-functioning networks may vitally Id boost the commercialization of new (iii) products, services, e ea pl s and business models . The participation of entrepreneurs in P eo Fostering Generation these networks also provides opportunities for firms to adapt learning through connections to other of new ideas business models observed elsewhere to their own industries or green technology through countries. entrepreneurs and connections ecosystem participants The establishment of (iv) transaction platforms promotes innovation through reducing information asymmetries among siness models the different stakeholders and through lowering search costs. Building connections In this respect, connections to external sources of financing, “Connective” Facilitation of the between green for example by investment facilitation, are often a precondition technology models adoption of “new Co m m u n to the market” to the development for nascent firms, especially within businesses and green technology countries with limited saving capacities. & bu other ecosystem actors locally and business models, products, and A cornerstone of well-functioning networks, strong (v) internationally ce s itie services communities are created by the self-reinforcing effects of r vi s sustained connections over time. In this sense, the buildup se Reduction in of a community of entrepreneurs striving to open up new s, business to business ct activities in a specific economic sector is both the ultimate du transaction costs o Pr goal of establishing connections among them and the best guarantee for the self-perpetuation of the network. The case Tran sa c ti o ns studies highlight the role of “promoters” or high-visibility firms in building this sense of community. Source: Authors. In Brief No. 3|Page 4 Operational implications for can include the provision of consultancy services, ranging from the opening of one-shop kiosks for new entrants to the public program design activation of peer-to-peer connections by “go-betweens,” or the setup of mentoring services matching new entrepreneurs with Connective models aimed at fostering open innovation successful, experienced ones. Support may also be directed processes by establishing the required connections suggest toward facilitating catalytic events such as “green technology specific forms of public intervention. There is little doubt that forums.” Favorable policy changes can include strengthening public support is needed to foster green sector innovation intellectual property rights to ease the licensing of ideas and in developing countries, given the pervasiveness of market technologies as well as setting restrictions on non-compete failures and the uncertainty attached to market demand for agreements to ensure the mobility of the workforce. climate-friendly technology and services. Findings from this Third, public programs should aim at including research suggest three best practices for public programs in entrepreneurs in global networks and technology this area. brokering platforms, complementing local action. A First, technology brokering may be best fostered by public managed program geared toward creating a bridge between policies that place the entrepreneur at the center of the green ventures, global assets, and stakeholders may support innovation process . The overarching goal should be to the development of the green technology sector in developing involve the entrepreneur in a dense network of connections. countries, complementing local action. This is all the more Participation in a strong network is critical to fulfilling the needed as, despite strong positive environmental, social, and three joint objectives of accelerating innovation processes economic externalities, clean technologies are particularly (“speed”) and expanding successful projects (“scope”) while prone to market failures and bottlenecks, notably relating to keeping public investment minimal (“cost”). the lack of market depth at the domestic level, limited access Second, public support can be instrumental in cementing to cutting-edge knowledge, and the difficulty of structuring peer-to-peer connections at the local level. Useful programs communities on these issues. Figure 4. Global coverage of the case study programs In Brief No. 3|Page 5 Figure 5. List of the 14 case studies Cases Program Description Key Takeaways University initiative that facilitates the • By focusing on building the design capabilities of individual participants development of innovative biomedical from diverse fields, the program enables the rapid spread of its innovation Stanford solutions by providing training and support methodology. Biodesign to students, faculty, and fellows from • The interdisciplinary nature of the teams, combined with specialized various disciplines. design training, pushes innovation in medical technology. Nonprofit organization that facilitates • Even with simple, low-tech equipment, connective model programs can People Digital extension services, knowledge transfer, succeed. Green and agricultural innovation through user- • The program capitalizes on the behavioral incentives inherent in peer-to- created educational videos. peer connection to encourage participation. Two-year, pre-college boarding • The focus on younger students increases the likelihood that the resources African program that aims to accelerate African it provides will have a longer-term impact. Leadership development by training and connecting • By securing service commitments in students’ native countries, the students with high leadership potential. Academy program brings its work to environments that would otherwise be inefficient target audiences. European public-private partnership that • By matching the market needs of large partners (such as corporations and connects governments, businesses, and municipalities) with entrepreneurs within the network, the program is able Climate- individuals to create innovative solutions to meet demand as needed and more efficiently allocate resources. KIC to specific climate issues. Also offers • The program’s ability to experiment has been helped by the fact that it has education and support for startups focused significant resources at its disposal. on climate change innovation. Open, online innovation platform designed • Because the platform is free, Internet based, and open to the public, it to facilitate communal development of has been able to engage a more diverse pool of contributors than would solutions to pressing global issues. The otherwise be possible. Ideas OpenIDEO site allows users to suggest ideas, offer • Some success may be attributed to support by its parent corporation, feedback, and collaborate on new solutions. which provides substantial brand capital in addition to financial and logistical resources. Nonprofit think tank that takes a multi- • The network aspect of the program is key to its high participation levels, as stage approach – research, network individual stakeholders tend to have strong reputational capital. Carbon engagement, and program implementation • The organization’s multi-modal approach, which focuses on different War Room – to address the market barriers that pathways to promoting green business solutions, encourages cross- prevent the adoption of carbon-friendly pollination of ideas and raises the likelihood of impact. solutions at large scale. and Business Models Products, Services • The organization is able to expand its reach by offering a suite Former investment fund that support of connective services, which allows it to customize the depth of BoP entrepreneurs through research engagement with individual entrepreneurs. and advisory services, idea challenge Ennovent management, and connection to a larger • Partnerships with other organizations allow both actors to amplify their impact. network of investors, business enablers and peers. • Integrated work between offices on multiple continents promotes the inclusion of diverse perspectives. In Brief No. 3|Page 6 Cases Program Description Key Takeaways Organization that incubates social • The organization’s vetting process increases the probability that Products, Services and Business Models entrepreneurs serving BoP markets to participating startups will benefit from available connections. Un- scale. Each year, the organization matches • In addition to a network of immediate beneficiaries, the institute allows reasonable participants to connect with like-minded peers, which creates a support a dozen vetted ventures from around the Institute network that encourages success. world with 50 mentors and 100+ funders at five-week boot camps. Company that promotes product • By creating a community-driven pool of ideas and concepts, the innovation by crowdsourcing design ideas company allows its engineers and developers to focus their energies on implementation rather than conception. Quirky and concepts and providing substantial assistance with manufacture, marketing, • The company lowers barriers to participation by providing manufacture, marketing, and distribution services. and distribution. Organization that supports innovative • The ability to effectively engage the skills and the competencies of social enterprises targeting low-income business partners can greatly increase the resources available to an incubator. Villgro populations through a fellowship program, entrepreneur workshops and events, and • Its own definition of “innovation” is technology embodied in new goods and services that are adapted to the needs of rural populations and to the incubation services for startups. limited purchasing power of poor rural households. Dutch nonprofit focused on supporting • BoP Innovation Center’s role as a vetting intermediary increases the Transactions business development for BoP markets. likelihood of immediate client “fit,” thus reducing the need for multiple BoP matches. Services are targeted toward entrepreneurs, Innovation • The organization promotes transactions by reducing information risk for startups, and investors interested in low- Center both foreign investors and local partners. income market opportunities. A network of “experimentation • The network design of the program allows labs to share and attract more environments” that promotes innovation resources than they would by acting individually. by allowing users and producers to work • By setting network-wide standards, the organization is able to ensure ENoLL together on idea and product development. greater consistency and higher-quality output. The network provides individual labs with • The partnerships created by this model have proven valuable enough that branding, education, connections, and individual labs are willing to pay for connections to other labs. Communities advisory services. MNC-led initiative to engage the global • The network model lowers transaction costs and helps transfer relevant business community to generate ideas knowledge on sustainable projects and market opportunities to members. WBCSD related to, and advocate for, sustainable • By limiting participation to members of a certain caliber, the organization development. creates trust between participants. Network focused on building a more • By connecting high-potential participants, the organization has created a peaceful and inclusive world by connecting network that has expanded beyond its original scope and purpose. WEF Global young (under 30) leaders through local • The local focus of each hub illustrates how a global organization can use Shapers the connective model to expand its work and mandate. hubs. Each hub undertakes projects targeted to their local communities. In Brief No. 3|Page 7 Climate Technology Program In Brief About Us The Climate Technology Program (CTP) In Brief series is a publication of the World Bank Group’s Trade and Competitiveness (T&C) Global Practice and infoDev. infoDev’s CTP is managed by the Innovation and Entrepreneurship Unit of T&C. CTP focuses on the growing opportunities of the clean technology sector in developing countries. Through a global network of seven Climate Innovation Centers, the program provides local entrepreneurs with the knowledge and resources they need to launch and scale their innovative business solutions to climate change. CTP In Brief is a series of knowledge briefs highlighting important aspects of the CTP global and in-country operations and research. Learn more at www.infoDev.org/climate. Acknowledgements © 2016 The World Bank Group This In Brief is based on the infoDev publication titled “Connecting 1818 H Street NW Green Technology Entrepreneurs: Implications for Public Program Design.” Please visit www.infoDev.org/publications to read the full Washington, DC 20433 report, including full case studies. This brief was prepared by Justine Website: www.infodev.org White with contributions from Rosa Lin, Jin Lee, Michael Ehst, and Email: info@infodev.org Xue Zheng. Twitter: @infoDev Facebook: /infoDevWBG