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Highlights From the Front Lines of the New Ecosystem of Innovation

11/20/2012 08:41 am ET | Updated Jan 19, 2013

I had the privilege of moderating a stellar on "The New Ecosystem of Innovation" at the recent Greenbiz VERGE conference in San Francisco. My panelists were: Cheryl Martin, Ph.D, Deputy Director, Commercialization of ARPA-E (the innovation arm of the U.S. Department of Energy); Ricardo Angel, Ph.D., SVP of GE Energy Financial Services; Jim Davis, Director of KPMG's Sustainable Enterprise unit in San Francisco; and John Argo, serial entrepreneur and incubator specializing in clean tech.

Here are highlights from our discussion for anyone seeking to prosper in the new ecosystem of innovation:

1. Collaborate: Collaborate with those who complement your organization's capabilities. Corporations are collaborating with venture capitalists "as a new funnel of innovation for their potential businesses, to really increase their exposure to breakthrough technologies that they would not be able to see otherwise," Ricardo Angel told the audience. As an example, he talked about GE's 18-month old joint venture with ConocoPhilips and NRG Energy. Through this joint venture, they can take a new technology from testing through tweaking to meet the customer's needs, because the customer is part of the team. "Having these corporates collaborate makes for a stronger platform and makes perfect sense," Angel said. I would submit that it also provides entrepreneurs with promising technologies an ecosystem in which to thrive as long as their technology evolves.

In this new day of belt-tightening, collaborative technologies, open innovation and social media, there are people in every sector who are interested in finding creative ways to create a win-win proposition. That's what these technologies are all about.

2. "Knowledge and network are key": "The entrepreneur has got to know more about the space they are investing in than I think they did before, so they can do a better job of transferring technology" out into the marketplace, Dr. Martin stressed. "And we as funders need to do a better job of making the outside world more aware of what we are funding and making sure it's relevant." She continued by talking about the "network" ARPA-E has built in terms of Memorandums of Understanding (MOU's) with Duke Energy and the Electric Power Institute, and the Department of Defense, "the largest user of energy in the United States."

3. Know your customer: Dr. Martin explained how entrepreneurs, corporates and government officials can stay in touch with their respective customers through these networks and collaborations. Leverage local IT systems and local networks to stay in touch, wherever your customer is located.

4. The next wave is in new financing models: Jim Davis explained that "what we're seeing now is the next wave of innovation is going to take place in the area of finance," especially with all this cash "sitting on the sidelines."

5. Emergence of city-states and the innovation they need: Local leaders are running cash-strapped cities with critical infrastructure needs, and corporations and institutions can collaborate with them in win-win arrangements. Sustainable cities was a theme of the VERGE conference. For example, Melanie Nutter, Director, Department of the Environment, City and County of San Francisco; and Rohit Aggarwala, Special Advisor to the Chair of C40 Cities Climate Leadership Group spoke with Greenbiz Founder Joel Makower about "the city as platform" and the innovations cities are making, such as PACE, the innovative initiative to enable property owners to make energy efficiency retrofits and pay for them through their energy bills. Cities are also sharing best practices through the C40 program.

6. Government funding is catalyst in new industries: "if it works, would it matter?" is one of the first questions Dr. Martin said she and her ARPA-E team ask when evaluating prospective grant applicants. As she described it, ARPA-E and other government grant programs such as SBIR's and STTR's provide critical funding "for things that are too early for it to make a corporate portfolio to take that level of risk..... And then, when we go to invest in those companies, choose the ones that by putting that money in, you're gonna be able to remove a certain amount of technical risk...It's an important catalytic piece of what has to happen here."

7. Support matters: Whether it's coming from incubators (organizations that provide legal, marketing and technical support to entrepreneurs), or business plan competitions that can "give you a solid foundation" along with the support services that can accompany them, according to John Argo, or from government grantors, it's critical to find the support that you need. I'd add that support matters for corporate folks, academicians and government officials too, as it's these support systems that will keep you learning, keep you up to date, and keep you in the loop for opportunities.

8. IP landscape is changing, address it upfront: Dr. Martin expressed her belief that "there's been a lot of change in intellectual property, everything from green track to first to file, which I actually think is a bigger deal, that are changing the IP landscape and people's decisions on filing. At ARPA-E we don't advise anybody on their intellectual property, that wouldn't be appropriate....With ARPA-E grants you own your own intellectual property, which is great, so beyond standard government rights, it stays with the inventor....You should think about intellectual property from the beginning....how's it going to move forward? Who's going to own it? .... IP is really only valuable when it's actually applied to the marketplace. It's not valuable on its own...knowing what partners can help you define the value."

9. Sustainability reporting systems build the business case: "What gets measured gets managed," Davis said, "so in order to get the business value out of it, you have to measure it. So what reporting systems do is they measure things and make them visible" and helps build the business case for sustainability. "I would say the transition is....to really evaluating what, running it through the enterprise risk management system to really help understand what is most material to the company, what drives performance results in these areas, and then how we can begin to put programs in place where we can actually measure financial results." Davis added that the SEC issued new voluntary guidance on greenhouse gases and climate change, and "One of the key things they focused on was the opportunity costs. What opportunities are you missing in new markets that are being created?"

The Carbon Disclosure Project states: "When provided with the necessary information, market forces can be a major cause of change."

10. Build your own ecosystem: Argo stressed that you have to get out of your four walls and build your own ecosystem, find the resources you need, and vet your ideas outside your walls. Include in that ecosystem "a diversity of thought," as Dr. Martin described it. "If you don't have a lot of different viewpoints around you, you're going to be less valuable than someone who does. So, we can take it to gender or race or background, education level part of the country. The more you can get out there and getting that breadth of experience of perspective the better off you're going to be. No matter what you're trying to do."

These points are summed up by the Founder and CEO of Zappos Tony Hsieh's description of it being all about "collisions, community and co-learning."