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Co-host:
Growing beyond:the cleantech growth journeyfrom product development to
global market leadershipCEO retreat report
Cleantech matters
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2 Cleantech CEO retreat report The cleantech growth journeyCo-hosted by Ernst & Young and Bloomberg New Energy Finance
Contents
ParticipantsPage 2
AgendaPage 2 & 3
Executive summaryPage 4
SunPowers journeyPage 8
CapitaPage 10
Partnerships and alliancesPage 12
PolicyPage 14
Selling to large corporationsPage 18
Growing beyondPage 21
Open forumPage 24
Innovation, disruptiontransformation
Page 27
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1Cleantech CEO retreat report The cleantech growth journey
Foreword
From start-ups to large corporations and nation
governments, organizations worldwide are
embracing cleantech as a means of growth,efficiency and competitive advantage. As
resource constraints continue to challenge the
global economy, the cleantech industry has the
opportunity to transform markets dramatically
in the next five years. Already, major businesse
are transitioning to adopt clean energy strateg
and make major long-term capital investments
alter and diversify their energy mix.
However, the cleantech story is not only one o
continuous growth. Expansion and contraction
have led companies to make significant
structural decisions on capital allocation,competitive alignments and sales channels.
Maturing cleantech companies must also
address new financial, political and regulatory
challenges.
To explore the most important business issues
for cleantech companies and their CEOs,
Ernst & Young LLP and Bloomberg New Energ
Finance (BNEF) convened the first annual
Cleantech Growth Journey retreat in Napa,
California, in September 2011.
Cleantech is often viewed from a vertical
perspective, focusing only on the issues of asingle sector, such as wind or solar energy.
But this retreat focused on the issues that
are relevant to all cleantech sectors at
the CEO and operating executive level
capital, partnerships, policy, selling to large
corporations and growing beyond borders.
Nearly 50 CEOs attended and another 20
industry, finance and policy thought leaders
contributed to the dialogue, sharing their lesso
learned, challenges overcome and best practic
Our report highlights the key perspectives
arising from this dynamic discussion. It
identifies important cleantech business
challenges and provides strategic insights and
a view of emerging trends. We hope that its
findings will prove to be a valuable contributio
to the ongoing conversation among cleantech
stakeholders on how to achieve the next stage
of industry growth.
2004 2005 2006 2007 2008 2009 2010 2011
$52
$76
$113
$151
$180 $186
$243
$260
US$
billion
Global newinvestment inclean energy
200411
Source: Bloomberg New Energy Finance
Gil Forer Michael Liebreich
Global Cleantech Leader CEO
Ernst & Young Bloomberg New Energy Finance
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2
DayoneKeynote: Tom Werner, President and
CEO, SunPower
CEO session: capital
In the cleantech growth journey, capital
is king.
What are the lessons learned in
raising, investing, preserving and
optimizing capital?
What are emerging new financing
mechanisms?
What is the concept behind the chief
capital officer role and how does it apply in
the cleantech marketplace?
Moderator: Matthew Sapp, Assurance Partner,
Cleantech Leader West Region,
Ernst & Young LLP
Panelists: Jack Hidary, Chairman, Samba Energy
Rick Needham, Director of Green Business
Operations and Strategy, Google
CEO session: partnerships and alliances
As growing companies encounter larger and
larger incumbent competition and complex
systems, partnerships and alliances may
become essential.
What do large corporations expect from
cleantech partnerships and alliances?
How can partnerships endure beyond the
first year?
What are the lessons learned from the
various partnerships in the cleantech
marketplace (new rules, new models)?
What are the key ingredients of
partnership readiness?
TIER Inc.
raig Husa, CEO
ABB
Allen Burchett, Region Function Manager,
trategic Initiatives
Agile Energy Inc.
Glen Davis, CEO
Algaeventure Systems
oss Youngs CEO
Areva Solar
om Bartolomei, Chief Commercial Officer
Bloo Solar
arry Bawden, CFO and Co-Founder
Bloomberg New Energy Finance
than Zindler, Head of Policy Analysis
Brazil Opportunities
arlos Miranda, CEO
Chevron Energy Solutionsames Davis, President
Cisco Systems
im Richardson, Sales Business Development
Manager
Codexis
Alan Shaw, CEO
Covington and Burling
Andy Jack, Partner
Dupont Innovalight
onrad Burke, General Manager
Evercore Partnersaul Deninger, Senior Managing Director
First Wind
aul Gaynor, CEO
Kojo Ako-Asare, Corporate Finance Manager
ick Needham, Director of Green Business
Operations and Strategy
Green Star LED
aul Duran, President & CEO
Harvard Business School
ucia Tian, The Forum for Growth and
nnovation
Harvest Power Inc.
aul Sellew, CEO
BM
Allan Schurr, Vice President, Strategy &
Development, Global Energy & Utilities
ce Energy Inc.
rank Ramirez, CEO
adoo Power
Ken Pearson, President
Lincoln Renewable Energy
Richard Gruber, Senior Vice President
Mendel Biotechnology Inc.
Neal Gutterson, President & CEO
MicroPower Global Group
Max Lewinsohn, Chairman & CEO
MontecoScott Monteith, President & CEO
Phononic Devices Inc./NC
Anthony Atti, President & CEO
Potter Drilling Inc.
Jared Potter, President & CEO
PowerGenix Systems Inc.
Dan Squiller, CEO
Princeton Energy Group
Steve Taber, CEO
Procter & Gamble
Steve Meller, Chief Innovation Catalyst
Rennovia
Robert Wedinger, President & CEO
Samba Energy
Jack Hidary, Chairman
Smith Electric
Bryan Hansel, President & CEO
SolarOne Solutions Inc.
Moneer Azzam, President & CEO
Solfocus
Mark Crowley, CEO
Standard Solar Inc.
Tony Clifford, CEO
Suniva Inc.
John Baumstark, Chairman & CEO
SunPower
Tom Werner, President and CEO
Suntech Power Holdings
Andrew Beebe, Chief Commercial Officer
USRG Renewable Finance
Ed Feo, Managing Partner
Washington Council Ernst & YoungTim Urban, Renewable Energy and Climate
Change Practice Leader
Wilson Solarpower Corporation
Doug Zingale, CEO
WITricity
Eric Giler, CEO
Xogen Technologies Inc.
Angella Hughes, President & CEO
Xtreme Power
Carlos Coe, Founder & CEO
Participants
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3Cleantech CEO retreat report The cleantech growth journey
Agenda
The cleantech growth journey:
from product development to
global market leadership
Moderator: Paul Deninger, Senior Managing
Director, Evercore Partners
Panelists: Paul Gaynor, CEO, First Wind; Alan
Shaw, President & CEO, Codexis; Allen Burchett,Region Function Manager, Strategic Initiatives,
ABB; Allan Schurr, VP Strategy & Development,
Global Energy & Utilities, IBM
CEO session: the role of
government policy
With diminishing government financial
support for cleantech in key markets,
policy-makers and CEOs alike are now trying
to devise policy measures that are more
effective in growing a more stable market.
How can the industry guide policy-makerstoward a longer-term vision?
What are the lessons learned from local,
state and federal programs and also from
other nations?
What are the top short-term policy actions
that the United States can take to support
the cleantech industry?
Moderator: Gil Forer, Global Cleantech Leader,
Ernst & Young
Panelists: Ethan Zindler, Head of Policy Analysis,
Bloomberg New Energy Finance; Timothy Urban,
Partner, Washington Council Ernst & Young
Keynote speaker: Tom Werner, President & CEO, SunPower Corporation
Moderator: Scott Sarazen, Global Markets
Leader, Global Cleantech Center,
Ernst & Young
Panelists: Andrew Beebe, Chief CommercialOfficer, Suntech Power; Carlos Miranda, CEO, BR
Opportunities; Mark Crowley, CEO, SolFocus; Ste
Meller, Chief Innovation Catalyst, Procter & Gamb
Open CEO forum
CEO interaction to discuss the most pressin
topics and share insights for the cleantech
journey ahead
Disruption, innovation, transformation
what are the possibilities for disruption
in cleantech?Lucia Tian, The Forum for Growth and
Innovation, Harvard Business School
DaytwoCEO session: selling to large corporations
For many cleantech growth companies,
selling to large corporations is the
paramount goal.
How do you penetrate large corporations
and utilities?
What are the key success factors in
winning contracts?
How can you find common interests to
arrive at win-win propositions?
Moderator: Jay Spencer, Americas Cleantech
Director, Ernst & Young LLP
Panelists: Tom Bartolomei, Chief Commercial
Officer, Areva Solar; Conrad Burke, CEO,
Innovalight (Dupont Innovalight); Jim Davis,
President, Chevron Energy Solutions
CEO session: growing beyond competing
for growth in a global world
As cleantech companies reach their
fullest fruition and compete with industry
incumbents in the global energy,
information and water systems, their growth
agenda expands beyond borders.
What are the success factors in working in
emerging markets?
How is it possible to continuously
drive and accelerate efficient
multinational innovation?
What are lessons learned in managing
talent across continents and leveraging a
multinational workforce?
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4 Cleantech CEO retreat report The cleantech growth journey
Executivesummary
>>Cleantech companies have the
potential to challenge incumbent
giants in the worlds largest
integrated energy, information and
water systems.
During the two days of the Cleantech GrowthJourney, cleantech executives and industry
leaders explored the following themes:
capital raising, strategic partnerships and
alliances and growing beyond the home
market. All of these concerns cut across
cleantech industry verticals and are critical
to address in strategies for the journey
ahead. Some of the key takeaways from the
cleantech CEO discussions follow.
Capital raising new financing structures
and processes needed
Capital raising and capital structuring
are primary challenges for the industry.
Even with a historic industry growth rate
averaging almost 30% per year, cleantech
companies will require financing on a much
greater scale given the billions of dollarsneeded for continued growth.
Many cleantech companies involved
in renewable energy generation and
manufacturing become asset-heavy as they
mature and shift from raising capital through
relatively fast, simple venture-capital deals
to raising it through time-consuming,
complex and highly customized structured-
financing deals. To maintain the pace of
growth, the cleantech industry must developfinancing vehicles that allow cleantech
financing transactions to scale up quickly
in both size and volume without a similar
scale-up in transaction costs.
Strategic partnerships a key ingredient
Strategic partnerships and alliances enable
the cleantech industry to grow. With nearly
650 joint ventures and an estimated
US$8 billion in value since 2004, these
partnerships provide cleantech companies
critical insulation from the vicissitudes of
the public markets, as well as providingsales channels, distribution networks and
capital for asset expansion. Partnerships
with established companies also provide
important market validation for new
technologies.
Participants found parallels with
the pattern of partnership growth
between biotech companies and large
pharmaceutical companies when the
number, interconnectedness and geographic
distribution of partnerships grew dramatically
At the same time, managing expectationsaround such partnerships is essential to
the cleantech CEO for future growth, given
that the nature, objectives and values of
such partnerships can change over time.
Partnerships involve significant hard
negotiations on the part of CEOs, but also
soft skills such as constant communication,
managing expectations and building a
network of relationships.
Government policy find a unified
message, look to the end of subsidiesAs cleantech companies grow beyond their
home markets, CEOs have to navigate
through a complex maze of government
policies around the world. Additionally,
the industry is now playing defense a
situation cleantech CEOs are not accustomed
to, given previous high-growth expectations
and political support. In the wake of the globa
financial crisis, the golden age of government
support is over, participants said.
Graphic recording of CEO retreat Welcome discussion, drawn by Paula Hansen of Grove Consultants International
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5Cleantech CEO retreat report The cleantech growth journey
Two predominant global issues now definethe cleantech policy environment: fiscal
austerity across regions and changes in
energy mix in the wake of the Fukushima
nuclear disaster. The competitive dynamic
within sectors will likely be tempered as
subsidies diminish, partnerships materialize
across the energy landscape, and clean
energy becomes more mainstream. Winning
over policy-makers now means a more
collaborative agenda and a unified message
among cleantech industry players.
As the industry moves away from relianceon government support, executives and
thought leaders find that developing
transitional capital sources for small and
medium-sized companies and having strong
due diligence processes will be key priorities
for bridging the short-term capital gaps.
In the long term, the industry expects a
phaseout of policy incentives with a defined
end date. CEOs agreed that having an end
date to subsidies will actually add much-
needed certainty and clarity to business
planning, as well as spur greater industry
competitiveness.
Selling to large corporations networking,
customization and reliability are key
Selling to large corporations is essential
for cleantech companies on the road
ahead. Larger corporations create product
demand and have the capital to buy entire
companies. A larger corporation also offers
value intangibles, such as leverage with
policy-makers, access to emerging markets,
new distribution channels and, above
all, integration within a larger energy orindustrial ecosystem.
Gaining access or closing a large deal
is difficult, but CEOs pointed out that
networking across the value chain,
customization for the client and
demonstrating the reliability of the product
were all successful best practices that gained
entry into a sale.
Large corporations continue to look forsuccessful innovative technologies, but
would rather have the ability to influence
the technology in the early stages, dictate
deployment or have a distinct role in the
distribution.
Growing beyond the home market a risk
mitigation strategy, discipline required
Cross-boundary transactions and
agreements will become commonplace as
the cleantech industry sees more alignment
and integration across the value chain.
Growing beyond the home market and
competing at the global level have always
presented opportunities, but now, entering
different markets also offers risk mitigation.
For CEOs, entering new markets calls for a
step-by-step approach that often requires
dedication and discipline.
The ability to grow beyond borders and
niches means partnering with local
companies and complementing each others
capabilities, whether for access to local
policy-makers or for overseas finance.
Counter to conventional thinking, growing in
a global market may not always mean scale
and commoditization of a product. Rather,
CEOs indicated, product customization,
integration across divisions and
re-verticalization were necessary strategies
to grow beyond.
Innovation, disruption, transformation
different for cleantech
The concepts of innovation, disruption andtransformation mean different things to the
cleantech industry than to other industries.
Innovation is bound by the requirements
of electrical reliability, fuel consistency and
water quality all of which are societal
expectations that are inherently unforgiving
of failures.
Cleantech transformation may have a longterm horizon, but the change that will occu
will be integrated into the largest economic
markets and have massive potential for
economic growth. The greatest disruption
that can take place in cleantech will not be
through one technological breakthrough,
but rather through the changing of many
conventional mindsets. The real change
will happen when incumbent industries
and systems wholly integrate cleantech
strategies as a new business model for
resource efficiency and growth. //
This white paper analyzes
the themes and captures
the unique CEO insights
of the Cleantech Growth
Journey. It includes insight
derived from discussion,
debate and panel sessions
and analysis performed
before and after the event,
and includes quotations
from participating cleantec
CEOs, who remain
anonymous under the
Chatham House Rule.
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Cleantech CEO retreat report The cleantech growth journey
GrowingbeyondHigh performers take charge of their own destiny. They have a laser-sharp focus on
executing against the four drivers of competitive success customer reach, operational
agility, cost competitiveness and stakeholder confidence. And they strike the right
balance in their approach to each of these four drivers in relation to the others
strategically and tactically. These are the key findings of the Ernst & Young Growing
Beyond report.
Ernst & Young commissioned the Economist Intelligence Unit (EIU) to survey the C-suite,
board directors and senior managers in large organizations. The survey included 646
executives and was conducted in September 2011. It was complemented by a more
detailed investigation of 300 Ernst & Young clients, undertaken through interviews with
Ernst & Young professinals globally.
It explores how these companies are improving performance in relation to the growth
drivers and how this is propelling them to enter new markets, develop new products and
adopt new approaches to talent management.
The report finds that the approach that high performers (top 30% EBITDA and
revenue growth) have taken to the four key drivers has been highly distinctive.
High performers are:
More successful than others in identifying and responding to opportunities
to maximize their potential market
Optimizing their ability to respond to these opportunities
Striking the right balance between price and cost to sustain growth
Building the support they need from their stakeholders to enable them
to respond to opportunities
Focus on keysegments
Broaden product/service offer
Prioritizemarkets
Enhancereporting
Anticipateregulatory compliance
Reinforcebrand
Identify andexplain risks
Accelerate speedof response
Improvecollaboration
Informpricing process
Optimizecapital
Masterinnovation
work/deliveryplatforms
Pass on costpressure
Sustain costreduction
Re-engage withinternal talent
Highperformers
Customer
reach
Cost
competitiveness
Stakeholder
Operational
agility
6
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7Cleantech CEO retreat report The cleantech growth journey
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8 Cleantech CEO retreat report The cleantech growth journey
SunPowersjourney
Highlights of the keynote
presentation by SunPower
CEO Tom Werner
The solar energy market has undergone
significant change over the past two
years from a supply-focused and capacity-
generating market to a demand-driven one.
Few companies have been able to lead in
this market, and the objective is now to
drive down costs on a kilowatt basis and yet
achieve higher module efficiency.
SunPower, based in San Jose, California,
is a leading solar company specializing in
high-efficiency, high-reliability solar
modules that has maneuvred through
this period of growth and transition. In his
keynote address, SunPowers CEO,
Tom Werner, provided an insightful and
in-depth explanation of the complex drivers
and dynamics that guided SunPowers
business strategy and growth from the time
the company went public in 2005 to its 60%
acquisition by Total SA in 2011. Werneraddressed the current market conditions
for solar, his view of grid parity and the
challenging considerations going forward
to achieve the scale necessary for moving
beyond the growth phase.
>> Eighty-five percent three-year CAGR
and then approximately 5% CAGR
the next few years. You see gross
overshoot of supply, you see prices
plummeting, and the question is,
how do you survive in that market
for the next few years?
SunPowers growth has been typical
of leading solar companies tripling
revenue-growth rates in the last three
years and raising more than US$1 billion
in investment capital, as well as acquiring
five other cleantech companies. As the
solar market matures and becomes more
cost-competitive, SunPowers direction is
now shifting toward aligning with major
energy partners, focusing on costs and
targeting new markets.
In the past few years, the solar industry
enjoyed a record 85% per annum revenue-
growth rate. Its growth was so fast that
the market focused on volume and scale
simply to add capacity as fast as possible.
Now, with capacity over-supply, market
projections indicate that solar may stay
at single-digit revenue growth. With this
correction in mind, how are companies
gearing up to change? And for how long willthese market conditions persist? Despite
volatility and policy support easing, Werner
sees long-term opportunity for solar and
revenue projections to improve again
particularly as coal retirement takes place
and global energy demand increases. The
size of the global energy market remains
impressive, and to capture a sizable piece of
that market, the solar sectors strategy will
need to adapt accordingly. The next growth
phase means operating in energy markets
with much more scope, as Werner indicated:
Weve spent US$2 billion in six years. Thisis big. This is the scale of the energy market.
Youre not going to go public if youre going
to make stuff with US$100 million. Its big
scale energy is big scale.
Lowering costs, maintaining efficiency
and differentiating products
Werner stated that cost competitiveness,
product differentiation and expansion of
the corporate balance sheet are three core
strategies SunPower currently focuses on
to continue in the punitive market. The
industry now must keep moving to improve
on two dimensions: the efficiency of the
solar module and cost.
As the overall solar market matures and
diversifies into different technologies,
SunPower is in a leadership position because
of its high-efficiency, high-reliability product,
which offers product differentiation among
competitors. Therefore, the company
now aims to achieve lower costs through
redesigning its manufacturing process and
vertically re-integrating its business line.
SunPower expects that a company-wide
restructuring program will accelerate
operating cost reduction by as much as
10% in 2012 and improve overall operating
efficiency. In addition, the company has
re-prioritized its capital expenditure and
research and development projects to focus
on cost reduction and optimizing cash flow.
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9Cleantech CEO retreat report The cleantech growth journey
Strengthening the balance sheet
The company is moving toward the
production and development of large-scale
solar power projects. Achieving capacity
at a scale that utilities will buy offers thecompany long-term balance sheet strength.
Having a gigawatt of booked power
projects that are secured through purchase
agreements gives SunPower a key bridge to
the future, Werner noted.
Growing to the level of utility-scale production,
however, requires major capital investments.
In mid-2011, Total SA acquired 60% of
SunPower. Werner discussed the negotiation
of the acquisition and how the partnership
provided SunPower the necessary capital and
direction for the next stage of growth.
As the fifth largest global energy company,
Total will continue to provide SunPower
significant leverage to compete among energy
incumbents. The acquisition has bolstered the
companys financial strength, augmented its
balance sheets, opened up its cash flow and
allowed Werner the luxury of looking ahead
10 years out. Werner indicated that the long-
term nature of the relationship has allowed
SunPower to pursue its strategy to integrate
vertically, develop R&D and win new markets.
New focus on balance of systems
In the past, modules have been the focus
of innovation and the recipient of R&D
investment while the balance of systems
(BOS) costs remained in the background.Now BOS is a major factor in bringing down
the levelized cost of solar. The BOS costs
the cabling, mounting, electronics and
installation have become more than the
cost of the module itself.
SunPower is incorporating different
innovations to improve and expand its BOS
by preassembling utility-scale PV systems
in the factory. By designing a ready-made
standardized power block, the company
takes skilled labor out of the field and moves
it to the factory floor. Other innovations
at the BOS level include improvements in
assembly, solar tracking and diversifying
distribution. According to Werner, most PV
companies have dozens of PhDs working on
the cost of the module. Most PV companies
have zero PhDs working on balance of
systems. Thats going to change the
people that do the mundane assembling
work theyre going to become really
important in PV.
>> In five years, were going to look
back, and the way we constructed
large-scale PV systems is [going to
be] incredibly primitive.
Grid parity and scaling up
In markets such as California, the utility
and the producer of solar electricity are
not rewarded for generating solar-based
electricity above a specific level. Solar
companies in the next stage will continue t
be lowering costs to reach grid parity
costs comparable to conventionally
generated energy. But Werner notes that
pricing relative to a grid that is dynamic
and changing will be challenging for the
industry collectively. We have a lot of wor
to do in the industry. I would call grid parity
necessary, but not sufficient, Werner said
The scale necessary to reach grid parity
will depend on the type of user (retail or
wholesale), the jurisdiction or even the
quantity of sunshine the region has. Grid
policy and rate structures will have to
change with the solar market, and impetus
to change policy on a large scale must com
not only from the solar sector but from the
incumbent energy providers themselves. //
Graphic recording of CEO retreat keynote speech by Tom Werner, CEO of SunPower, drawn by Paula Hansen of Grove Consultants International
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10 Cleantech CEO retreat report The cleantech growth journey
CapitalModerator: Matthew Sapp, Assurance Partner,
Cleantech Leader West Region,
Ernst & Young LLP
Panelists: Jack Hidary, Chairman,
Samba Energy
Rick Needham, Director of Green
Business Operations and Strategy,
Key issues in raising capital
Having themselves raised more than US$2 billion in nearly 150 investment rounds
for their current companies, the 50 CEOs and executives at the retreat agreed that
continuing to raise capital is the single greatest priority for cleantech CEOs.
Early-stage and angel investing remains challenging, but building a robust angel
network or facilitating research and development investment can be instrumental
to the industry.
Given strong policy signals, China can be a key financier to invest in major infrastructure
development over the next five years.
Governments now have a role to play in facilitating capital but also facilitating
the creation of industry standards and streamlining incentives to lower costs to
the consumer.
Capital must evolve to the needs of the cleantech company from early-stage,
capital-light financing to complex, large, asset-heavy or project-finance deals.
Financing structures need to reach scale, and moving away from singular customized
deals allows for lower transactions fees, as well as diversifi
cation.
expensive than developing a software idea orlaunching a website.
Time to look beyond venture capital
Delegates had questions as to the long-
term utility of venture capital in an energy
game dominated by large, asset-heavy
companies. Many companies just emerging
from a laboratory are viewed initially as a
capital-light investment for early funders,
but as they mature, they require much
more money than a start-up information
technology company; they also requireinvestment in complex fixed assets and a
patient approach to returns. The time frame
for traditional VC investors coming out of the
IT sector is 12 to 18 months, while the time
horizon for cleantech is much longer and
commercialization could take decades.
The valley of debt
One participant noted that cleantech
companies typically receive a lot of equity
investment in the early stages, but then
they must raise a significant amount of debt
as they begin developing capital-intensive
assets. Thus, it is important to look beyond
venture capital to partnerships and joint
ventures with larger multinational companies
that have significant cash on hand for longer-
term deployment and can readily reduce the
cost of capital to finance a project.
Capital raising new financing structures
and processes needed
Capital raising and capital structuring
are primary challenges for the industry.
Even with a historic industry growth rate
averaging almost 30% per year, cleantech
companies will require financing on a much
greater scale given the billions of dollars
needed for continued growth.
Cleantech companies become asset-heavy
as they mature and shift from raising capital
through relatively fast, simple venture-
capital deals to raising it through time-
consuming, complex and highly customized
>> The companies participating in the
retreat had raised more than
US$2 billion in nearly 150
investment rounds.
The challenging investment landscape
points to one of the highest priorities for
the cleantech CEO: continuing to raise
enough capital to support expansion and
commercialization. Those attending theretreat had raised more than US$2 billion
in nearly 150 investment rounds for their
current companies. Their depth, history and
networks in capital raising provided them
with valuable insights into financing needs,
development of new financing structures
and preservation and optimization of capital.
Lack of early-stage financing
One of the primary financing challenges
noted by the retreat participants was the
increasing scarcity of early-stage capital.
While private equity and venture capital (VC)
funding has been recovering over the last few
years, in cleantech, there has been a shift
in the nature of what is being invested in.
Venture capital investors are now finding more
capital-efficient businesses or are investing
in follow-on rounds to support the later-stage
companies that they funded between 2004
and 2006.
As a result, early-stage financiers and angel
investors have become some of the most
sought-afterfinancing sources. One industry
veteran noted that the biggest gap in funding
was the lack of a robust, sector-specific angel
network. In addition, early-stage investing in
cleantech companies at least in renewables
requires far more capital than in other
industries. A pilot project to demonstrate a
new solar or battery technology is much more
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structured-financing deals. To maintain
the pace of growth, the cleantech industry
must develop financing vehicles that allow
cleantech financing transactions to scale up
quickly in both size and volume without asimilar scale-up in transaction costs.
Participants expect that the most successful
financing in the cleantech industrys next
phase will not be the creation of specific
new vehicles for financing but rather the
development of a whole asset class that
allows investors to diversify across a pool of
projects or combine many smaller projects.
Participants pointed to different structures,
such as REITs, asset-backed securitization or
alignment with traditional energy sources in
infrastructure and development funds.
>> Cleantech financing can begin in
venture capital and end with term
lending.
Governments facilitation role
With the scaling back of government
financial support for cleantech in developed
markets, and in the US in particular, the role
of government will likely shift to investment
facilitation convening or coordinating
companies and investors.
Governments also can streamline incentives or
improve standards to reduce costs and facilitate
investment. As an example, the US has more
than 3,000 different solar incentives in different
counties, states, cities and utility jurisdictions,which results in higher systems costs overall.
Coordinating and streamlining the incentive
programs could substantially reduce installation
and development costs and transactions fees.
China as cleantech financier
China, in contrast, is set to continue making
substantial investments in cleantech. As a
result of its Twelfth Five-Year Plan, China is set
to commit up to US$200 billion per year to
critical infrastructure development, including
renewables, energy efficiency and water. Chinasinvestment in cleantech manufacturing has
changed the competitive landscape in the solar
and wind sectors as Chinese companies have
become the dominant players because of their
low cost structures. China is now targeting seven
emerging strategic industries for development,
five of which are cleantech-related. Chinas
investments may well drive the same kind of
market disruption in new areas, such as electric
vehicles and water desalinization. //
Growing
beyondKey questions for management
Have you engaged in a competitive
review of pricing strategies?
How confident are you that you have
full visibility of your cost base and key
value drivers?
How are you ensuring sufficient capit
is available at a reasonable cost to
deliver your growth strategy? Whatalternative sources of capital are you
exploring?
How effective is cash flow forecasting
and cash reporting? Do any
measurement tools and performance
indicators need to be enhanced? Are
the forecasting models in place as
useful as they could be?
11
Graphic recording of CEO retreat Capital discussion, drawn by Paula Hansen of Grove Consultants International
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Partnershipsand alliancesModerator: Paul Deninger, Senior Managing
Director, Evercore Partners
Panelists: Paul Gaynor, CEO, First Wind
Alan Shaw, President & CEO, Codexis
Allen Burchett, Region FunctionManager, Strategic Initiatives, ABB
Allan Schurr, VP Strategy &
Development, Global Energy &
Utilities, IBM
Key expectations of partnerships and alliances
Alliances and partnerships have transformed the industry and will continue to be the
cornerstone of the way the cleantech CEO will manage in the next stage of growth. Globally, cleantech companies have undertaken nearly 650 joint ventures with an
estimated value of US$8 billion.
Partnerships have provided cleantech companies insulation from the broader public
markets, as well as providing critical sales channels, distribution networks and capital
for asset expansion.
Alliances may change over time, and CEOs must manage the expectations of all the
participants, but especially the larger counterparties. Maintaining the engagement of
the original project champion is essential.
Partnerships involve significant hard negotiations on the part of CEOs, but also soft
skills, such as constant communication, managing expectations and building a network
of relationships.
One of the greatest achievements andstrengths of the cleantech industry is the
experience and breadth of partnerships
and alliances that CEOs have built since its
inception. Alliances and partnerships have
transformed the industry and will continue
to be the stepping stone to the next stage
of company growth. Cleantech companies
have formed nearly 650 joint ventures, with
an estimated US$8 billion in total value,
since 2004, according to Bloomberg New
Energy Finance.
Partnerships with larger corporations offera number of benefits to emerging cleantech
companies sales channels, distribution
networks and capital for asset expansion.
They also offer relief from the short-term
volatility of market forces. As one bioenergy
CEO said, JVs with larger companies provide
insulation from being whipped around
by the sentiments of the public markets.
And, particularly for cleantech companies,
partnerships can also facilitate the creation
of industry standards, enable guarantee
arrangements and provide credentials in
nascent markets.
Wind
Solar
Biofuels
Services & support
Biomass & waste
Energy storage
Advanced transport
Other
Total = 647
22%
19%
11%10%
9%
9%
5%
4%
11%
Clean energyjoint ventures20042011
Source: Bloomberg New Energy Finance; announced and completed joint ventures
20042011; excludes canceled or postponed transactions.
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>> US$8.0b Total estimatedvalue of clean energy joint ventures
>> If you go through a really stickypatch, with all the work youve put
in, do you think the partnership
would survive, or would it fall apart?
At the same time, cleantech CEOs noted that
partnerships are not without their perils.
Partnerships often fail due to the inherent
mismatches of expectation between small
and large firms. Start-up cleantech firms
and their corporate partners may have
divergent expectations in many areas,
such as time to market for product; level of
corporate commitment to the product or
project; and style of communication within
companies. Corporate agendas can change
and leave pure-play cleantech companies
as a minnow to a whale, according to one
CEO. As a result, it is essential to maintain
the engagement of the original projectchampion to ensure consistent internal
sponsorship.
While risks of failure may often be personal
for the founders of small firms, they
are merely rounding errors within large
corporations. Thus, one CEOs suggestion
to partner with mid-sized companies that
are still small enough to be nimble, but have
developed a value chain we can partner with.
Executives discussed many best practices
for making a partnership succeed, including
hard contractual obligations such as dilutionoptions, but mainly found that soft skills
were necessary.
CEOs said that they had to communicate
continuously, open up the financials and be
tenacious through the slow decision-makin
process. As one executive put it, the
decision-making process can take months[for a large company]; in our company, it
takes a couple of hours. So the big problem
is [figuring out] how many times is enough
communication. Three times a week? You
constantly have to keep them on track, and
if you start losing them, that could have
serious consequences. //
Graphic recording of CEO retreat Alliances and partnership discussion, drawn by Paula Hansen of Grove Consultants International
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PolicyModerator: Gil Forer, Global Cleantech Leader,
Ernst & Young
Panelists: Ethan Zindler, Head of Policy
Analysis, Bloomberg New Energy
Finance
Timothy Urban, Partner, Washington
Council Ernst & Young
Key policy expectations
Cleantech CEOs will have to navigate through complex and difficult networks of
government policies around the world, and they generally agree that the age of
government support is over.
The industry is now playing defense a situation CEOs are not accustomed to, given
previous high-growth expectations and political support.
Two predominant global issues now define the policy environment fiscal
austerity across regions and changes in energy mix resulting from the Fukushima
nuclear disaster.
The competitive dynamic within sectors will likely be tempered as subsidies diminish,
partnerships materialize across the energy landscape and clean energy becomes more
mainstream.
Winning over policy-makers now means a more collaborative policy agenda and
consistent messages across the industry.
The policy landscape for the cleantech
industry has changed significantly in the past
two to three years. The CEOs of expanding
cleantech companies must navigate through
not only their own countries complex
systems of tariffs and grant programs but
also those of target foreign markets, all in an
environment of increasing scrutiny on trade
and export regulations.
Two predominant global issues now definethe policy environment fiscal austerity
and changes in energy mix resulting from
the Fukushima nuclear disaster. Across the
board, CEOs agreed that the future policy
environment will be difficult as government
support continues to diminish around the
world and companies must survive without
reliance on subsidies.
CEOs also cite lessons learned related to
the reliance on government subsidies and
feed-in tariffs (FiTs), which have been a
cornerstone of cleantech public policy but
have also led to volatility in sectors like solar
and wind as the private sector overshoots
or undershoots government objectives.
Governments, policy-makers and CEOs alike
are now trying to formulate policy measures
that are more cost-effective and provide for
more stable growth.
Fiscal austerity
Fiscal austerity measures will define the
next stage of cleantech policy for European
countries and the United States. In the past,
CEOs had a simple strategy to follow: add
generating capacity anywhere there was
strong fiscal support from government.
Therefore, markets rose and fell depending
on the annual attractiveness of a particular
FiT or grant. Now that most governments
in developed markets have pulled back,the cleantech industry must adopt a more
sophisticated approach of lobbying and
engaging with governments to pursue long-
term objectives and develop on-the-ground
relationships.
Policy-makers and CEOs alike are looking
for new policy mechanisms that cannot be
perceived as wasteful to attract financing
for cleaner energy sources. As one policy
panelist indicated, policy-makers are
designing new policies that get the most
bang for the taxpayer or rate payer dollar.
South American countries, for example, are
finding that reverse auctions are attractive
for spurring wind development and meeting
renewable energy capacity targets because
the tender offer process for a project
allows dramatic price reductions through
competitive bidding. In Brazil, the latest
reverse auction led to major cost reductions
for the regulator with wind projects
beating out natural gas projects in
some cases.
Around the world, there are lessons learnedabout overreaching on policy, and CEOs
agreed that collectively, the industry must
start to better manage expectations on what
public policy can support or deliver.
Changing energy mixes post-Fukushima
The political climate post-Fukushima also
has changed the landscape for clean
energy companies. Japan, Germany and
Switzerland are moving away from nuclear
power. However, the gigawatts of capacity
required to take its place in these countries
energy mix is considerable, with attendant
cost and political implications.
As a result of Fukushima, the nuclear
component of a countrys energy mix is
no longer a known strategy replacing
nuclear baseload has become an important
unknown for policy-makers. CEOs will
have to keep an eye on the myriad political
sensitivities at play among safety, reliability,
price and environmental issues.
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The policy
landscape forthe cleantechindustry has
changedsignificantly.
15
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Playing defense in the United States
CEOs agreed that the industry has entered
a tough period in the United States. Little
legislative progress on important cleantech
issues, such as the extension of the creditfor wind and solar under the US Treasurys
1603 Program, can be expected in the near
term, in view of the congressional deadlock
on debt and tax policy and the presidential
elections in 2012. Overall, CEOs agreed that
the US cleantech industry is diversifying to
different markets or overseas to move away
from the reliance on subsidies.
In addition, the effect of having a few
cleantech companies in the political spotlight
go from darlings to scapegoats has had an
effect on the entire industry. Altogether, the
bankruptcies of a few solar companies have
affected the policy perception of the wind,
biofuels and efficiency markets as well.
To counter the negative political perception,
cleantech companies must emphasize the
benefits of cleantech industry development
beyond manufacturing. CEOs are now
pointing to innovation, new intellectual
property and installation as generators of
economic growth and jobs. As one policy
panelist noted, saving manufacturing
jobs in the US is important, but the reality
is that installation is 10 times the size of
manufacturing 10 times. We can easily getto 250,000 jobs in installation in the United
States, but will not get to that number in
manufacturing jobs.
There is no single enemy. Conventional oil
and gas or coal are all part of an integrated
energy system that renewable energy
companies must work within. Winning over
moderate politicians means conveying a
more positive message and putting together
a more collaborative policy agenda. As
the cleantech industry moves toward a
defensive policy agenda, the ability to
work together and collaborate on a unified
front that delivers more unified messages to
policy-makers will be essential.
There are unprecedented opportunities for
new renewable generation build-out in the
US with the retirement of aging coal fleets
and a changing energy mix in many states
if political consensus can be marshaled in
favor of cleaner energy systems.
The impact of China
The Chinese solar industry has benefited
from national policy support and financing
by the China Development Bank; as a result,
China has become the top manufacturer andexporter of solar modules. However, more
than 80% of Chinese solar exports are to the
European market, which is quickly becoming
oversupplied due to declining demand as
a result of austerity measures. Panelists
suggested that China would likely implement
policies to soak up excess supply through
domestic consumption and new export
markets.
Some participants said that competition
with China in solar is a non-starter and
that Chinas strength in manufacturing
should not become a political issue. Lower-
cost products from China have led to solar
adoption and growth in new markets. Chinas
manufacturing strength has also led non-
Chinese companies to specialize and focus
on different competitive advantages like
design, technology, new materials, quality
and reliability. //
Graphic recording of CEO retreat Policy discussion, drawn by Paula Hansen of Grove Consultants International
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GrowingbeyondFocusing on government and
policy risk
The risk in entering a new market should
not be underestimated. As we found in
our previous research, the rapid-growthcountries are markets that have seen
the greatest increase in competitive
intensity since the crisis. This is driven
by the arrival of many international
players in complex markets that
already had large and robust domestic
incumbents.
Respondents generally seem confident
in their ability to compete with other
players. However, they have a concern
about shifts in government policy,
hostility to foreign investment and thelack of effectiveness or stability in local
regulation and governance all issues
that are outside their control. It is
interesting to note that high performers,
in particular, place significant emphasis
on the importance of a supportive
attitude from government.
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Selling to largecorporationsModerator: Jay Spencer, Americas Cleantech
Leader, Ernst & Young LLP
Panelists: Tom Bartolomei, Chief Commercial
Officer, Areva Solar
Conrad Burke, CEO, DupontInnovalight
Jim Davis, President, Chevron
Energy Solutions
Key aspects of selling to large corporations
Selling to large corporations is essential to reaching the next stage of cleantech
industry development. Large corporations create product demand and have the capitalto buy entire companies.
The larger corporations also offer non-financial benefits, such as leverage with policy-
makers, access to emerging markets, new distribution channels, market validation
of new technologies and above all, integration within a larger energy or industrial
ecosystem.
Gaining access or closing a large deal is difficult, but CEOs pointed out that networking
across the value chain, customization for the client and demonstrating the reliability of
the product were all successful best practices that gained entry into a sale.
Large corporations continue to look for successful innovative technologies but
would rather have the ability to influence the technology in the early stages, dictate
deployment or have a distinct role in the distribution.
The cleantech industry offers products and
services that vary tremendously across
sectors. Yet CEOs found common ground in
the challenges and success factors in selling
to large corporations.
Cleantech executives characterized selling to
large corporations as an art form rather than
a clear business strategy. Penetrating new
markets where large incumbent companies
dominate is not easy, and executiveswho were able to do so had considerable
experience, networks and access points.
Thefinancial position of large corporations
makes them essential sales targets for
cleantech companies. Larger corporations
create an essential demand for products
and, at the same time, have the capital to
buy entire companies. According to BNEF,
the 3,000 largest public corporations in the
world hold more than US$2 trillion in cash
on their balance sheets, of which nearly half
is held by potential strategic acquirers.
In addition, the larger corporation also
represents non-financial intangibles, such
as leverage with policy-makers, access
to emerging markets, new distributionchannels, market validation of new
technologies and, above all, integration
within a larger energy ecosystem.
Executives pointed out some important
lessons learned in selling to large
corporations.
>> When Im trying to do a US$500million deal with US$1 million in the
bank and a handshake and saying,
Dont worry, Ill be there in three
years, its not going to happen.
Demonstrate long-term reliability
To penetrate a larger conventional market,
CEOs have found success in closing a
deal by emphasizing the long-term nature
of the business and the reliability of the
product. One executive noted that providing
performance guarantees has now becomemore critical, and structuring a project-
finance deal may include warrants or
established guarantees. Large corporations
need their cleantech ventures to succeed
before deploying a technology across
the board. Executives also noted that
demonstration does not only mean a reliable
initial project, but establishing data and
records and sound accountability.
Evolve to the needs of the customer
Companies traditionally follow the design-manufacture-distribute model, but as the
cleantech industry matures, companies
are evolving to focus just on licensing,
installation, financing, distribution or point-
of-sale services, depending on the market
opportunity. Finding the right business to
complement a larger corporate partners
strengths is important. In the case of an
energy-efficiency service provider, accessing
the vast federal buildings market meant
the company specialized in the supply side
of a joint venture while the larger, more
experienced and networked partner focused
on distribution and the demand side.
Open innovation
CEOs found it critical to open up their
technology design to corporate partners
and collaborate with them on particular
technologies through joint ventures.
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Collaborating with larger partners in the
design stage allows the technology to be
better integrated with the needs of larger
corporations and their clients and reduces
costs for both parties. In the eyes of largercorporations, a cleantech firms flexibility
to reconfigure a particular business model
or technology is important, given that the
larger firm must deal with the demands
of the larger market, including multiple
customers and regulators.
Network
CEOs agreed that the initial access point is
most difficult. Executives must constantly
network to get the word out, talk up a
particular technology and gather the rightrecommendations to gain the initial access
point. One executive suggested getting
credentials with recognized external third
parties as an effective means to get on the
radar of larger companies. And another
participant suggested networking up and
down the value chain to sell to utilities
from the project financiers to the NGOs
contesting a particular development.
GrowingbeyondHigh performers use incremental innovation to capture the wallets of current
customers, in terms of share and price premium, by:
Seeking to get further up the value
curve and secure better prices for their
efforts, both through capturing more
value in product design and through
increased marketing to establish and
protect a brand premium
Increasing product ranges
significantly some 30% have
increased their product range by morethan 20% in the past two years
Focusing on current customers and
employees as primary sources of
innovation approaching innovation
closer to the target market and,
increasingly, in rapid-growth markets
themselves
Following a more formal innovation
process, but with greater clarity on
go/no go criteria and with launch and
review built into the development proces
Achieving competitive advantage by
having business management oversee t
innovation process
Taking their stakeholders with them by
sharing more detail on the potential oftheir innovations and the progress they
are making with them
Graphic recording of CEO retreat Selling to large corporations discussion, drawn by Paula Hansen of Grove Consultants International
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All underscored the need to know and
cultivate your internal champions at a large
corporation. Executives noted that following
another large corporations successful
venture partners resulted in a better
understanding of the corporate culture and
reputation of the larger entity.
>> Were constantly baiting the hook to
suit the fish.
Each entry point is different
Participants underscored that multinational
corporations have many entry points,
some of which may have differing cultural
attitudes to the deployment of a new
technology. One executive noted that
customers in an emerging market may be
open to fast deployment if there is a critical
need for a particular technology, whereas in
the US, several pilot projects would likely be
necessary.
Know the process
When selling to a large corporation, the
CEOs agreed, the pace is always slower
than the innovator would like because of
the procurement systems and processes
in place at big companies. A CEO should
understand its larger partners processes
and manage expectations accordingly. Most
often, a sale is a step-by-step engagement
with constantly changing expectations on
both sides. //
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Growing beyond:competing for growthin a global world
Moderator: Scott Sarazen, Global Markets
Leader, Ernst & Young
Panelists: Andrew Beebe, Chief Commercial
Officer, Suntech Power
Carlos Miranda, CEO, BR
Opportunities
Mark Crowley, CEO, SolFocus
Steve Meller, Chief Innovation
Catalyst, Procter & Gamble
Key actions to compete for growth
Growing beyond the home market may allow cost competitiveness, manufacturing
capabilities, access to a wider customer base or policy incentives, but each CEO needs
to have clear objectives when entering a new market.
Companies must have dedication and a disciplined approach to providing a high-quality
product, but also adapt or localize the product and business model for new markets.
Adapting to local markets also may mean restructuring, undoing vertical integration or
changing the nature of the product or partnerships.
The approach to innovation must be bidirectional, one in which innovation flows not just
from developed markets to emerging markets but also the reverse.
Todays challenging economic environment
has forced cleantech companies to look
beyond their national borders for the next
stage of growth. For cleantech CEOs across
the spectrum, from start-ups to large
corporations, growing beyond the home
market and diversifying across a range
of countries present the single largest
opportunity for growth today.
Cross-border partnerships and alliancesbetween cleantech companies will only
become stronger in the cleantech space.
Cleantech CEOs say that penetrating
different markets or migration across
many nations has allowed their companies
to benefit from tax incentives and subsidies.
Growing beyond the home market is not
just opportunistic, however; it is also
an important risk mitigation strategy.
Diversifying across many markets allows
a company to better balance risks and
rewards.
Benefits to both sides
Whether driven by cost competitiveness,
manufacturing capabilities, a bigger
customer base, R&D or better policy
incentives, each company needs clear
objectives for what it hopes to gain from
the new market. As one of the CEOs stated,
Make sure you are putting the right
emphasis on the right market so that you
are maximizing your growth.
Panel executives noted that cross-border
relationships with large companies in a new
market can have meaningful influence at
a policy and regulatory level. Technology
demonstration and experimentation mayhappen faster or differently in a new count
due to local needs or demands. Going glob
has allowed companies large and small to
experiment and find opportunities to offer
unique solutions that they normally would
not have in the home market.
From an emerging market companys
point of view, a partnership with a US
or European company may also mean
better understanding and knowledge of
financial markets, such as private equity
financing, exits or accessing lines of capita
Partnerships enable companies on both
sides to collaborate and trade experience
and knowledge to overcome challenges an
volatility from the capital markets.
Balance and integrate
The balancing act of having different parts
of the value chain in different countries
means that CEOs must now achieve some
level of integration between different
divisions in different markets. Participants
saw a new trend toward integration of thesupply chain, re-verticalization or ensuring
that the manufacturing process overseas
was effectively linked with development
and engineering. Companies have found
themselves decentralizing operations only
have to vertically re-integrate after enterin
new markets.
>> If you havent laid that groundwork
or you havent spent the years doin
the little projects supporting the
infrastructure, it is very difficult
to run in as an unknown and be
a participant or even remotely
competitive.
Understand local
For cleantech companies targeting new
markets, there is no one-size-fits-all
approach since each market has different
local needs and specifications. Adopting
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Key
questions Which market(s) will be the most
important in the short, mid and long
term, and how do your investment
plans prioritize these markets?
Do you have the right processes,
information systems and experience
to assess market opportunities and
implement strategies?
Do you understand your optimum
geographic footprint in light of shifting
risks, opportunities, regulation and
levels of government intervention in
different regions?
What alternative business
combinations, market-entry strategies
and channels are you considering to
further market reach while managing
risk and without over-extending
capital?
an appropriate business model or entry
strategy is crucial. Hiring a local team is a
popular strategy for many as it enables them
to exploit the local knowledge of culture,
language, risk environment and growthopportunities. To lessen their risk portfolios,
many choose to co-invest with a local
partner. To the contrary, other companies
said that it was worthwhile to build strong
internal teams within the company to better
understand how the business may fit or
how to apply a particular innovation to new
markets. Across the board, participants
agreed that new market entry is a slow,
step-by-step process.
22
Graphic recording of CEO retreat Growing beyond discussion, drawn by Paula Hansen of Grove Consultants International
Bidirectional innovation
Participants emphasized that the approach
to innovation must be bidirectional, one
in which innovation flows not just from
developed markets to emerging marketsbut also the reverse. The innovation
welling up from emerging markets should
be recognized and applied across the
organization. //
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GrowingbeyondHigh performers have an active but
focused approach to market expansion,
including:
Approaching their markets through
a deep understanding of their target
customers
Going beyond the figures to develop
a deeper understanding of the real
nature of the new market and their
target segment and innovating their
products and processes accordingly
Being flexible in their approach to
market entry, but with a focus on
speed of activation and integration
into wider operations
Moving pricing, production and
decision-making as close to target
markets as possible
Paying greater attention to how they
fill technical and operational roles in
their new operations
Communicating more openly and
frequently with stakeholders abouttheir new market strategy
Although India and China stand out
as targets, clear regional approaches
emerge with regard to cross-border
opportunities and the next generation
of rapid-growth opportunities (there is
no new global BRIC)
23
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Open forum
CEO open forum insights
Even if the road leads to success for a particular innovator, CEOs caution that success
may be ephemeral because the cleantech journey means continuously reinventing,
solving problems and recognizing the unexpected turning points.
The growth journey of the biotech sector is an example to cleantech, especially since
biotech also experienced tough early years but weathered difficult times by aligning
and partnering with larger pharmaceutical companies. As policy support wanes, CEOs
recognize that the cleantech industry can strengthen through partnerships with larger
established companies or structure deals much as biotech has done.
Financing for small and medium-sized companies is going to be more difficult, so
compartmentalizing and leveraging value off an existing technology may mean setting
up royalties, licenses, subsidiaries or partnerships focused on a particular technology
that is then deployed elsewhere in a project owned by someone else.
Across the board, CEOs recognize that a step-by-step long-term approach means
careful due diligence, careful timing and more strategic thinking as they move into new
markets or find new partners.
Political winds may not change given the current economic austerity around the world,
but crafting a unified message and delivering a long-term plan to policy-makers can
lead to a more collaborative dynamic politically and will add much-needed certainty to
CEOs future plans.
Overall, the cleantech industry continues
to see growth across the different sector
verticals, and while the growth curve will not
be replicated as in prior years, CEOs see a
different but positive road ahead. The open
forum session allowed the executives to
come together to discuss top-of-mind issues
with peers and brainstorm on potential
solutions. Some of the discussion highlights
are summarized below.
>> There is one thing that everyone in
this room probably relates to. When
you are an innovator and want to
bring a solution or a technology to
market, you have to solve multiple
problems and you have to solve
problems you never planned on or
never wanted to solve.
Managing success
Even if a company realizes success in its core
business, it still needs to be nimble to address
an unexpected issue or manage the results
of its success. One executive observed that
you are now trying to manage all of the
information that comes with success and
deciding what to do with it.
An initial success creates the need to keep
communicating and reassuring JV partners orcounterparties who might not continue to trust
the business strategy as the core business
evolves into addressing something else.
Continued success in the market may also
mean aligning with other parties with which
you would not have in the past perhaps
even a previous competitor.
Many cleantech CEOs noted that theywere initially so focused on realizing their
innovation and providing solutions to
problems that they were not prepared for
the new set of problems or challenges that
came with success.
On the opposite side, in the event of
an unsuccessful venture, unexpected
opportunities arose that shaped the
evolution of the product.
Be on the lookout for unexpected valueCEOs agreed that, at some point, the
business model evolves and there is a turning
point where the unexpected solution may be
more valuable than the initial innovation. One
CEO cited the example of color television.
While RCA first commercialized the color TV,
NBC, the first company to broadcast in color,
ultimately became the more valuable asset.
CEOs agreed that the cleantech journey
means continuously reinventing, solving
problems and recognizing the unexpected
turning points.
Look to biotech
Throughout the retreat, thought leaders
returned to the growth and success of the
biotech sector as an example of industry
development with lessons for cleantech.
Cleantech and biotech share many
characteristics yet also have essential
differences that executives thought were
useful in mapping the future ahead.
>> Having worked across telecom,
software, energy, etc., biotech isthe industry that feels most similar
to cleantech in that it is a highly
innovative industry but unlike
the early stages of software and
telecom, it has very high capital
demands.
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25Cleantech CEO retreat report The cleantech growth journey
Both industries are capital-intensive, have
a long product-development pipeline and
operate under substantial regulatory
oversight. Both industries emphasize
similar objectives, such as reliability, scaleto gain market share and lower costs, and
effectiveness or efficiency of output. Most
importantly, both sectors also often use
collaboration between small and large firms
to drive products to markets.
The biotech industry has had the ability to
form partnerships and attract capital for
more than 30 years but also experienced
early days of risk taking and failures of the
capital markets similar to the cleantech
industry in recent years.
The partnerships between largepharmaceutical conglomerates and
start-up biotechs drove the development
and maturation of the biotech industry,
participants noted. Biotechs reliance on
partnerships with very large, well-capitalized
companies with a global reach was a way to
accelerate its growth in real economic terms
without external policy support.
The cleantech industry is moving toward
adopting deal structures very similar to
those found in biotech, characterized by a
step-by-step approach to financing driven
by the achievement of product developmentmilestones. CEOs pointed to an industry
maturation curve in cleantech that tracks
to biotech especially with regard to
challenges in raising capital, structuring
deals and exits.
Yet differences also exist between the two
industries. While reliability and reaching
scale are key objectives for both industries,
CEOs explained that it continues to be a lot
more complex to explain to investors the
product pipeline for a blockbuster drug than
for an electron delivered. And while large
pharmaceuticals constantly need a robust
product pipeline that provides demand for
biotech products, the incumbent fossil fuel
companies dont have the same need for a
pipeline of renewable resources at least
not yet.
Addressing transitional capital and
balance sheet problems
CEOs discussed in great depth the
challenges related to capital raising, but
homed in particularly on the challengesin financing small or midsize companies,
especially when the industry is facing highl
risk-averse investor sentiment. CEOs agree
that having a larger partner was essential t
solving the capital balance sheet problems
for medium-sized companies, especially
in a transitional stage. For example, many
cleantech companies are on the brink of
commercialization or need to expand towa
the installation segment of the business.
Partnerships at this stage of commercial
development essentially mean lowering
the cost of capital. Instead of raising capita
at a high cost, a company could license or
leverage the technology for a particular
project that a larger partner owns and
develops, with those revenues accruing to
royalties paid on the technology.
Graphic recording of CEO retreat Open forum discussion, drawn by Paula Hansen of Grove Consultants International
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26 Cleantech CEO retreat report The cleantech growth journey
Due diligence
As the industry collaborates with new
players across a wide spectrum of
industries, having the right due diligence
process will become one of the most
important strategies for a cleantech
company. The due diligence process can
be very costly, and executives suggested
having trade organizations take a role in
establishing dialogue across industries,
as well as meeting with external parties
that can help in the process, such as banks
and other support networks. In addition,
conducting due diligence early in the
process is much more valuable, especially
for entering new markets.
A sound due diligence process also leads
to more proactive partnerships and better
timing in entering a market. Throughout the
retreat, executives echoed the sentiment
that being in a market at the right place was
not as important as at the right time. Timing
and the longer-term pace of transactions
will be defining characteristics of the next
stage for cleantech companies. Therefore,
executives see an important role for
stronger due diligence of new partners, sales
opportunities and new markets.
Embracing the end of policy supports
CEOs found that a move away from reliance
on government support was inevitable.
They embraced the certainty of having an
agreed-upon end date when the industry
and its verticals must be able to stand
alone. It would be difficult, but having an
understanding and policy certainty about the
sunsetting of government provisions would
mean better resource planning and capital
allocation. For the wind and solar sectors,
executives agreed that they were in striking
distance of being able to stand alone.
Executives also concluded that more
government expenditure is not the policy
objective but that a coordinated effort by
government to integrate clean energy is
more useful. State-level priorities, nationalsecurity priorities, global warming and
economic competitiveness all are factors
that influence policy-makers. But a unified
message of integration with larger energy
ecosystems from across industries may be
the one factor that brings parties across the
aisle to the same table. //
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Cleantech CEO retreat report The cleantech growth journey
Summary points Innovation is challenging for the cleantech industry given the requirements
for electrical reliability, fuel consistency and water quality which are societal
expectations governed by systems that are inherently unforgiving of failures.
Cleantech is a long-term game. Companies require fixed assets and capital investment;
they also require long build times and contractual guarantees for output or product in
order to attract financing.
The greatest disruption that takes place in cleantech will not be through one
technology breakthrough, but rather through the changing of conventional mindsets.
The real change happens when incumbent industries and systems wholly integrate
cleantech strategies as a new business model for resource efficiency and growth.
Innovation,disruption,transformationFacilitator: Lucia Tian Tian, Harvard Business
School
Cleantech is a challenging case for the usual
discussions of business innovation and in
particular, ideas of disruption. Software
companies can disrupt an industry in a
matter of months or years, augmenting or
completely replacing incumbents. Product
launches can be done asset-light and even
without an addressable market and just as
importantly, failures can happen at low cost.
>> Disruption is a nice word forbusiness plans, but its not a nice
word for electric utilities.
>> You need a system to disrupt
a system.
Cleantechs innovation challenge is in many
ways greater: electrical reliability, fuel
consistency and water quality are all societal
expectations their delivery systems are
therefore inherently unforgiving of failures.
Almost all cleantech companies require
fixed assets and capital investment; they
also require long build times and contractual
guarantees for output or product in order to
attract financing. Cleantechs target marketstend to be heavily regulated and intolerant
of service or quality disruptions, favoring
powerful incumbent companies that are
themselves favored by regulators. Inserting
innovations into complex integrated systems,
therefore, requires an integrated approach.
As one delegate stated, disruption is a nice
word for business plans, but its not a nice
word for electric utilities.
Thinkingthrough aninnovation
frameworkLucia Tian, The Forum for Growth andInnovation, Harvard Business School
Many innovative cleantech companies
are at a stage in which access to capita
is crucial for survival and growth. Often
they turn to large companies like BP
and IBM for strategic partnerships or
acquisitions that allow them access to a
larger balance sheet.
What can innovation theory tell us abouwhether these partnerships are likely to
succeed? What can we do to ensure the
success?
Many innovations fail because the
capabilities of the organization are
not well matched to the pursuit of a
particular innovation. What do we mea
by capability? Specifically, we mean
three interlinked factors that determine
what an organization can and cannot
accomplish: resources, processes and
priorities (RPP).
Resources are visible and measurabl
things like people, equipment,
information and cash; these tend to b
flexible and portable in their usage.
Processes are the patterns of
interaction, communication and
decision-maki
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