Better Place: The Very Model of a 21st Century Enterprise

betterplace

Photo: With colleague Jennifer Biringer, test-driving the Th!nk EV at Better Place’s Palo Alto headquarters back in June.

Many of us at SustainAbility have a big sustaina-crush on Better Place, the start-up working to build the infrastructure for electric vehicles—charging stations and battery packs—in cities around the world, and its founder Shai Agassi. (Our biggest Better Place fan, Gary Kendall, has contributed to their blog here and here, and the urgent need to transition our systems away from oil is a recurring theme for our team—see most recently Jeff Erikson’s blog on the BP Deepwater Horizon spill.)

But what’s a crush without a little analysis? Here are seven reasons why we think Better Place is one of the best examples of a 21st century enterprise out there.

1. Better Place started with an urgent social need, is moving rapidly to bring a solution to market, and is doing so by prototyping around the world. First, Agassi started with a Big Hairy Audacious Goal for his country: no less than independence from oil.

Says Better Place Australia CEO Evan Thornley in an interview on CNET’s CarTech blog: “[When Shai Agassi was coming up with his initial white paper] he went through the stages of ‘how can we run a country without being dependent on oil?’… We’re a mission-driven organization; we want to get the world off oil. There’s nothing good about it: fighting over it, paying for it, running out of it, or polluting the atmosphere with it.”

And Better Place is not wasting any time, as Cisco strategy EVP Inder Sidhu writes in a nice excerpt from his strategy book Doing Both, which argues that pursuing two seemingly disparate paths at once is often mutually reinforcing:

Agassi hopes to move quickly—before the next wave of first-time car buyers choose gas- or diesel- powered vehicles… Over the next five years, Chinese and Indian consumers are projected to buy as many as 70 million vehicles—more than all of the cars that exist in the UK and Germany today.

Most technology startups set out to build advanced products for sophisticated customers in established countries… Afterwards, they typically water down their innovations for sale to customers in emerging countries. Agassi has dispensed with this model and is instead focused on building simple solutions that can be deployed anywhere around the world simultaneously.

2. Better Place is thinking service, not product. Why are service-based business models often a better bet from a sustainability perspective?

Service-based models incentivize manufacturers to make assets that last and to take end-of-life responsibility (think Xerox copiers). They allow many more people to get use out of the same amount of physical assets (think laundromats, or car sharing services like Zipcar, and see Rachel Botsman and Roo Rogers’s Collaborative Consumption website and book for more examples). And they start with the human need and ask, “How can we best meet this?”

Agassi understands that people fundamentally seek the service of convenient mobility. This insight means that his business model is designed around meeting that need for mobility as effectively as possible, rather than making the current model (liquid-fuelled cars) somewhat better.

For transportation, says Agassi in an interview, what matters is miles:

Oil companies sell miles…at the end of the day [not gasoline]. [Better Place is like] an oil company that has a guaranteed supply of oil at a cost of zero dollars a barrel… I don’t sell the energy—the battery makers do that. I sell the convenience. (Interview by Martin LaMonica, CNET)

And access to a service is often a much better model for the customer than owning the asset itself, say Better Place’s Evan Thornley and Guy Pross in another interview:

Separating the battery from the car is a key to our business. It not only takes that battery [technology] risk from you, but also saves you from purchasing the battery up front, which is a huge part of the cost of hybrid and electric vehicles. (Interview by Derek Fung, CNET)

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“BOP and all the stupid buzz in the world”

Just came across the following pair of posts on the blog of E+Co, a fund that invests in small-scale rural energy enterprises.

First, Harish Hande of Indian solar company Selco points out:

I am shocked, to say the least, that people are looking at the BOP in a very unidirectional way – how to SELL to the BOP, making BOP an ‘marketable area’, high returns from the BOP etc. Sometimes I feel it crosses the line of vulgarity and the word ‘exploitation’ becomes a soft word. People famously quote the example of 1 Re sachets of Shampoo bought by the poor in rural parts of India – termed as a brilliant marketing strategy. High returns, but very unsustainable for the society. But this is what the corporate and the venture capitalists like.

Selling to the BOP is a becoming completely unilateral in a way that we are not helping the BOP to come out of BOP but making them consumers while they still remain in BOP. Investors would rather invest in organizations selling to BOP (high returns) than invest in organizations trying to create services that will help people come out of BOP (small returns).

Phil LaRocco of E+Co agrees:

We need to shift the emphasis from the ROI BOP buzz. Creating portfolios of sustainable businesses analyzed and valued for their financial, social and environmental returns is a long term race endangered by any inane talk that there are financial killings to be made. The buzz I would like to hear is more to the effect: “Invest in providing services and capital to men and women so that they can provide life changing services and products to their neighbors”.