In “Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers”, author Geoffrey Moore writes about the gap (what he calls the “chasm”) or the challenge of acquiring the early customers. Another term for this phenomenon is called “Valley of Death,” defined as “that gap between when a company first launches the new product and when it begins generating steady revenue from paying customers.” This is especially crucial for start-up companies, who live and die by the cash balance in their bank account. In consumer or technology products this chasm may be a few months to a year. In energy, utilities, and health industries, this Valley of Death could be grueling several years.

Ecosystem

In many cases, the success of a new product doesn’t depend only on the customers’ needs and willingness to buy it. Other ecosystem players and stakeholders impact the market acceptance of the product, or, in some cases, put some speed bumps into the adoption of it.  A perfect example is the healthcare industry where the target audience includes physicians, pharmaceutical retailers, health insurance providers, hospitals, the patients themselves, and last but not least, government regulators.

One of my clients developed an HVAC add-on device that saves about 30% of the energy consumption; a very significant saving. On the surface, the device should have been an overnight success. Why did it take years to get it accepted? It’s the complexity of the ecosystem: Building owners; building tenants; supply chain of components; third-party sales channels; utilities that need to qualify the product for energy-saving rebates; nonprofit organizations in the green building space; air-conditioning governing bodies; governments; HVAC installers; and HVAC engineering firms.

Each one of these stakeholders is led by a different agenda. Businesses that are driven by their financial performance will ask whether their revenues and profits will go up or down with this new paradigm product. Non-profits will look for mission and vision compatibility. Government agencies will investigate compliance with the relevant regulations.

The Human Factor

In addition to the business considerations, there are the equally important human factors. All of these organizations deal with real people, each with his/her career aspirations, personality, risk attitudes, as well as politically related motivations. Those could influence professional considerations.

Ecosystem Map

The first step in the business development process is mapping the ecosystem, which includes defining the synergistic relationships among all the stakeholders and outlining the give-and-take interactions between the players in the space. Here is a generic template that can be modified for a specific situation.

The ecosystem map is the beginning of a journey toward the desired business outcome. Each business has to define its own goals, as well as the milestones to accomplish the goals.

The complexity of the ecosystem in the case of utilities and energy companies combined with the natural risk-averse culture of these industries makes the Valley of Death a pretty long and gruesome journey. A larger company has the endurance and deep pockets to survive the Valley of Death, however, a cash-strapped start-up will have a real problem enduring the journey. A utility startup must plan very carefully its survival strategy for the Valley of the Death voyage.

Surviving the Valley of the Death

Here are a few ideas on how to survive the Valley of Death:

The brute force approach – fund it.
Most entrepreneurs and venture capitalists are coming from the technology industry where this chasm is shorter and usually measured in months. They often have a significant culture shock and financial jolt when realizing that the business development cycle for utilities is so much longer.

Find another short term source of revenue.
One of my clients had developed a wind measurement technology targeted for the wind energy market. We also developed a short term backup targeted for wind dependent sports. When the Wright Brothers realized that the sales cycle of their new invention, the airplane, may take years, they created two short term sources of income by offering flight training classes, and also by performing flight acrobatic shows and charge spectators that come to watch it.

Partner with governments.
Many utility & energy inventions are likely to trigger governments’ interest because they contribute to the country’s infrastructure. The government may be able to help in two ways. One will be funding. Many governments have budgets that are earmarked to help entrepreneurship activity in the country, especially in areas with government interest. Second, partner with a relevant government agency to conduct a pilot project at one of their research labs.

Partner with academia.
If your invention is innovative enough some universities may be interested to participate in the project. Be prepared to pivot a little from the original plan and allow parts of the projects to be performed as part of a university research project. Another partnership interest universities might have is in allowing students to participate in the project. Some universities may have a large enough research lab that will qualify as a utility-scale pilot.

The time gap between having a working prototype in the lab to a commercial pilot project is very significant in the utility industry. Many utility start-ups fail because they haven’t planned for this time gap thus, they don’t survive.